A Q&A with Mehdi Zhiri, CEO of Mosaïque LLC
CEO Mehdi Zhiri, who founded Mosaïque LLC in 2017, has dug deep into the digital asset world and sees a new dimension of possibilities. His firm provides education, consulting and technology services for customers interested in blockchain and digital ledger technologies. We spoke with him about the digital landscape and where cyrptocurrencies, blockchain and initial coin offerings (ICOs) are going.
Q: When you look at the blockchain and crypto space today, what does the landscape look like?
A: When I started to look at it about two or three years ago, it looked like some very promising technology that was going to change our world. At the time, I was working at a financial services firm where everything was centralized. As I learned more about blockchain and crypto assets, that’s where the black hole started to grow, and there was so much more than appeared on the surface. It took me almost a year to fully dive into the foundations and promises of the technology. And, do the promises align with the technology that is out there?
I learned some of the coding that is behind the technology so I understand how it is different from traditional technologies. I studied what researchers and academics are looking at in this space, which is very important to me. And then I tried to link that with the corporate world. And that’s why I see such a gap between what is underneath and what is on the surface. Without that perspective, I can see how people can really get lost and see it as a total mess. And to some degree they are right because there are still many unknowns that are nascent and need to mature. So, it could appear as messy to people. But hopefully, the maturation of technology will push that forward and we can use it soon.
Q: What are some of biggest points of confusion about blockchain today?
A: The biggest confusion is that blockchain technology was introduced by bitcoin. But it was really never called blockchain. If you read the white paper that Satoshi Nakamoto wrote, where he explained bitcoin, the word blockchain never appears. So, people know bitcoin and, by association, know the word blockchain and say that it is blockchain technology. And you have the concept of distributed ledger technology, which is a different layer than blockchain. The three concepts are becoming one very quickly as a way of introduction and people are getting lost. Is bitcoin a technology? Is it an asset? How does it work? And they think bitcoin can be called blockchain, but those two concepts are completely different. One is a cryptocurrency using the blockchain, which can be called a technology itself. The other is a larger technology that can support things like cryptocurrencies, smart contracts and other cryptographic concepts.
Q: So how do you clarify that? I think of bitcoin as two things at once – a currency and a technology.
A: It is two things at once although I like to call bitcoin a technology that is maturing over the years. There is always improvement to be made on bitcoin. I describe bitcoin as being like a car. And there are lots of other types of cars introduced along the way. And so that gives you the depth of what we are dealing with.
But what is also very important, is when people have this level of confusion, they need to start using the technology. My advice to anyone curious about how it works is to start by buying some bitcoin in small amounts. Get used to the technology and the digital wallet and learn how transactions are imprinted onto the blockchain. All of that is public domain. From there, read more about the technology behind it. And as you get there, you’ll start reading more about complex concepts like cryptography and so on. But that starting point is to start using the crypto assets.
Q: Let’s switch to ICOs, which are in the news every day. What is happening in that space and how is that playing into the crypto and blockchain technologies?
A: ICOs, or Initial Coin Offerings, are what we call crowdfunding. It is a very decentralized way of funding an idea you may have. And with that idea, you can take that out there to the market.
What we are seeing is that the funding goes superfast. Sometimes people can raise $10 million or $20 million in a few days or hours. Not every project is like this but there is a lot of euphoria out there. There is a lot of fear of missing out that is created by this crowdfunding movement. But I think we are evolving into a world where crowdfunding is going to take a larger role and will eventually replace traditional venture capital. That is what we began to see in 2017.
Some of the metrics measured by research companies in Q4 2017, when you compare the blockchain VC funding versus what we’ve seen in the ICO world, ICOs were close to five or six-fold what we saw invested in blockchain companies. This year, though, we’re going back to what makes sense, moving out of this euphoria. Going forward, I hope the regulation ensures consumers are protected but also creates rules of engagement for ICOs, so people can safely use that mechanism to raise funds.
Q: Can ICOs really disrupt traditional fundraising processes such as IPOs, or even VC investment?
A: I think it will. On the back of ICOs is the tokenization of assets. Most of these ICOs are creating tokens that most of the time represents an asset, whether real or digital assets. And so, I’d be surprised if five years from now a share or a stock in a company is not actually tokenized. We won’t be talking about IPOs anymore, and instead we will be talking about some sort of crowdfunding or combined mechanism. I think there is a big opportunity for that to expand in the future.
Q: Right, the T-Zero group, from Overstock.com, are doing something like that already – creating almost a completely separate, but regulated marketplace that circumvents traditional capital markets.
A: That is fueled by what is going to happen with regulation. When you look at their platform, they are preparing the future of securities tokens, as opposed to utility tokens. So for example, you would have a share of a company, being a securities token, completely crowdfunded and issued on that platform. There you are creating a platform that is fully compliant with the regulators.
Q: So where does the US stand in terms of crypto development?
A: If you look at ICOs, the US is sort of behind. The regulations are still not clear. And most ICOs are avoiding the US and running investment from Europe and Asia. Asia is really big. Singapore has created a sandbox to help with the crypto industry and create companies, and raise capital. In the US, even though regulators have issued the statement they want to do no harm, we are still waiting for more clarity. I can see a lot of advances, especially in Wyoming, where they just passed a number of bills, and defining what a security token really is. Again, that could create a sandbox for companies to make advances in that space.
Q: It feels like this is the new asset class that Chicago jumped on first.
A: It’s a new asset class. But also, what is more interesting from a financial services standpoint, the institutionalization of cryptocurrency trading is going to be made easier by the trading platforms that support futures. So yes, I see CME, Cboe, DRW and others being big players in that space. And now I’m hearing some of the cash crypto markets are interested in setting up offices in Chicago. Our trading, execution and clearing expertise, can really serve that industry well, especially as it becomes more institutional.
Q: What will this look like in the next few years – at the exchange, broker, even trader level?
A: This new asset class is going to disrupt every single layer that we know today in trading and clearing. The role of exchanges and brokers will be disrupted by new types of layers. And we’ll see more direct access to assets where there are tokens with a push toward end users, rather than a push toward the larger institutions who are deemed to be intermediaries today.
Q: Are there a lot of processes, then, that can be simplified?
A: Simplified, or completely avoided. The right words are: friction points. We use it a lot in studies on blockchain where you can break through with new processes. If you look at the life of a trade today, there are tons of frictions and unneeded processes just because firms decided they wanted to keep their own version of a database which causes a number of reconciliations down the line. These can be addressed in a decentralized model. So, it’s not only making it more efficient but removing processes that are costly for the customer.
Q: Is this an evolution or a revolution?
A: We’re in a constant state of evolution. What is the new normal today? Not what it was 10 years ago. It is an evolution. A revolution is something that happens quite fast. This is not a sprint, it’s really a marathon. And because the technology is very nascent, we have time to see new functionality and new concepts in the long term.
No technology exists in isolation. What blockchain looks like 10 years from now may be a combination of blockchain, AI, machine learning and quantum computing. And when you develop this picture, that’s where you start understanding this will take time to put in place and we have to make sure we have the right skill sets to implement.
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