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- [00:00]
Brendan
Foreign. Welcome back to the Crypto 101 podcast. We have an awesome podcast in store for all of you today. And as we're coming in here, at least at the time of recording the crypto market, I'll tell you what, it is soaring. Bitcoin is well above all time highs, it's above $110,000. And the crypto market is booming. So you better believe we're going to bring in some of the biggest leaders in the space to talk about what's going on. And as per usual, we got a very special guest in store for all of you. So I want to welcome Mr. Johnny Garcia. He is the head of institutional strategy over at Vechain, and before he came on and started working with Vechain, he was the director of ETFs and ETPs at Bitwise Asset Management, another group who we've had on here before and clearly an ETF provider. But over there, he played a key role in bringing these ETFs for Bitcoin and Ethereum to the markets. And prior to that, he played a key role at Vanguard. So he's no, he's no new name to the space. He's an absolute veteran and we're excited to have him. So, Johnny, welcome and excited to have you here.
- [01:22]
Johnny Garcia
Excited to be here, Brendan, thanks for the kind words, introduction.
- [01:25]
Brendan
Absolutely. Well, let's kick things off. I mean, you have this extensive career. You went from first being in the army, then you went to Vanguard, then Bitwise, and now you're at Vechain, I guess at what point in all of that did crypto come on your radar?
- [01:42]
Johnny Garcia
Britain. It's interesting. It's quite. Well, it's just a long and winding road. Right. As oftentimes these things are. And my career, my professional sort of tenure is not. Has not been. It's been nonlinear, for sure. So as you mentioned, interestingly enough, I'd heard I'd come across bitcoin. Right. As most of us do. And traditionally speaking, when you think about folks in their first intro into crypto in 2013, when I was deployed to Afghanistan. So I often share this story because it's, it's fun, but it's also not as it's fun to say, but it's not incredibly funny. Right. So you think 2013, you're like, oh, wow, that's awesome. Did you get in? And of course my response was no.
- [02:26]
Brendan
Maybe you wouldn't be here if you got in that early. So, you know.
- [02:28]
Johnny Garcia
Yeah, that's quite likely. Yeah, that could have been a Possible, that could have been a possible, possible scenario. Although, you know, who knows? Yeah. So in 2013, a good friend of mine, I'll never forget, I'd walked into this, this tactical command center and she and I were chatting and she brought up this article, she's like, have you heard of this thing called bitcoin? Naturally my response was no, no idea what this is. And we read the article together and I came away thinking, this feels a lot basically like E Money or maybe it's something different. But either way, either this is incredibly genius or something bad is going to happen to a lot of folks. And of course, you know, now I find myself somewhat 12 years later, obviously kicking, kicking, kicking myself a little bit in the behind. But it was, it was, it was very funny because in four years or so, the next time I had heard the word bitcoin was in a central banking class in business school. So at the University of Chicago, it was a class I was being held by Randall Crosner, who used to be a former Central Banker, the US during the, during the dot, during the GFC, the Global Financial Crisis 2008. And we had a two part class on distributed ledger technology and crypto and bitcoin. And I'll never forget there was an undergrad in our graduate class who was easily the most sound, coherent, technically capable or individual in that class who could articulate it in a way that made sense to what would make me feel like I was pretty old. And at that time, I don't think it was 27, 26. And that's when it kind of sparked for me. And it was in the fact that it was also being caught, taught in a central banking class I thought was also what did not, did not fall on me to be a little bit ironic. But that's when it started to kind of like make a little bit more sense to me. That's when I caught the bug. And you know, and the journey, and the journey goes on from there. Right. Ended up being a vanguard and I could chat a little bit about what the transition ultimately looked like. But generally speaking, I came across in 2013, didn't really get back until 1718.
- [04:43]
Brendan
And while you were overseas and did you say Afghanistan, is that right?
- [04:47]
Johnny Garcia
Yes, Yeah, I was deployed to Afghanistan.
- [04:49]
Brendan
Wow.
- [04:49]
Johnny Garcia
What?
- [04:49]
Brendan
I don't think we've ever had anyone come on and say, yeah, I found out about crypto and bitcoin while I was deployed overseas in the military. Like, that's such a cool, unique story. There is a lot of people that come on and when I saw that you worked at Vanguard, I was going to go, oh, he found out about it, you know, at Vanguard and then decided to make the transition because it stood out to him. And that's usually how the story goes, is it's a trad fi name or a trad fi player saying, I heard about this, I thought it was innovative, so I decided to work in it. But man, what a cool story. So you found out about it pretty early on. And for those that are listening, you know, Bitcoin in 2013, it was an entirely different asset back then. Not only was it incredibly hard to get your hands on in those days, but it was viewed as, like you said, this kind of like sketchy Internet money. It's like you really didn't want to necessarily. It was cool, but it was risky and it was a little bit scary and you didn't know who was dealing with it back then. And I kind of had the same reaction when I found out about it around the same time in 2012. Ish. And it was one of those things where you like brought it up and you showed people and they're like, I don't know, man, I don't think I'm going to. That's right, I don't think I'm going to touch that. And that was just the reaction. So it is easy to look back on and be like, oh, I should have bought. But it really isn't that simple. And I'm sure that there's other listeners who have gone through the same experience. But, you know, now we're at the world where Bitcoin has ETFs from just about all the major financial players, all these tradfi players. And you had the awesome privilege of help bringing some of these first bitcoin and Ethereum ETFs to the market. What was that like?
- [06:34]
Johnny Garcia
Yeah, so, I mean, again, I revert, I revert back to this that I've, I, I think about it, or think about it in the form of like this, this multi, multi, multi saga of Johnny's sort of journey.
- [06:46]
Brendan
Yeah.
- [06:47]
Johnny Garcia
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- [06:49]
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- [08:54]
Johnny Garcia
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- [09:49]
Brendan
Cards issued by Sutton bank members.
- [09:50]
Johnny Garcia
FDIC terms and conditions apply. I'm at Vanguard. I'm on what is referred to as your ETF Capital Markets desk, which is effectively, you should think of this team specifically as we're on the front lines trying to drive down costs for. In what we refer to as execution costs. But it's basically the cost that you pay to trade an ETF or to trade a product. And for look for all the pushback that I think, particularly on crypto Twitter, that you may get around Vanguard perhaps being a little sleepy or behind the eight ball and certain things. We had been having conversations around the applications internally to existing operations to Vanguard via a group that was referred to as generally the bucket group for all these sort of emerging technologies. Your Fintech group and this Fintech group was within our investment management team, the team that actually manages the operations of taking cash to putting that cash either into said asset. Right. So whether it's a money market fund, buying Treasuries, so forth and so on. And it was there where I started to really get the bug of, oh, how could you possibly work in this industry? And bitwise. Bitwise came around. I remember seeing the commercials around bitw in particular. You have this individual out in a restaurant and looking at this menu and this menu seems, you know, it seems to be almost uninterpretable by the, by the viewer. It's like, what do. I don't know what to choose. And naturally, you know, someone comes over and says, look, I'm going to. I'll clarify all these things up for you. You should take the smorgasbord so you can have everything. And that really resonated with me vis a vis index funds. Right. So if you think about Vanguard and you think about sort of, you know, look, this, they're. They're. What is the thing that they brought to the market that was revolutionary at its time when Jack Bogle conceived of the idea of pulling assets together for multiple folks, deploying it in a way where you can get beta, market beta that was. I was inconceivable at a time where most folks thought of investing purely as looking for mispriced opportunities in the market. What do you mean? You want the market. And that was revolutionary. And I thought, wow, this seems like this team is doing the same exact thing. They're effectively being the vanguard, if you will, of an emerging asset class that still at that point in time, this is 2022, and even today seems highly, it seems highly suspicious to most traditional investors. Right. And traditional audiences. So I had the opportunity to come and participate and be part of a team with Matt and Teddy and Hunter and Catherine and the rest of the folks there to build out this ETF pipeline. And then two years later, lo and behold, we had spot Bitcoin etf. So I say that as if it was a long journey for me personally, but if we think about the genesis of this sort of, or the initial days, the early days of this battle, we're talking circa 2013, 14 with the Winklevoss twins submission for a spot Bitcoin ETP in the US and here we were almost 12 years later finally seeing it come to fruition. So I mean, it was an all out, it was a two year journey for me. Right. In the interim, we launched tangential ETFs, right? So crypto ETFs, your picks and shovels, folks that were offering up exposure to the space, but nothing that was as clean and crisp as the spot ETPs that we see today. And so it was an exciting journey. It's great to see that we finally gotten past that hurdle, but there's still multiple hurdles to overcome, which I'm sure we'll get to throughout this call.
- [13:31]
Brendan
Absolutely. And it's amazing to see how successful that they've been. I saw that, you know, it wasn't the Bitwise ETF, but Ibit, one of the Bitcoin ETFs is now the fifth largest ETF in terms of year to date flows. Putting it above like things like QQQ and just these monsters that we think of and maybe even use or have exposure to on a daily basis. And it's crazy that we live in a world now, again, going back to 2013, 2012, if you would have said that a Bitcoin ETF would not only be out, but it would have the fifth largest year to date flows. People look at you like you're crazy. So it's, we're at this crazy, insane level of adoption where it's almost like you can't even say bad things about it anymore. I think all these people are like, oh, it's a scam, it's going to zero. It doesn't make sense. No one's using it. Well, no, it's not only are people like using and trading this thing, it is one of the most traded assets on the planet right now. So it's been awesome to see this thing mature. We talked a little bit about other kinds of ETFs. The final question I got for you and then I, you know, I'll move us on the V chain, but do you think that we could see more spot ETFs for altcoins? Right. That seems to be a big focus for people is that they're looking at the altcoin market saying you, you know, I want to get exposure to this and that through my traditional brokerage, but there's just not ETFs for it, I guess. Is that something that you think that we're going to see maybe in the next year or so?
- [15:08]
Johnny Garcia
I would place a high probability that we will. I think the short answer is yes. And if, Brendan, if you don't mind, I'm going to get a little boring here.
- [15:16]
Brendan
Yeah.
- [15:17]
Johnny Garcia
But if we think about the history of what's taking place since the original listing of spot Bitcoin ETPs on the NASDAQ, CBO and the New York Stock Exchange, January 11, 2024. Right. Last year, it's only been a year. Right. And we're talking about a group of pulled products that have, that have pulled in or account for roughly 5% of all Bitcoin available currently available. Right. North of 100 billion, $120 billion in assets under management. Spot Bitcoin ETFs have approached. I mean, I think I heard James Seifert e, the renowned analyst over at Bloomberg mentioned how they're closing into $15 billion of US based spot gold ETFs. It has been wildly and incredibly successful. That being said, there's still so much more room to grow. See, I talked about the concept of indexing itself being a major inflection point of change for democratization in what was historically referred to as your own pro rata share of America and global earnings. Now, the second wave of that was ETFs. So taking mutual funds, which are these boring things that only get priced, you know, the twice, you know, once a day with the end of nav and taking that and putting them in this wrapper called an exchange trader product. And now you can actually trade that intraday. And that in the early days of ETFs and ETPs was, was inconceivable. Why would you do this? Who is going to want to trade a mutual fund in the middle of a day now in the middle of the day and now ETFs. I mean if you look at Vanguard, it's north of a trillion dollars in ETF assets. You look at Blackrock, they're north of, don't quote me on this. This is, this is, I used to be well, well, well versed in this space, but obviously being much more of a player than someone on the, on the sideline doing package products is very different. But this, this is an industry that continues to take market share from traditional structured products or pulled, pulled vehicles. And now we're, we're seeing what that's doing. Also for crypto, it will continue to exist. I know that there are a cohort of folks who naturally are going to opt out and prefer to use their own non custodial wallets or self custody wallets to actively purchase their own tokens. But ETPs offer up a way for you to do it, as you said, in a very traditional format that you and I and my siblings and my mother and my father know how to access it. So I would put a probability of 80, 90%. You know, I'm going to say that I'll probably have to opt out and I'll give it over to Eric Baltunas or James and them to come up with something a little bit more accurate. But it feels like we're going to see something to the likes of an XRP or sol. And yeah, the boring component there as I was going to talk about, you know, how these filings work, the 19 before process and how we looked at. Oh well, you have to have these futures. The short of it is there's a, there's, there, there are major things that have taken place in just the last five months, namely in the form of. We actually have an SEC that is not necessarily agreeable, well approachable. So that's a major, that's a major change. They're actively engaged and actively looking to be educated on a topic that historically has largely just been Persona non grata. Right. So we're not in that place anymore. So there's been this sort of veil or this breath that's been left out of sigh of relief that's been sort of exited the room. And then the other item is we do have CME futures available for SOUL and for xrp. So we're satisfying even the historical sort of framework through which we, we thought was just table stakes requirements in order for you to get their approval. And in addition to that, we also have a group of folks in the regulatory side that are much more Accommodative. So with that being said, that's a long answer of saying I think we will see it. I'm fairly positive we'll see it this year. Where it goes from those four, I'm unsure and I think it's anyone's ballgame in.
- [19:51]
Brendan
I mean it's a lot of exciting stuff. And so I think that the only next logical question here is what did you see at VE chain where you said I'm going to drop all the cool things I've been working on at Vanguard and with the ETFs and with Bitcoin and Ethereum and all these different financial products and you said I'm going to drop everything and I'm going to go over to Vechain. I guess what stood out to you so much?
- [20:15]
Johnny Garcia
Yeah, it's such a great question. Britain. I think there's a couple of things here, right. So when I think about sort of the philosophical tenets that under the sort of undercurrents about crypto and blockchain and dlt, it's I think about a couple of things. One, there's the, we can talk about all the features that we've met that I think maybe your audience are quite familiar with, right. The immutability, the efficiency, things of that nature. But there's also this transferability. But there's also like ownership which I think is, is, is, is quite. Ownership, I think is, is an underappreciated component of this entire experience. First and foremost, when we think about the, when we think about financial services, we think about more broadly, like broadly speaking, not just specifically wealth and asset management. Generally speaking, the way that these things have rolled out historically is it's, it's largely been top down and this is a phenomena where it's been bottom up. Right. Bitcoin is a bottom up phenomena. Now I know that there are a lot of potential concerns that exist with, now that you have the influx of new institutions and what does that mean? I just mentioned 5% of assets are now being owned by spot Bitcoin, by these ETF issuers, ETP issuers. Um, but I do think that it's just a fundamental, it's, it's, it's a, it's a component that, that oftentimes it's not really highlighted but it's, I think it's incredibly important and I just wanted to sort of tee that up because I think it's going to be one of the, it's going to be one of the sort of under, undercurrents that I'll. I'll reflect on throughout the remaining of our remainder of our conversation, I'm sure. But Vechain, I'll say two things. One is the people, right? First and foremost, one of the things that I've grown to appreciate and understand from the army to Vanguard to Bitwise to little stints at Lazard, and it's the people matter so much. Like how you spend your waking time, the quality of that time, the interactions with the folks that you are spending most of your, most of our lived lives with is incredibly important. And I say that for the following reasons every day. I am still surprised by the level of commitment, vigor, excitement, outspokenness that not only the people here at Vechain, but then also the community members of Vechain have for this project. It's quite incredible. One of the things that I, when I'm interacting with, with you know, institutions or ultra high net worth individuals, one of the first things they say is, yeah, I'm familiar with Vechain. I'm also really perhaps mostly familiar with their community because it's such an outspoken and engaged community. So I start with that. That was, that was clearly an indicator that for me, one, there, there's. The community is really engaged. It goes, it speaks back to the ownership, right? So like naturally when you have an owner stake, you then take on an owner's mentality. And that was very clear to me from the get go, just looking at the community side of things. I will also say working with Sonny not for. And I do think that that's like a really clear item that I want to push home here was very evident in the beginning that he was looking for a partner and not a lackey. And that was something that really resonated. Like I'm sure you, you can read up on some. He's, he's had tremendous success and you know, and he's been in Bitcoin since 12 or 13 and he's. And he's. And he's still going with Vechain. And it's, it's just incredibly exciting to see a founder that's this incredibly passionate about the use cases above and beyond a store of value. A, you know, a flight to safety sort of component that I know bitcoin sort of occupies like that. That's been something that was just incredibly motivating for me. The last item I'll just touch on here really quickly is naturally, sort of like the story and the narrative. One of the things that Sunny and I shared very early on was in order for this Journey collectively to work out, we have to have like philosophical alignment. And that was one of the things that resonated with me so much. And so when I think about the story, when I think about the product that the foundation supports vis a Vishain Thor network, it was very clear to me. It's one of those few instances where it's like, wow, it's something beyond speculation. You think about the history of Vechain and being more enterprise focused. Tag and trace, the sort of custody throughout the supply chain, ownership and responsibility of an item throughout the entire chain. That just made so much sense. And then the direction vis a visa vis better dao and other items that I'm sure we'll get into was something that was. That made that to me there was objectively and undisputedly a lot of clarity there. And I do think that blockchain in particular is one of the. It's because of that technology that we can accomplish some of the strategic initiatives that we've embarked on since. And so those are the two major items. The people and then the people community and then obviously the story and the product.
- [25:37]
Brendan
Yeah, I mean, who you build your team around is essential. Right. I think that's a given in the business world, is that your team is everything. And we see projects fall apart because they maybe don't have the right people or they're not in agreement or they can't work well together. And this comes from really innovative products. I know, you know, maybe some people are going to hate on me for this, but we saw this kind of happen recently with what I would say is happening with Barachain, super innovative project and intelligent team. But there is some disconnect, some disagreements and they've kind of seen internal conflict and that's affected the project and the ecosystem as a whole. So I would just double down and agree with you that we see how effective that a team can be and what that does to a project. And Vechain has been around for a while, which I think brings us to a good spot where we can kind of step it back here. And let's talk about V Chain, right. Because it's a layer one. And so what that means is that it's similar in nature to things like Ethereum and Solana and maybe like Sui and a lot of these other projects that we would classify as layer ones. And for all the listeners out there who are maybe newer to crypto, can you kind of just like very briefly, like walk us through what it means to be a layer one and maybe how you see Vechain kind of differing from some of the other major players like Solana or Ethereum.
- [27:06]
Johnny Garcia
Yeah, no, it's, it's, it's. I can certainly do that and I think it is worthwhile articulating that. It's interesting enough we launched on Ethereum in the early days and then in 2018 or so we actually had split from Ethereum and establish our own, our own L1. So essentially going back to like, what does it mean to be layer one? So you should think of it conceivably as having our own standalone network that requires its own. I step back to say, what are blockchains ultimately? It's software, right? It's software. And what do we know about software is that software has various different components in the stack that provide or that execute certain missions, right? These are machines that are effectively told what to do. Like tell me, you give me the instruction and then I go and I execute. So I do think that it's worthwhile taking a step back and then just, just effectively just dissecting what is it that we're actually referring to as opposed to, you know, using defaulting to what you and I are probably experiencing corporate America, which is jargon, jargon, jargon, jargon, jargon, jargon. But effectively, what is it? It's software. And we are our own standalone network. We're fairly unique in so much as you did mention one other chain that also has a similar structure, but we have a dual token system, right? So we've got vet, which we refer to as effectively our monetary or staking asset. And then we have veto vtho, which is a gas or fee asset. So when you think about what is a blockchain, it's, it's an opting in sort of software. So you take ownership stake in the network. You and I do not have ownership stake on any of the Internet browsers that provide us access to the World Wide Web. We don't have that. So when you go onto Google, when you go on or so when you go into a Chrome and this is not. I love Google, I love Chrome, I love Safari, I love Brave. But we are, we are, we are opting out of owning, are owning our own information effectively when we go onto these individual browsers. So you think about the sites that you visit, you think about little bits of information that are all being effectively sold and stored and wholesaled and created in these identities of our online identities. You don't have any ownership stake in it. And that's where crypto comes in and it Fixes that. And this is where I think Vee Chain in particular is doing something really unique around really delivering across on delivering on that promise of owning your digital footprint. And sorry, when we think about L1s I mentioned, we have dual tokens. We have this gas fee with Visa vis veto. We have the owner's asset which is vet and we have historically been focused on what you can ostensibly refer to as enterprise blockchain solutions. So I mentioned the tag and trace. I mentioned chain of custody. But just to drive home the example here, imagine that you have a luxury retail bag. There's a device that's in place on that luxury retail bag. The information about determining whether that's a counterfeit or it's a real bag. Right. Is obviously stored in that device. The data or sorry is used Visa the device. The data is in store it on our blockchain. And so this is sort of the history of vechain. And I think oftentimes those who are familiar with Vechain in its early days, they think back to oh, it's tag and trace. Makes a lot of sense. Where are we presently and where are we headed? So right now we're much more focused on enterprise engage sorry on retail engagement. And there have been a number of initiatives that have been taking place there. Namely Be better Dao, which was a dao initiative that was launched in June of 2024. So just last year it'd be a year and one month. This initiative is focused on two things. One, tokenizing individual behaviors and two, growing growing retail and end users ownership and involvement in transaction activity on Vechain. And there's a number of ways in which we're looking to accomplish that. And I can talk at length about it, but that's vechain. In short, in terms of how are we different from L1s? We have very similar stack structures. Key differences are the dual token and then obviously the use cases that have been built on. On Vechain Memorial Day door buster deals are here at Lowe's right now. Rewards members save $80 on the Master Forge 4 burner gas grill. Now just one 49 plus rewards members save $900 on the Lowe's exclusive Hisense French door refrigerator. Now only 9.99 Lowes we help you save valid through 526 selection varies by location while supplies last seeloes.com for more more details Program subject to terms and conditions. Details@lowe's.com Terms subject to change.
- [32:28]
Brendan
Tell us more about tokenizing behavior. I think that's what you Said, yeah.
- [32:33]
Johnny Garcia
So again, it's. When I go back to the analogy or to the concept of ownership, right? Of, of owning, of owning your information, of owning your, your activities online, this is, this is one of the things that, you know, we are, we are, we, we are effectively getting towards, but we're doing it in a way that is incentivizing certain activities. So when I refer to, you know, X to earn applications, it's do X activity to earn some sort of reward. When you think about all the sort of value that exists in what I will refer to generally as intangible assets, right. I mean, I think generally speaking when you refer to that, people think of it as goodwill or they think of it as ip. There are other activities that you and I engage in on a day to day basis that could be, you know, that could be priced. So you think of the inconvenience it is to constantly walk around with a reusable water bottle or constantly walk around with a reusable coffee mug when you, if you want to purchase coffee at your preferred vendor of choice, taking the train version or taking a train or a bus, versus taking an Uber there or sorry. Or versus driving your own vehicle, right. There are a number of trade offs that you and I are making on any given day that ostensibly could be priced and not only that, they should be incentivized. And so thematically we are focused on sustainability, which I don't think I hit on the top note. So circling back thematically, we're focused on sustainability. It doesn't have to only be, it's not sustainability through the lens of, you know, we're applying filters through an ESG framework and we're clearing out all the things. That's not at all what we're referring to. We're talking about sustainable activities that you and I perform on a day to day basis that just aren't being captured. And there's value there. There's value to individuals who potentially could, who would like to know, hey, do you show a high propensity to be sustainably, to have a sustainable bent or be sustainably sustainable in your actions? Therefore, maybe there are, there's merchandise that perhaps you would be interested in and we could possibly also build on, be better down on D chain, right. There are a number of use cases and potential pathways to monetization, but we're focused on again, top down versus bottom up. We believe that sustainability as a theme, it's an issue that you and I and all of us and our kids are all having to deal with. And this is one of those mechanisms that gets at, gets at the issue.
- [35:07]
Brendan
Via bottom up in the whole tokenization and real world asset space, as people like to call it. It's a fascinating, it's a fascinating one that constantly comes up here on the podcast and we have people from all different projects and all different backgrounds and all different sectors and it continues to come up about how the world is looking at this, this genre of tokenization more and more. I saw just Yesterday, me and TiVo were talking about it and it was that Robinhood was even looking at this, you know, the big brokerage for mobile users. And they were saying we want to tokenize as many assets as we can to. I know that BlackRock has published reports on this. They have a tokenized fund. We've seen JP Morgan publish reports on this, bank of America, Citigroup. I mean these are all things that I've gone through. And so this topic of tokenization is quickly becoming a global one where it's not just maybe crypto enthusiasts, crypto savvies like you and I where we talk about this, but it's like everyone is starting to turn eyes to this and it seems like it really is becoming the next sticking point.
- [36:21]
Johnny Garcia
So this is our view, right? This is the thesis that, that we've taken here at Vechain as well, right Brendan? And I think you, I think you, you, you said it. Well, look, yesterday I was at an event where the global head of rates and in markets at a bulge bracket, at a top three bulge bracket bank was speaking specifically about tokenization, right? And estimates could be somewhere north of 16 trillion. It depends on where, on what you're referring to. But I sort of back away from total addressable market research estimates. But I do think that it's quite large and sizable. But in this conversation it was really interesting. So I think early stage, particularly from the institutional side, the idea of tokenized deposits. And naturally the thing that's most germane at present would be vis a vis the genius bill stablecoins. Imagine a scenario where you have a stablecoin that sits in your brokerage account side by side with your money market fund, right? This is a really. It's not to say that one is directly in competition or taking away from the other, but in this instance they're compatible. And so to quite quickly move from something that is interest bearing into something that's not, then to get into the token economy, it's a phenomena that I think one large institutions are going to have to look at it from an existential potential risk. But two, this is going to be a net surplus opportunity for end users, for retailers, for folks like you and I. And that's just, and that's just one, that's obviously one quite large use case. But when you think about things like what we're doing in the event of tokenizing, you know, tokenizing individual behavior, we think about this as effectively. You can think of it as the cost of customer acquisition. You could think of it as the price of inconvenience for certain activities that could be incredibly fruitful and informative for, for sustainable marketing or for ESG marketing with which a lot of many corporates do have allocated budgets for. So like, there's, there's an opportunity here that I just think that conversation is not loud and robust and it's not, it's not the one that's obviously hitting, hitting, hitting headlines quite yet, but it is something that we're, you know, quietly trying to increasingly make a bigger part of the story. And so, yeah, I think you're tagging onto something that's quite interesting. Right. When we touch onto the things of, like how do we incentivize behavior, how do we continue to collaborate? This is certainly an issue where we look at the fragmentation and the fracturing of relationships across, whether it's things like the Paris climate agreement and so forth and so on. This is a tough topic to resolve. But then also the transferability and tokenization provides that without having to be geofenced. Right. So I'll take a pause there because it's one of the things that I think we can go on for, for quite some time around. But this is, this is, this is going to be a major, major item for all sorts of things. Not only things that already currently have a price and where it presents existential threats too, but also for things that actually are, have incredible value, but they just currently don't have a pricing discovery mechanism that exists.
- [39:52]
Brendan
Absolutely. And I think that's what gives it so so much value, is making illiquid assets liquid, making assets that were, you know, never really tradable virtually in the first place, all of a sudden become fractionalized and tradable and you can track them and there's infinite benefits. And we could talk about it for, for literally the rest of this episode. But yes, I want to make sure that we dive into V Chain renaissance. This is a big, big new addition that's coming. I know that there's going to be new tokenomics, there's going to be an updated roadmap, things along the lines of consensus just walk us through. Let's say people are not familiar at all with Vechain Renaissance. Walk it through us from a high level start to finish.
- [40:36]
Johnny Garcia
I will certainly do that. I will start with this. There's three major strategic initiatives at the Vechain foundation that we're looking to support vis a vis to Vechain Thor Network. And one of them, the core item here is Vechain Renaissance, which is a. You can think of it as a modernization to core infrastructure on the network. The other item we mentioned was this tokenizing individual behavior vis a vis be better dao. And then the last item is vworld, which vworld is the wallet. It's the native wallet for Vechain. But we do see it growing into something much more of much more importance. Think of it as the equivalent of your application hub on your iPhone, for instance. Right. So back to Vechain Renaissance. So there are a couple of items that are happening here. One of the major points of differentiation that exists in Vechain relative to other chains is we have was referred to as a proof of authority mechanism. This can be thought of as effectively staking, but with AML KYC. So we have 101 validators that are known to the foundation but are not known externally. And effectively they go through an AML process or they go through a KYC process and then they're also approved by a steering committee. If you think about the history of Vechain, this makes sense. We had large enterprise relationships the likes of Walmart, China, the likes of lvmh. These individuals wanted to have custody and clarity as to who were the folks who were having access to two very important information. So therein lies the reason for why we had proof of authority. Because this mechanism, this is a mechanism that's been known amongst technologists and technical individuals. But I do think that it's worthwhile at least providing a definition because that is changing. We've seen that new market standards have effectively converged towards staking, staking either via proof of staking mechanism or delegated proof of staking mechanism. And we've also acknowledged that that's the trend that, that the market is headed. And we also see that we acknowledge that there's benefits there. Right?
- [43:14]
Brendan
Yeah.
- [43:16]
Johnny Garcia
So what? At its core Vechain Renaissance is two things. We're changing our proof of authority mechanism to a delegated proof of stake. What does that mean? We are removing the permissioned component of becoming a validator. So therefore that veil will ultimately be lifted and then second or that requirement will ultimately be lifted. Excuse me. And the second item is we'll be introducing delegators. Now, many of your audience may already be familiar with what delegators do, but these are other individuals that contribute to the security, to securing the network. We have a group of those, loosely speaking, that we refer to as our X and echo notes. These are folks who have soft lock tokens. And in exchange for soft locking their tokens, they are receiving rewards, but they're not delegated, they're not contributing to security to securing the network. In this new model they will be. And so active participation will, in the form of contributing security to the network will then yield rewards in exchange for those actions, in exchange for those services rendered. Right. And so that's the major change here, is shifting from a proof of authority to delegated proof of stakeholders bringing in delegators and then lifting the requirements. On the validator side, there are a number of things where we think this is going to be one, incredible for VeChain, incredible for its stakeholders and its participants, namely via naturally, the rewards are now going to be structured in a way where you being a betholder does not mean that you get to automatically receive etho, which was the historic model. Now you either, you have to be an active participant in the network in securing and validating transactions. That's the only way in which you can, in which you could generate yield. That's one, and then two is naturally there's going to be some really dynamic and attractive rewards on the back end of this. So by reducing the issuance rate, by removing this fixed fee that we also have, and for the gas fee, you're going to see much more dynamic rewards and much more dynamic competition for winning the blocks. So hopefully, I mean, that touches on a lot. I think we can go in multiple directions, but I wanted to make sure that we tried to provide as clear of an example here as to what are the main features that are changing POA to DPOs, dynamic fees. And then naturally the only recipients of any rewards from the protocol directly will be only validators and delegators.
- [46:03]
Brendan
No, I think that's good. It gives everyone a bit of perspective as to what's happening here and also what's happening behind the scenes, I guess. Which one of those do you think is going to impact the roadmap or the future vision of Vechain the most?
- [46:20]
Johnny Garcia
Yeah, so you're asking across the. The sort of three major initiatives that I mentioned, Right? So V World v Better Dow and then BJ Renaissance. Yeah, Look I think, I think it's, it's kind of a one, two, three punch. I don't, I don't, I don't. You know, as, as it's not clear to me that at any point in time there's going to be one that's going to be more like there, there's, there's. These strategies are appropriate for the times and which they are being delivered. So if we think about Vechain renaissance, this is, this will result in two hard forks. One which is that we're introducing the dynamic gas fees as I mentioned just a few minutes ago, that's going to take place the first of July. So that hard for. We've already shifted to testnet. Mainnet will happen the first of July for the, for the shift from proof of authority to delegated proof of stake that's going to happen in December. So ultimately there's timelines and milestones for which these events will take place and ultimately be delivered. I think fundamentally what we're achieving here is one greater decentralization, right? Moving from permission to permissionless. So that will not only satisfy and try to get ahead of compliance and regulatory related matters, but it will also actively reward those who are participating on the network. So we think that there's greater incentive alignment that is definitely going to be a buoy for engaged participation and then also for prospective contributions. Be Better Dao is incredibly important because when I think about where are the users going to come from? Be Better Dao is effectively, in our view, it's us going to Web two users. It's not us requiring them to come to Web three. Right? So the sort of provincial or like mantra of go where they are, this is what the V Better now initiative is explicitly trying to achieve, right? When we talk about folks thinking about 20 million weekly average users or a billion new users into crypto, it's not clear to me that, and maybe I'll also. I'm not looking to try to, you know, start any fights or anything. It's not clear to me that, you know, Meme Coins is a thing that we need. That is the experience when we think about the user journey in and out that new prospective web3 users should have. It is clear to me though, when we think about crypto and blockchain that all of these things should be abstracted away and most Web2 users shouldn't even know that the crypto exists. It should feel much like, you know, our, much like the wallet experience that we, that we receive with our, with our Apple wallets, for instance. But that's, that's in the background. And instead you're interacting with the application or you're interacting in this instance potentially with the better DAO throughout your day, from your coffee to when you rest to when you take breaks from your phone. All things that are ultimately that incentivizing you. One, to, to take care of your, to take care of yourself and take care of the environment around you. So those are the two items that I, that, that I would, I would, I would primarily put most of the emphasis on, but I think that, you know, they're appropriate for the times in which they're being executed and delivered.
- [49:51]
Brendan
I think that's, that makes sense, I guess. Who would, who is the target demographic of Vechain? Do you think that it is more retail centric, more institutional centric? Is it a little bit of both? How does Vechain look at that? You know, when you all are going into a strategy meeting and you are looking at maybe partnering with clients or new institutions or whatever it may be, are you leaning towards catering more towards one side or do you have this 5050 approach of like, hey, we want anyone and everyone and that means both institutional and retail?
- [50:27]
Johnny Garcia
Yeah. So I like to think of, I'll harken back to how we even think about generative AI. This is a general purpose technology. And so therefore the way that you and I individually use and deploy AI models, it's going to be very different than the way that the investment management team at a, at a fund complex is going to deploy it or integrate it into their processes. So that's a way of saying, Brennan, we're for both enterprises and for retail. Now, that being said, there's a very clear focus here. From the foundation's perspective, we support the Network. From the DAO's perspective, which is separate from the DAO's perspective, their goal is quite clear, which is they want to incentivize and continue to attract more and more individual users. So the mandate and the remit there as professed by that community is pretty clear. Right. It's primarily going to be retail focused. It's primarily going to be user growth focused. And so I think again, going back to. I think we've all heard right, the 1 billion new users into Crypto for the most part, I think we can be generally honest here. When we think about the most prevalent use cases here, it's primarily been speculative trading and other things. And so that's not what the v. Better DAO is trying to accomplish. I think what that team and the group is primarily focused on is how do we bring real world, not assets but activity, how do we price and value those things? And then how do we attract, most Importantly the next 20, 30, 40, 50 million weekly average users that are actively engaging in a way that is beneficial to themselves, beneficial to the community. And then also candidly speaks with this, speaks to this image issue that we as an industry and the community have. Right. And I heard this the other day, I mean so I won't take credit but like this is a self regulating issue, right? Like other industries do this and we're gonna have to do the same thing when it comes to our image, when it comes to thinking about how we're engaging. And I know that's a bit of a step back from your question, but directly to your question is it's clearly focused on attracting individual users. I think there will definitely, there will certainly come a day and an age where, where, when you have a community of 100 million active users where naturally there's going to be commercial interests that build and enterprises will effectively go after that. And so if I were to prioritize the order, at present it's primarily users and eventually commercial interests. And pathways to monetization I'm sure will become abundantly clear in the future. Let's think about the early days of the Internet. I know I'm rambling here a bit but like we think about the early days of the Internet, I'd be hard pressed to say when Apple came up with the iPhone that you thought that was going to be the pathway towards successful relationships, that that was going to be the pathway towards successful democratization of, of. Of access to, to, to, to purchasing the S&P 500. No one thought about that. It was plainly I want to be able to call like make phone calls and syntext. And it has become something wholly different. Right, the Internet, Amazon, right. It was an online bookstore and now it has become way, way more than just an e commerce platform. So it's very early and at present it's primarily just user growth. Who knows what the next business application enterprise use cases are going to be in the future.
- [54:38]
Brendan
Yeah, well Johnny, this has been a super informative episode. We appreciate you coming on. For people that are listening in and they want to track what vechain is doing, they want to follow along with what you're doing. Where can they find you at?
- [54:54]
Johnny Garcia
Yeah, so you can find us, you can find us officially on Twitter at Vchain is, is, is our, is our handle naturally. I mean I'm, I'M I'm, I'm on there as well as at Johnny Garcia V Chain. I'm also on LinkedIn. So yeah I would highly encourage if you, if you have any questions about about vechain about what we're doing about what I'm doing on the institutional side. Happy to also in engage. So yeah, feel free, feel free to reach out. We're always, we're pretty, we're pretty open, open community.
- [55:25]
Brendan
Absolutely. Well, once again Johnny, thank you so much for joining us and we appreciate your time.
- [55:30]
Johnny Garcia
Awesome. Thanks so much Brendan. It was a pleasure. You know where your business would be without you. Imagine where it could go with more of you. Well, with wix you can create a website with more of your vision, your voice, your expertise. Wix gives you the freedom to truly own your brand and do it on your own with full customization and advanced AI tools that help turn your ideas into reality. Grow your business into your online brand. Because without you, your business is just business as usual. Go to wix.com memorial day door buster deals are here at Lowe's right now. Rewards members save $80 on the Master Forge 4 Burger Burner gas grill. Now just 149 plus. Rewards members save $900 on the Lowes exclusive Hisense French door refrigerator. Now only 9.99 Lowes we help you save. Valid through 526. Selection varies by location while supplies last. Seeloes.com for more details Programs subject to terms and conditions. Details@lowes.com Terms subject to change.