May 3, 2023

Episode 262: Gene Hoffman, CEO & President at Chia Network, Inc.

Gene Hoffman currently serves as the Chief Executive Officer and President of Chia Network. Chia is a technology infrastructure company building a transformative open-source, public blockchain focused on real-world utility that is secure in approach, regulatory compliant, and sustainable by design. From 2017 to 2019, Hoffman was an advisor to the board of Chia Network before joining the Company as COO and President in August 2019.

Throughout his career in technology, Hoffman has built and scaled companies in enterprise software and SaaS, subscriptions, cryptography, and software development, served as a chief executive of a publicly traded company, raised over $215,000,000 in public and private markets, acquired four companies, and successfully sold three companies to PGP, Inc., Vivendi-Universal, and Amdocs. His success demonstrates the vital element of his entrepreneurial philosophy - deeply understanding the technology and starting with real utility and industry application creates foundational use cases and unlocks future potential.

Prior to joining Chia, Hoffman served as co-founder, Chairman, and CEO of Vindicia, a consumer subscription infrastructure company from 2003 until its sale to Amdocs in 2016. Previously, he co-founded the company that came to be, serving as CEO and President from 1998 to 2002. Hoffman has 23 years of experience in high-compliance security environments, including 12 years of managing PCI and SSAE-16 compliance for the storage of 220,000,000 credit cards.

Hoffman identifies as a true cypherpunk. In 1997, he helped end U.S. export controls on cryptography while at PGP, Inc. by personally exporting the PGP Source Code book. Just as Hoffman has spent his career driving the adoption of digital transformation, today he sees decentralized blockchain technology as the next step toward the future of finance.

Julian:Hi everyone. Thank you so much for joining the Behind Company Lines podcast.Today we're interviewing Gene Hoffman, CEO and President at Chia Network. Chiais a technology infrastructure company building a transformative open sourcepublic blockchain focus on real world utility that is secure and approachregulatory compliant, and sustainable by design.

Gene, I'm soexcited to chat with you, not only what you know you're working on currentlyand how you're really affecting. Kind of the, the implementation of thistechnology. We all think about web three. You all think about tokens and NFTs,but really there's this underlying just like, adoptable kind of new age,transformative technology, kind of that, that can implement in all theseunderlying functions that, a lot of people don't think about today, but you cansee the application of them and you see their value.

So obviously we'lldive into that and kind of what all that means and what you're working on atchia. But before we get into that, what were you doing before you started thecompany?  

Gene:Well, so I've built and sold a, a long list of companies. So my first company,we invented internet ad blocking and sold at the PGP Inc.

Which was kind ofthe granddaddy crypto company. And then when PGP was sold to McAfee, I almoststarted a cryptocurrency then in 1997, but instead ended up starting what and helped launch the iTunes music store and the iPod with TonyFidel. Then after Vidi kind of broke up their music industry situation startedan infrastructure company for subscription services.

That sold to Amdocsabout seven years ago.  

Julian:It's incredible to think about. You almost built blockchain back in 1997. What,what was the technology like that? What were you kind of. What got youintroduced to that technology and what particular did you see in, in terms of,its longevity and why essentially didn't you build back then and, and choose tobuild around it now?

Gene:Well, so it was the intersection of the, coming internet and cryptographybecoming a normal thing that, individual software developers could actuallyimplement. Yeah. And so, at PGP it was, could we take back the ability to knowwho's listening to what we're saying?

And, can weactually have control of, Whose hawks and who could share a secret or not sharea secret. And it was very clear that that would also apply potentially tofinancial transactions. And at the time, the, state of the art was what wascalled CH and digital Cash Cash after David Chum.

And there was areal seminal breakthrough in 1997 that was doubleblind RSA signatures nobodyneeds to carry. It basically meant that you could have true anonymity. In howa, like digital cash bank couldn't work. Yeah. But you know, I think the bestway to explain why we didn't have cryptocurrency then is my then girlfriend,now wife said, so you're telling me that we'll have to live on a strangeCaribbean island surrounded by armed guards.

Can we back to theUnited States? Probably not. You should do that music thing. So we thankSatoshi for finally fixing the, single point of failure problem, right? Yeah.Because of course, if you had like one entity that was the bank, that bank isgoing to be the target for the entire international world to regulate or worse.

Julian:Right, right. And, and why wasn't it essentially, was it that barrier for mostdeveloping around the technology that, led to, that kind of the progress ofthat not not coming out until later and, and what essentially did you see inkind of this renaissance around the technology and why people were getting,obviously kind of, there was this boom around tokens and things like that.

But you know, oncetechnology started getting built around a kind of Ethereum and that framework,what did you really see on how adoption really started to pick up?  

Gene:Well, so there's a huge breakthrough that is Nakamoto consensus. So, there's alot of subtle math there. There's a tremendous amount of like understandingapplied cryptography and game theory and a lot of learning from Bit Torrent.

Bitcoin named anhomage to Bit Torrent. So when you pull all those things together, you finallyhad a solution for the double spend or single point of failure problem. Causethat was the same reason you had the single point of failure in the past,right? So, It really proved that it was finally a technology that we couldlayer a, trust infrastructure and a transaction infrastructure on.

But both it, andthen later Ethereum have some significant flaws. Yeah. We did not see the realworld pick up and use Ethereum and Solidity because there are real risks from asecurity perspective. Yeah. And. The kind of development history of Bitcoin isthat we don't really have smart contracts on Bitcoin.

Yeah. And so if youcould get a Bitcoin that had smart contracts and also didn't use all thatelectricity, like maybe 300 times less electricity. Yeah. Then you would reallytotally take back the objections. That governments and banks and others had forputting real money on blockchains. And so, Bram and I set out to solve for theenergy problem of Bitcoin, and then most importantly, build a Bitcoin stylesmart contracting environment.

It is a much moresecure environment. I mean, Bitcoin is really right about how it is mucheasier. It is much easier to self custody. Yeah. You really can reason aboutyour assets, you can audit them cleanly. Instead of having, all these reentryproblems in North Korea stealing, 1.3 billion last year, solidity contracts.

Yeah. So, We had tofix that problem and give people a trustworthy programming environment to thenget folks like the World Bank and the IFC and the nations that are behind theParis article, Paris Agreement, article 6.2, to really look at this as atechnology they could use to solve real problems.

Yeah, and so we'rein the early days of that, but we were really bringing new use cases toblockchains where they make a ton of sense.

Julian:Yeah. And for those who don't understand, what are the risks or what are thesecurity risks with the other technology that Bitcoin kind of, I guess,mitigates Is it, and, and what are the reasons because of simplicity of it?

Is it the, the waythat it's built in terms of the logic? What in particular kind of are the, therisks? What are the difference between the, the currencies and or even justthe, the mechanics behind the machine that, that make it maybe risky or lessrisky?  

Gene:So there's really kind of two ways to go about keeping the data in ablockchain.

Yeah. Bitcoin andChia go about what's called the Coin model. Sometimes you hear it called the UT X O model. And the idea is, is like, Everything that changes, just some coinsget created and some coins get destroyed. Yeah. Now the logic inside thosecoins can be a touring complete computer. Yeah. So you actually have theability to do all the things you might want to do about, Hey, is this tradegonna be close enough to the price Oracle that it should go through or not?

In Ethereum, theytook a very different approach. You have a kind of centralized, smart contractthat keeps a list of all of the kind of values of ownership that come out ofit. And so it causes all sorts of interesting problems because it's kind of astate machine where, you might not know how somebody could kind of go throughyour program in a way that you didn't intend it to, and therefore, convince itto unlock funds that it shouldn't.

I mean, this iswhat North Korea kind of does on a weekly basis, right? Yeah. And, and itdoesn't work real well from a performance perspective either because you have areally popular, smart contract, so like a really popular asset or a reallypopular class of NFTs, any transaction has to update that specific, specific.

Central smartcontract, right? Where like in chia or Bitcoin, if I have a really popular NFTand I wanna sell it to you, the only thing that gets updated is your coins andmy nft. Yeah. Not everybody else's nft too, right? Yeah. And so you have a muchbetter kind of truly peer-to-peer capability and you have a lot betterefficiency.

And because you'vegot that kind of auditability, it's much easier to reason about, okay, what canyou do with this nft not. What can you do with this NFT contract that has allof these different things that you could and couldn't do with it? Right, right,right. I, I like to joke, one of the things we have is very different calledoffer files, and you're starting to see this in inscriptions at Bitcoin aswell.

Mm-hmm. Where I canpropose to you to sell my NFT to you for, X amount of money. Yeah. It's just asigned object and if you accept it and meet the other side of it, You can putit through on a blockchain, and now we've done a peer-to-peer transaction with nosmart contract in the middle. Yeah.

And you're doingthis in Ethereum, it's peer to smart, contract to peer, right. It's not trulydirect peer-to-peer.  

Julian:Yeah. And, and what was, I guess what was the mechanics of, of the technologyaround Chia that allowed it to be more energy efficient and create smartcontracts on, obviously the mechanics must be different, at least from Ethereumstandpoint, being that, it, it, it's, is it tied to, the token or the coins?

Cuz it seems asthough, solid, you kind of build those contracts into the system. Just curiouson the mechanics on how that works and, and how it has decreased kinda theoverall energy cost.  

Gene:Yeah, so there's kinda like two questions there, right? There's, how do we fixthe energy use problem and keep kind of proof of works?

Yeah. Security.I'll answer that one first in the sense that what Bram invented is kind ofproof of proof of work. So the way it works, it's called proof of space andtime. So you take unused hard drive space and like on the weekend you mightfill up a couple terabytes of your unused hard drive space.

So you did somework there. You have to go out and kind of print out mm-hmm. Proofs, they'relike bingo cards. And what happens is once you're done, you can now compete inevery block by listening to the network. And comparing the proof of time kindaannounces like a bingo number, right? Yeah.

And if you have abingo number, you're close enough. You win the block. Yeah. So it's very energyefficient in that, your hard drive is kind of idling until you are the personwho's gonna make a block. So you're not sitting there like constantly, crushingnew hashes out in compute Yeah.

Like Bitcoin does.Right? So, it's not energy free, but we're about three or 400 times more inefficient, more energy efficient with the same security and. We actually happento have the most decentralized network in the world. We've got about 120,000farmers and a knock moto coefficient. This is, how many different farmers aresigning of nearly 90 that compares to like Bitcoin at 50,000 and like a two ora three knock moto coefficient.

Yeah. So even withall those farmers around the world, we use about the same power that Ethereumnow does in proof of stake and. Never expected it, but it kind of goes to theefficiencies and other things. And then the other question is, okay, so how theheck did we make smart contracts in the Bitcoin style?

Right. And I thinkit's important to back up and say that Bitcoin is almost exactly right. Like there'sa whole bunch of the right security assumptions and good practices andunderstandably it's been afraid to kind of go to that next step because to getthere it's had to make. Changes to consensus.

It wasn't able tokind of start with a smart contracting environment. Right now we actually thinkChi Lisp, which is what ours is there's serious consideration by Bitcoin coreto adopt Bitcoin lisp and follow the same basic model because once you kind ofbite the bullet once, then all of your programming is now up in this,abstracted programming environment where people can create new things withouthaving to change the underlying protocol.

Yeah. But I mean,what we did is we looked at a list of, okay. If you were gonna do it in aBitcoin style, what are the major factors that would drive how you'd make thatdecision? And so one of the things is like, you want it to be interpretedbecause, an actual non interpreted language could like escape on your farmingmachine and start to like search for your private keys.

You don't want thatbat, right? You need it to be deterministic. You wanted it to be functional.These are all things that describe Lisp. And it was really funny. We were notlist fans per se, but basically one of our developers as we were whiteboarding,this was just like, we've just talked about a list dialect, right?

Yeah. And it'sreally funny. Lisp is all about lists. And when we think about what ablockchain is, it's a really sophisticated list. Yeah. And so by implementingChi Lisp and kind of generalizing that capability, we were able to launch ablockchain that we don't have to touch much to change. Yeah. But can really be.

As inventive asanybody wants to be at the smart contracting layer and get real auditability.So, the trade off is, it's certainly not as easy to write G list, but as justto write, sickle Solidity, which is kind of JavaScript. Yeah. But once you do,you know exactly what it's gonna do. You can really deeply audit it and the waywe work, instead of like, In Ethereum, almost every developer has to write anentire smart contract.

Now, often theystart from, somebody else, but in our world it, a lot of developers will neverwrite a CHI asset token. They will literally grab the primitive for CHI assettoken, because the way it works in chia and Bitcoin, the smart contract is theCoin. Yeah. So every Coin is a smart contract.

Even the basic,like, you have one chia sitting there in your wallet. It's a little smartcontract. Whose solution is your private key? Right, so, so a lot of developerswill end up using Chi Lisp in the sense of like, they'll have a type script ora go SDK to say, Hey, create my chia token with these parameters.

Yeah, and it'lljust do it. You won't have to actually like write a chi lisp.

Julian:It's so fascinating thinking about, the ways that the, that could be adopted,not even just in peer-to-peer transactions, but in, in har harboring data or,or kind of holding some amount of value in it. Whether it's data, whether it'sactual, kind of currency or anything like that.

Describe for theaudience, like some ways that, you've been able to uset and, and kind of itsimpact. And not only, the progress we've seen up to this point, but what's,particularly excited about the next phase of the adaptability of the technologyand kind of new avenues you're looking into.

Gene:Okay, so you know, the first thing that had to be fixed for enterprises andgovernments was, truly being truly decentralized. Being truly sustainable.Yeah. And then being secure at the programming language level. There's a lot of. Really good enterprise software developers at banks and governments who areworried about trying to use solidity for real money, right?

Yeah. And in fact,if you've seen, what you've seen banks do is they've run private blockchains,so a private copy of Ethereum, because then the North Koreans can't get on toactually steal the money. Right. But that's not the value, like the value isactually having the public chain so that you can interact with parties youhadn't expected to interact with yet.

Right, right. Wehave this technology we call data Layer, and what it is is a federateddatabase. So there's this like internal tension in in blockchains where peoplewanna like put PDF files on their blockchain. This is a really bad idea. Wehave like 2000 farmers in Ukraine during the war, and you do not wanna push2000 PDFs to 2000 farmers in Ukraine right now, right?

Yeah. So what thisdoes is instead it says, okay, anybody can create a coalition database. Mm-hmm.And so the, one of the best ways to describe this is our partnership with theWorld Bank, Ida and Singapore. This is the Climate Action Data Trust. And sothe idea is that the voluntary carbon markets, there's registries.

You may have heardof Vera Standard. Mm-hmm. And there's also national registries, Japan, the uk,Mexico, all these folks were participants in the final proof of concept. Andthis went live last December. They're integrating to it right as we speak.Instead of having just one registry, they actually have a meta registry onchain.

And so the idea isthat like Vera will have a rewrite table for Vera's carbon registry. So aproject comes and says, Hey, I wanna register, this acreage and this timeframefor this many tons of carbon. The first thing they're gonna do is check themeta registry to make sure it's not been registered somewhere else first.

Yeah. Yeah. So oncethey register it, they're then gonna put most of the details of it into theclimate action data trust. The way this works is. They make an update on theirtable and they publish the hash of that update. Yeah. And anybody else in theclimate action data trust will see that change on chain.

And we'll ask eachother, like Mexico might ask Peru for Vera's change. Yeah, right. Mexico grabsthat looks on chain and goes, yeah, this matches the change. An update thatJapan made, let me play it, apply it to my read only copy of Japan's table.Yeah. And so this way you can keep a multi-party. Totally spread databasensync.

Yeah. And trulyauditable and trustworthy and do this between like governments and privateparties, yeah. It's pretty hard for governments to like actually mediate witheach other, but this allows them through transparency to make it almostimpossible to cheat. Yeah. If like, I'm only using this as example, apologiesto Sri Lanka, but like, well, Sri Lanka decided to go rogue and start likedouble printing carbon.

Everybody could seethat. Yeah. And that's its own incentive not to do that.  

Julian:Yeah. And, and, and what were they doing beforehand? They were just kind ofkeeping a public registry and, and everyone just kind of, it, it's within goodfaith.  

Gene:It was an unsolved problem in good faith. Yeah. And this is a problem for thebuyers, right?

Because the buyersare kind of shooting, dark of Yeah. Did I buy something that's been sold twiceor not? Yeah. They'd been doing a, they said it was gonna be an eight year projectto try to find a solution here. We ended a year four, but before that, they'ddone private blockchains and those sorts of things.

But especially withthe governments involved, private blockchain isn't a good solution because,Even though like most countries like Singapore, who's technically the host ofthis, there's some countries that don't. And the whole point is that you wanteverybody to be able to participate in this.

And so now as ahost, at most they're the technical support number, not, the persons who cangrant or degra you access to this data set.

Julian:Yeah. And, and thinking, one thing that hasn't been proposed a lot on, on thispodcast in, in terms of networks that, run similar projects or haveinfrastructure layers on Web three is, we talk a lot about, consumers, we talka lot about, companies using it, different pieces of information, at least, thestate side where we can use the technology.

But what hasn'tbeen talked about is like, the communication aspect with other countries andall this work that's being done in transaction, through countries that,whether. They have conflict or previous history, or maybe they're cooperating,maybe they're not. There's a state change always.

Even if there's atreaty or something in place that, that says you have to behave well, what doesthat mean in terms of the trust kind of, layer to blockchain to allow countriesto not only do you know, carbon credit transactions, but also. Do other thingsin, in, in business, whether it's transaction through tariffs or trades orthings like that.

How broad can youknow this technology have an impact in just the activities that countries do toone another? And what are some pros and cons that come with that? That, thatinteraction  

Gene:Well, so I think that, other really big item beyond just international paymentsin general is the kind of supply chain monitoring and attestation.

Right? Right. Youhave a lot of geopolitical. Fights over, did this lithium ion battery come fromthe right place? Yeah. Is this a blood diamond? Right, right. And, and fromthat perspective, you don't solve everything with the blockchain, but you doadd a trust and transparency layer that you otherwise wouldn't have.

Mm-hmm. Yeah. So,you're still relying on things in the real world to, FedEx to correctly checksomething in, or the shipper in Peru to enter the right data. But now you havea transparent, audited, time bound record of all of that. So you can actuallynow go research and go, wait, I got something from the supply chain that didn'tmeet the quality specifications, who signed off.

Yeah. Right. Andit's the ability to kind of go walk back and see that, that, that transparencyengine means that people don't have the room to cheat as much in the firstplace right now, I will say there's probably some things where people stillwant to be able to cheat and blockchains are bad for that.

I mean, that's whatthe trade-offs sort of is. Yeah. But you know, ultimately there's usuallysomeone in that supply chain that it. That cares enough and has enoughinfluence as a buyer or as a consumer to be able to force that level oftransparency on down. And so, we see that like global trade, there's a bunch ofthings that like yeah, day-to-day customers don't know about, but like the waythat you actually like buy DRAM from a Chinese vendor and pick it up in LosAngeles.

There's a wholebunch of bank transactions people don't know about. Yeah, those can go away.You can go to a world where, You are like trusting only the shipper to sign offthat the shipment's been received. Right. And they're the only person who canchange that. And they actually cause the funds to flow.

Yeah. And you evenhave it have like a 30 day claw back after that that like, if the buyer,disputes it, it goes back to the escrow and all of a sudden, you do this in away that. Like, you don't trust the escrow agent. You only trust what they'resaying. Right. Right. It's a, it's a very different kind of model that youreally can do.

And when you talk aboutdata layer, and so the technology we have called offers, I'll give you thecarbon version of this. Like Japan can propose to Peru, Hey, if you make thischange in your voluntary registry, we'll make this change in our voluntaryregistry. Yeah. And we'll sweeten it with a million dollars.

And you literallyemail that. Yeah. And so Peru can look at that email and go, yeah, that's whatwe agreed to. They, create their other side of the transactions submitted onchain and now you've got trustless escrows company, country to country trading.Yeah. Certainly can be done as a a, if you're a DRAM wholesaler, right?

It's like, okay,the, the D Ram market, we all have our own consortium, but somebody, new in thecomputer business to buy some from us. I can prove to you that I own this inthe, port of Oakland, and I can prove to you that I can transfer it to you, andall you need to do is show me on the other side that you make the payment.

And if you do,We're done. You now have that bill of lading that says you own it, right?  

Julian:Yeah. Yeah. In thinking about just like this, this open source concept,obviously it's been around and, and it wasn't necessarily web three that, that,created this concept, but it, it really got popularized with kind of the, thewhole philosophy around building and that this community aspect.

What does that meanin terms of, the efficiency and the velocity that you can. Deploy, say DAPs andDeFi protocols and other projects on, within blockchain when you're able tocommunicate and, and build code with, minds of, of different countries. And,what, what are some of the exciting parts about that?

But, what are somethings that people are, say a little bit more skeptical about and, and, andconcerned about when kind of thinking about building, with, with just otherparties outside of, your own interests.  

Gene:Yeah. So you know, when you think about the internet as a revolution, right?

It was an interrevolution in like time, place and information. Yeah. There were kind of twothings that weren't naturally there and one was there was kind of noTransaction processing capability. I mean, you don't have a kind of nativecurrency of the internet, right? Yeah. And then the internet wasn't very goodat necessarily the authenticity of the data.

I mean, spoofingemail is the thing we used to do back in the day, and you still really canactually we all witnessed the spam problem, right? Yeah. So, so what's reallyfundamentally interesting about. Open source, public good blockchain is thatyou now have this trust layer that you really can certify, which AI model was usedto generate this llm.

Where did thatlettuce actually come from, and who signed off on it? Yeah. And wait, I mightbe able to charge you to talk to me. And as long as you're willing to pay meenough, you'll get into my wallet and be able to send me a message that, Hey,you wanna buy my N F T or you wanna buy my car?

Yeah. And thosewere problems we've always had on the internet that all of a sudden having aglobally distributed public good really changes and it becomes a commons. Imean, like in the climate action data trust, because we're an American company,we certainly can't help anybody in Iran.

But that doesn'tmean Iran can't find people who understand the technology and absolutelyparticipate in the climate action data trust and in, yeah, in the grand schemeof like, Solving climate change. You can see why having this kind of neutralbut public trust layer is extremely valuable right now on the other side.

We've only reallyseen the crypto casino, and that's a bad thing. I mean, we're watching thebacklash here. The, the, the places where blockchain are gonna take off, likeRed Hat Lennox took off in the financial infrastructure back in the latenineties, early two thousands are gonna be on the back end first.

So you know, youraverage user may never see some of the huge fundamental changes blockchainswill allow. Like as a carbon credit buyer, you won't necessarily know that thecarbon credit was recorded. The GIA blockchain tokenized in the GIA blockchainand then retired on the Geo blockchain. You'll just see like on your Bloombergterminal that you bought 50,000 tons of ISC class carbon and retired it.

Right. And the samething's gonna be true for things like we expect to start doing things like autoloan origination on chain. Now if you're an auto buyer, you're still gonna likesend your loan payments to the same loan servicer, but the loan servicer isgonna pay out the loan owners on chain monthly.

Yeah. Driving downthe cost of capital. Cause it's easier for them now to raise money and,automate all those systems. So for now, a lot of this stuff is gonna be kindof, In the back end. Now, I think long term, 10, 15 years, you may very well bebuying a cup of coffee with chia, at Starbucks.

Yeah. But that'sgonna happen more because like you're using this card that still looks likeyour debit card, but in fact is like using a secured wallet. Your phone and abackup system mediate and your security's just much better.  

Julian:Yeah. And obviously, it's a silly question, but you know what is.

The problems that,that this is solving. Obviously with the carbon credits, the trust layer isjust extremely valuable and, and especially when I'm sure just high volumetransactions and things like that, but, what are the problems that are solvingon the backend layer that say, we're, we're not seeing, that makes it sofundamentally critical to adopt this technology.

I mean, we thinkabout, oh, this is cool, this is new. There's a lot of trust there, which is alot of visibility, but. For what you know, is it for security, is it for trust?Is it for the, the speed of transaction? What are the, what are the problemsthat set it solving that we don't see and and why it's so imperative toactually adopt the technology on the backend.

Gene:So it turns out there are very few technologies that have true finality. Yeah.Fed wire in the United States has finality in the sense that like if you send awire to another bank, you can't get that money back from your bank. The bestyou can do is go to the other bank and try to get it there.

There, there,there's one thing that kind of starts this, which is, The ability to selfcustody and truly control your assets is a kind of new phenomena. It's beenalmost impossible for normal folks or even institutions to like self custodyequities or debt or mortgage backed security. Normal folks probably still won'tnecessarily self custody like their own stock.

But certainly largefinancial institutions would love to self custom that stuff and like directlyin control of loaning it out when it's being, loaned for margin and taking thatmoney directly instead of like using a prime broker to do that. Right. Right.And so the places where you're gonna see it, like there's kinda like six thingsBlockchains are better at.

They're very, verygood at payments. I mean, that's kinda the native thing. They're excellenttransparency engines, right? It's like supply chain. The carbon market, it's,let me, let me be able to audit and see what happened. And that means that peoplecan't cheat in the first place. If you do cheat, you leave a record andtherefore, right.

They're very, verygood at of all things, random number generation, which people don't kind of gacatch how valve flood is, but like, Literally sports drafts have been riggedaround this answer. So like, if you're a sports fan and you want your localteam to be able to get the first pick, you want a real random number used tofigure out that lottery.

Right, right,right. They're really good at self custody. I mean, the experience people haveof blockchains today is very limited cuz most people are using Ethereum. Theaccount model doesn't have the same sort of custody capabilities that the Coinmodel does. Mm-hmm. So like in the Coin model, you can do things like have thechain itself enforce rate limiting or, or make it so that the chain itselfenforces like.

Any one of thesethree keys can sign. Yeah. But this key can do it quickly. This other key, ittakes 24 hours before it goes through, and this third key takes 30 days. Andyou can overrule each other with real rules. And so all of a sudden like, oops,I lost my key. Isn't so scary cuz you take one of those backups, right?

But if somebodysteals your backup and you still have the good key, you're like, Nope, nope.I'm taking those funds back. Yeah, yeah. Right, right. So, so that's the kindsof systems we can have and when we start doing that, each one of these kind ofmajor use cases for blockchains never really fits in just like one box.

But when you havelike two or three of these things, you really start to get to a place where ablockchain is going to be better at its ability to get these things done than,the traditional way of doing them.  

Julian:Yeah. And thinking about whether it's external, internal, what are some of thebiggest risks that, you face today that chain network faces today?

Gene:So, look, there's a, obviously just a sentiment's horrible out there now, forus, our core paying customers kind of don't care. They've got real businessneeds and financial institutions and banking and other places to go get thingsdone. So, I think that's the, the shortest term kind of item, but, we havealways kind of known that this was coming from a regulatory perspective.

We started outsaying, look, you gotta follow us. Securities laws, compliance matters. And wedid we recently filed confidentially for an offering with the S E c, which kindof culminates a long conversation we've had there. So, we believe that if youbuild something the long term, you can kind of, weather through the ups anddowns here.

Julian:Yeah. And, and if everything goes well, what's the long term vision?  

Gene:So, we think this is at least a 20 or 30 year effort. The, the real goalactually is to kind of get the level of adoption so high and have built enoughstockholder value that we're able to solely but surely kind of spin out theindividual components.

So the Red Hatsoftware business goes out to the shareholders and then ultimately, potentiallythe pre-farm. The coins that the company owns are also sort of distributed tothe shareholders via either stock buybacks or dividends. And then at the endyou kind of create something like the Linux Foundation, where you've got afoundation that makes sure that the core development team can always be there.

Yeah. But you know,as more banks and governments adopt, they're gonna have the same way that Linuxdoes. You've got your Linux guy at Cisco, you've got your Linux guy at Intel.Right, right. And I expect the exact same thing to happen with the GIAblockchain where you know, you've got that kind of.

Core ongoingMozilla or Linux Foundation, but that ultimately the company that you'recurrently talking with doesn't exist anymore and was kinda distributed to theshareholders.  

Julian:Yeah. Yeah. I always like this next section I'll call my founder faq. So I'mgonna hit you with some rapid fire questions and we'll see what we get.

So, I always liketo open up with this question. What's particularly hard about your jobday-to-day?  

Gene:The hardest thing about this particular job is we're doing so many things thatare so novel is, I joke with people in Capitol Hill and other places that theproblem with our space is you go from the edges of the bleeding edges ofcomputer science to like the 1933 and 1934 securities act, bad sentence.

So you really haveto have this kind of broad expertise at a pretty expert level that. No one'sreally pulled together before, so you do a lot of time trying to explain somereally tough stuff.  

Julian:Yeah, yeah. What's one thing that your technology hasn't been used for, thatyou're kind of waiting or hoping, or even maybe working on now to start, usingand implementing it in a particular industry?

Anything come tomind?  

Gene:So I, I'm kind of weird and boring. I'm excited about actually starting tochange how international shipping works. Yeah. It's gonna take some time to getthere, but there's no good reason why you couldn't truly automate and take alot of the risks out of the entire process.

Yeah. What Chiakinda gives you the ability to do is to build all the tools that you see insidebanks, but now you can make them explicit and customize 'em for what you'redoing. And so, getting rid of letters of credit and the way that internationalShipping and international commerce works.

Yeah. I think it'sjust gonna be a huge transition, so, yeah.

Julian:Yeah. Thinking about, obviously, your, your professional expertise in buildingbusinesses and, and, and one thing I'm always curious about, first seasonentrepreneurs like yourself is, what are some of the kind of early mistakesthat businesses make or founders make?

When kind ofsetting up the, the infrastructure layer, even the, like the, the importantcomponents of their company to build long term. I think a lot of people startbuilding around, a quote product, maybe idea versus a problem. Sometimes theystart to scale without understanding what they're building towards or even,what part of the business is necessary.

What are somecommon mistakes that you see companies made or even you've made yourself, andwhat are some ways to kind of correct and start kind of building kind of a moremature company, even on the onset as an early founder.  

Gene:Well, so there's a bunch of things that kind of answer that question, but Ithink the thing I can kind of point to quickest is you've gotta really careabout the problem you're after.

Right? You, yousaid something there where it's like people got a new technology and they'retrying to find something to do with it. It's like, no, no. You've gotta caredeeply about what that problem actually is because you're not likely to haveexactly the plan to start with. Be the plan that really gets product market fitand goes right.

And I like to saythis to people a lot. You need to be willing to eat glass over the issue. Mostpeople have no idea how much. Pain and setback and you know how many times youwill be told no. It is a, a very, very hard path. Yeah. And if you really careabout what you're trying to do, it makes it much easier to go do that.

You wake up in themorning going, this battle is worth it. Let me keep fighting. Yeah. So, that's,that's the thing I'd say. Now the other side of that is there's a bunch ofpragmatic crap. It's like, go figure out how to not have to rebuild, like yourgeneral ledger and accounting software every.

Every X years,right? Yeah. So, so some of that is just, go get some best practices cuz it'sbetter to kind of get that stuff right. Cuz by the time you're scaling likemad, you won't want to deal with it. Yeah. But it really is the, if you'regonna be all in, you gotta be all in.  

Julian:Right. Yeah.

Thinking about howfounders kind of focus on building their company and, and thinking aboutwhat's, what's more, I guess, popularized around building, previously it washaving, great ui, ux and interface and things like that. Having kind of morescalable, microservices built into your your company.

Thinking aboutnowadays it seems like a lot of AI engine, a lot of mls. Ex become extremelypopular. Obviously we chat g p t becoming, widely adoptable and, and usable. Howhas, the impact of that type of technology whether, obviously whether it'simpacted positively or, or built internally.

How has AI kind ofbeen implemented in, useful in, in, your building process?  

Gene:Well, so for us we're more interested in frankly training AI on how to writechs, that's actually an interesting tool from the, code development side to beable to make yet another, ease of use pattern and yeah.

And CHS wasactually sort of, Especially relevant to what the way AI kind of think. Justagain, the kind of linear mode of it and everything else just makes sense.Yeah. But you know, if you're asking in the general sense, I mean, I, right nowI see AI as a really beautiful feature of a product that hasn't been shippedyet.

Right. And, ultimately,like the, the old master plan for most people is go do 80% of a problem, 20Well, partly 20% of the problem, 80% better. Right. And, expand in later.Right? And so, so I think there's gonna be a lot of opportunities to take AIand do interesting things that cut into, incumbents abilities.

And, you see thiswith Microsoft, playing with Google on this one, right? Right. But I think thatcan be done even at the, two, two people in a startup. Mode. But again, itcomes back to, okay, so what problem are you trying to solve? Right? Like,right, making developers far more efficient.

That's a goodproblem to solve. There's a lot of leverage there if you can really do that.And we're seeing that, right? But, I, I think it's to be seen by new andinteresting founders of, okay, if you've got a chat bot that's pretty close andit's like 90% accurate, What can you do with that?

Julian:Right, right. I always like to ask this question and what's something in yourcareer that you maybe weren't particularly good at, but now you're better at?Anything kind of come to mind?  

Gene:Oh probably sales, and I don't mean that like I've always had an ability tokind of sell the investment and the idea, but the actual, like how do you goget somebody like the BBC to go spend, hundreds of thousands to millions ofdollars on something?

And it's beensomething I've really enjoyed learning from some of the amazing professionalsI've had on my teams. Yeah. So that's been one of the ones that you know,really helps. And I will tell you, it ends up making you a much better.Founder, entrepreneur, because you can kind of think about how to engage withthat when you're thinking through product and you're thinking through whichdirection to go.

And like,sometimes, especially when you're talking about enterprise stuff, You don'thave to be done with the product, you just have to have a good explanation of,here's the core that you're gonna like and here's our path to supporting someof the more sophisticated stuff you might need.

Yeah, right. And inthat world it's a very different world than it's kind of the consumer worldwhere, it kinda has to start working immediately. But I think the core lessonsabout sales work both ways, it's just you have a much shorter sales cycle whenyou're talking about consumer.


Julian:Yeah. Well, thinking about, founders who are needing to like incorporate a lotof stakeholders, whether enterprise sales or even mid-market. What are someclever ways, or even just if you think about the strategy and how you approach,thinking about a partnership, are you reaching out to say the primary decisionmaker or are you reaching out to the core?

How do you identifythe core? What are some ways you kind of build, build the funnel in regards tohow to kind of not only reach out to that business, gain interest, but then kindof secure that and get a contract signed? Any, anything that had been helpfulfor other founders?  

Gene:Yeah, so I, there's a couple things like, people talk about solution selling,and I do believe in it.

And what I mean bythat is, you're not going, you're not gonna hear somebody always wanna talkabout your product. You're instead gonna talk about the problems, right? Right.And, and what you're really trying to do is cast a net to find what we call thecoach. And the coach is the person in the, in the company who's not thedecision makers.

They're notnecessarily the. Ceo, in fact, often that's the wrong way to go. You wantsomebody, like in my previous company, we did subscription infrastructure. Youwanted somebody on the finance team who, or the marketing team who had thenumber to be worried about their subscriber count, right?

Yeah. And to bethinking about how could I improve that? Because if you can get that coach andthen they can explain to you exactly where the pain is, now all of a suddenit's much, much easier for you to go articulate a specific message that's gonnaresonate and get them. As coach to look really good in front of the actualdecision maker, get the decision maker bought in, and bring and have momentumto get something done.

Right? Yeah. And soit's really thinking about how do you get to those coaches as the kind ofnumber one way to break into, larger opportunities.  

Julian:Yeah, yeah, yeah. I always like to ask this question cause I love how foundersextract knowledge out of anything that they ingest. Whether it's early in yourcareer or now, what books or people have been, highly impactful, high, highlyinfluential in your career.

Gene:So one book that comes to mind, it's kind of weird, is Knowledge and the Wealthof the Nations. This was, describing like what it was to create wealth and howthat all works. Yeah. It's a, it was a really fascinating book to think aboutwhat, growth really was. Right. And that like ideas of the actual thing andthat they kind of, spread overturn.

But the, the placesthat can create the most ideas the fastest are where the most of the wealthgoes. After that I don't remember the book, but it's the basic concept ofstarting from why and it's a kinda a marketing principle of going, okay, whythe hell do we care? Right? It's like, it's not like, Hey, I've got somethingcool to sell you.

It's like, no,look, this technology's gonna secure people's civil liberties and wealth.That's the why. Yeah. Now, you know the how is it's got feminist security, realself custody. You're gonna be in control of your destiny and you're gonna speedup these systems. You're gonna make 'em more certain, you're gonna trust lesspeople.

It's a differentsell. Right. It's like it comes from why it matters. And so that's the otherone that I think is kind of really kind of critically important.  

Julian: Ilove that. I know we're coming to the end of the episode here, so I wanna makesure we didn't leave anything on the table. Is there any question that I didn'task you or anything that we didn't talk about that you wanted to bring up?

Right, right.Before we end here, anything that we left on the table?  

Gene:Well, I think the last thing I would just say is, especially in this currentenvironment, There's a lot of noise about what I think our projects that didn'tnecessarily do things well. And so when people are like, there's no such thingas DeFi.

It's like, yeah,well, in Ethereum it's not really that decentralized, but there is real DeFiand that real DeFi is gonna be extremely powerful. Not just, businesses andgovernments, but you know, sending money back home to South America, yeah.Being able to transact with people across the globe and buy like digital artthat you never would've had access to and actually own it.

Yeah. It, it, it'sa really powerful set of technologies when you have true peer-to-peer financialcapabilities.  

Julian:Yeah. Gene, it's been such a pleasure. Not only learn about your experiencekind of, and the evolution of technology and the internet and really thinkingabout how adoptable, the new kind of wave of not only, web three technology is,but you know, how its impact can be from, a consumer level, even some of thethings that we don't really see.

And also on, on aglobal level and the transactions, and even on supply chain. How muchvisibility, how much transparency, how much kind of, things could be productivein a lot of ways by just. Having a, a general kind of understanding of, wherethings are and how things are and it's so exciting to think about the, thefuture of the technology as well.

So I appreciate youbeing on the show. I hope you enjoyed yourself. And thank you again for beingon Behind Company Lines today.  

Gene:Thank you, Julian.  

Julian:Of course.

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