Tuesday 9 June 2020 8:18 pmBEQUANT Talk

EXCLUSIVE: Dan Simerman talks Covid-19, Digital Assets and IOTA

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Dan Simerman is an investor and technical product manager well versed in consumer psychology, digital assets and open source software development. Dan has a history of building software for Fortune 50 financial institutions, multinational media companies and strategic consulting firms.

As Head of Financial Relations at the IOTA Foundation, Dan’s goal is to support technology for a new type of open infrastructure, one where people and devices can seamlessly exchange data freely, safely and securely in a digital world.  In his role, Dan focuses on how to build the ‘financial infrastructure’ to support a technology with its own native digital asset.  The IOTA Token, developed as a permissionless, peer 2 peer value transfer mechanism, requires a host of systems, processes, and approvals for it to be widely adopted by individuals, organizations, and potentially governments. 

Dan talks exclusively to BEQUANT about how the IOTA Foundation has been affected by Covid-19, how digital assets are going to be disrupted by the impending economical changes and what the future holds for the industry, blockchain and IOTA.

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How is your company coping through Covid-19? 

We’re doing well considering the circumstances.  It’s true that many of our partners are having a difficult time and we feel deeply for how it’s impacting individuals and our community, In a weird way though, many decentralized organizations were well equipped to handle a drastic change in how we operate and work.  Many of us were already working remotely and had acclimated to this way of doing business for some time. 

Also, in a weird way, the world of digital assets and distributed ledger technology feels a bit insulated from what’s happening in the global macroeconomic environment. Sure, we are being incredibly careful with our finances and making sure that we can support ourselves in the case of a prolonged economic downturn, but digital assets and DLT technologies have always been, in some ways, an alternative to current economic and financial systems.  They were designed to support a new way to exchange value, data and information.  Because of this, many people feel that now is the time to be heads down working.   This may not be the case for some of our competitors that are closer to traditional finance and silicon valley, but I would guess that many of the older protocols see this climate as an opportunity. 

What is your company doing that is involving digital assets?

So we are actually not a for-profit digital asset company . IOTA is a non-profit Foundation that is in the process of developing a new standard for data and value communication across IOT devices and people. In that context, we have created a digital asset to support the value transfer capabilities of a future global IOT network.  In the realm of digital assets, our primary goal and responsibility is to build a set of systems and partnerships around our digital asset so that the IOTA Token is easy to acquire, easy to use, and easy to manage. 

How does IOTA support the digital assets market? 

IOTA has always been a contrarian of sorts.  Since day one, we set out to design a network that could actually be used and adopted by industry.  Because of this, we developed an architecture where the IOTA token was Feeless, meaning there are no fees to send an IOTA between two participants on the network. 

In this way, IOTA supports the digital asset market by extending the use cases and capabilities of digital assets in the real world.  For most blockchains, data and value are stuck on the same ‘thread’, meaning that you cannot send data without paying a fee to the network. This makes data heavy or data-centric applications nearly impossible for large corporations to adopt for the following reasons:

  • Usability: It’s problematic UX to force users/businesses to hold a digital asset for an application that has nothing to do with value transfer. Clicking on links require small fees. 
  • Cost: What happens if you have an application that handles millions of transactions? Even if it’s a small fee, this can add up over time. 
  • Legal/Accounting: The majority of companies are not set up to support digital assets.  Forcing them to build digital assets into their accounting practices is a huge barrier to adoption. 
  • Regulatory: There is a good chance that the digital assets that sit atop DLTs may end up being securities due to how they initially raised funding. Companies will not want to take the risk of holding a digital asset (that may be a security) for paying for data transfer in a distributed application. 

Not only does IOTA’s feeless architecture and infrastructure mitigate these issues, but it significantly strengthens the market as a whole. IOTA is not a blockchain but a distributed ledger called The Tangle. We designed it to address many of the limitations of the current blockchain market for businesses actually trying to implement distributed technology for real world use cases. 

How will you IOTA infrastructure help to strengthen the market? and What in your view will happen to digital assets post COVID-19?

There are probably two converging forces that will drive interest in digital assets as a result of COVID-19:

  1. A fear of contamination may force governments to look at ways of being pandemic resistant in the future. One way will be the digitization of the local dollar. It’s very possible that the infrastructure for a digital dollar or a central bank digital currency may be similar to what’s being developed for digital assets today (custody, payment solutions), so natural cross pollination could expand the use of digital assets as a whole. 
  2. Groups will use the current actions of governments as reason to explore alternative economic systems. For example, we saw the 2008 financial crisis as a massive driver for Bitcoin, the first digital asset of its kind. It’s quite possible that the actions we are seeing take place will drive even more people around the world to explore Bitcoin and even other digital assets like Ethereum and IOTA.  

Why do you think the digital assets market is experiencing a high right now?

A mix of things: The market was expecting the ‘halving’ event to crash the digital asset market (there were a lot of shorts placed from institutional players).  When that didn’t happen, It was a positive sign that the halving wasn’t a catastrophic event…causing upward momentum ever since.  People are very much playing into the idea that ‘history doesn’t repeat itself but it certainly rhymes’.  The last two halving events were the beginning of parabolic moves for digital assets – and many believe this will happen again in this next cycle. 

Digital assets have held up pretty well in their first real economic test. Sure, we had that big selloff in March that coincided with traditional assets, but overall we’re seeing more and more individuals and organizations trust digital assets because they hold properties that other assets may not have, like a hedge against inflation. 

Blockchain technology holds promise – what do you think is a good use case for it in the current economic climate?

Regardless of the current economic climate, I’ve always been of the opinion that blockchain technology holds the most promise for connecting the human economy and the machine economy.  Which is why I’ve been such a fan of IOTA since day one. Traditional blockchain architecture doesn’t support two critical elements for true adoption: Scalability and feeless microtransactions. 

By offering the ability to scale the network as participation grows, IOTA creates use cases to secure the data and value that is sent between humans and devices in future corporate, independent and smart city networks.  Without such an open system, centralized networks would be at risk of putting lives in danger as critical functions are replaced or augmented by technology. What happens if someone hacks into a centralized database connected to pacemakers? Or shuts off critical energy infrastructure for a population? 

Providing trust and security to these physical/digital networks is the best use case we have at the moment. 

What are some barriers still holding back wide scale adoption of digital assets?

The technical, legal, and regulatory infrastructure around digital assets still has some catching up to do with the world of traditional finance, however we’ve made some significant progress in the last 24 months.  At this point, the biggest barriers are:

  • People and organizations feeling psychologically comfortable with the idea.  We will see this shift rapidly as new entrants like Paul Tudor Jones feel comfortable coming out and sharing their allocations with the world. 
  • Comprehensive legal and regulatory guidelines – many companies that want to use digital assets are still waiting for guidance in the form of formal legislation. Until that happens, it will probably be the more risk prone groups that start to incorporate digital assets into their business models. 

How do you see digital assets evolving in the next decade? 

I’m going to take a contrarian view here and say that we’re going to see a Cambrian explosion of the ‘tokenization of everything’.  Once we have proper secondary markets for security tokens (for retail) it will open a huge market for people to build innovative business models that allow individuals to participate in the growth and success of their favorite products and services.  There will still be new native digital assets released on future protocols that don’t exist yet. Because of the behaviors that go along with crypto-economics, there will always be someone trying to create an incentive with a token/currency/digital asset. This will become an even more crowded space then we’re seeing now. 

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