Blockchain's Future: Decentralization, Tokenization, and Industry Impact with Johannes Schweifer

Pivoting to Web3 Host [00:00:00]:
Welcome to pivoting the web 3. And I have Johannes Swifer here today and he is in Vienna, Austria. Now, Johannes, you may not know or be familiar with him, but many on the blockchain side are because he is one of the founders and leaders and also one of the founders of Core Ledger, which you're going to hear a lot about, but rather hear me talk about everything going on in blockchain and what he's been involved with. Say hello to your audience and ours and let us know how you decided to come out of the chemistry space and move all the way into blockchain and technology and all the great things you're doing today.

Johannes Schweifer [00:00:44]:
I don't know. It's a pleasure and hi audience. So a pleasure to talk to you. Well, my story is rather long, so I think it will not exactly fit the scope that you set for the, for the podcast. But you can cut away the boring parts, right?

Pivoting to Web3 Host [00:01:00]:
We can, we can cut away and get a little bit of an idea on what brought you, what brought you to web3, what brought you to the blockchain space and Bitcoin Core Ledger and everything that you've done. What piqued your interest? How did you know that was the way to go?

Johannes Schweifer [00:01:15]:
Actually, all. It was all by a lucky incident, as you already introduced me. I'm a chemist, so theoretically chemist. I did a PhD in quantum chemistry. It was really interesting, a lot of coding. So I'm also a developer, which is sometimes a nightmare because I'm still coding sometimes some parts of solutions. Anyway, after chemistry, I simply wanted to do more with, let's say with. To do more in the industry space.

Johannes Schweifer [00:01:50]:
So not really exactly working in chemistry, but bringing to fruition what I learned the doing the best, solving problems. So what most chemists and physicists and mathematicians become is a consultant. So I went into consulting and I spent many years in Germany, accidentally came to Switzerland. And by the way, at the moment I am in Switzerland, I'm in the city of Bar, which is next to Souk, that's in Crypto Valley. So really in the western part of, sorry, eastern part of Switzerland. And well, then I was already, I mean, I already left Austria for good practically, because then I settled here in Switzerland. I also have a C permit now and will soon register as a, as a. I mean, get a Swiss passport.

Johannes Schweifer [00:02:39]:
The point is, I was. I spent almost 8 years, 10 years in consulting, project management, designing complex software solutions and also working for banks. And while I was working for a bank, I met a very interesting guy, Nicholas Nicol. Eisen is his name. The two of us, we became co founders of Bitcoin Swiss. And actually he told me about bitcoin. And the funny thing is I love science fiction. Really.

Johannes Schweifer [00:03:08]:
I love it very much and read so many novels. I have bookshelves full. One of such an interesting science fiction novel series is Shadow Run. I don't know, Donna, have you ever heard about it? Shadow Run, it's kind of a mixture of science fiction and fantasy. But the fascinating part about it is, and I read it in the 80s, it's they, they use digital credits for payment. And when I read this, something was kind of disturbing. I mean, you, you're used to reading things which, where you know, okay, it's not possible. But something was intriguing there because these digital credits, I thought it's not possible actually to handle it.

Johannes Schweifer [00:03:53]:
Because if you have digital units, I mean, if money is purely digital, if you can really store it on a USB stick, for example, which is exactly what came up in these novels that people store their credits on cred sticks, then what prevents you from copying those units? So becoming a millionaire by just thousand times multiplying your thousand credits that you have. And then in 2011, just by talking, actually by talking about gold and then being introduced to Bitcoin by Nikias, I realized there is a solution. It's possible to prevent digital units to be copied, that is Bitcoin. And therefore I realized this technology really has potential. And that's the reason why actually I became, I mean, I'm not a bitcoin maximalist going in contrast, right? But I became a believer in the technology because once you understand how something works, it's much easier actually to also invest in it because, well, you know that it works, right? So it has on the one hand not only a theoretical background, but also some something that can be practically used. And they already read about it in the science fiction novel, they use it for money. So that was the time when I became an investor in Bitcoin. I'm basically only good as a hodler because I always failed when I tried to speculate.

Johannes Schweifer [00:05:18]:
So I just, I didn't attempt this very often. But. Well, after realizing the potential of bitcoin, after reading the white paper and understanding it, Nicholas and me discussed how we could potentially use it. He told me about the friend of his in Denmark trading bitcoin. And he said, well, his bags full of money at home. And I was like, well, okay, that doesn't sound good. I mean, bags full of money means some kind of shady business, right? Actually, it Turned out that it was. But the point is we realized there is business, right? We just have to do it in a clean way.

Johannes Schweifer [00:06:00]:
And so I still remember that we have been sitting together, actually the four of us. There were two more co founders, but they, they left the company three months after, after founding. So you don't really have to count them as co founders at. They're still in the commercial register.

Pivoting to Web3 Host [00:06:17]:
But let me ask you this though, while you talking about that. How did, what did you learn as a co founder for Bitcoin? Bitcoin Swiss. How did that end up influencing your vision to Core Ledger? Because it sounds like you had experiences along the way that led you one point to another point. Did that lead you into Core Ledger? How did that happen?

Johannes Schweifer [00:06:39]:
Absolutely, because the trading business, I mean, it was a simple business, right? People give you money, you give them bitcoin and vice versa. In the old days, it was mostly the first, so just people getting into bitcoin and the difficulty there was actually getting the money into the bank account because banks have been an obstacle ever since. And it has become a little bit better. But nonetheless, it was always difficult actually to trade bitcoin professionally. And I realized that's not the kind of business I want to do. I can tell you many stories about Bitcoin. People who turned up in front, as in our office, demanding things like replacement for hardware devices which we never sold to them, but still they demanded replacement for the bitcoins they lost on these devices. If I count that now, that was a fortune.

Johannes Schweifer [00:07:36]:
Anyway, so the point is, it wasn't my business first off, not the right audience and customer segment, etc. And I'm an engineer, so I understood the potential of bitcoin, sorry, blockchain technology, for being used for all kinds of decentralized applications, even centralized applications where you want many parties to collaborate, but no single party should be in control because they distrust each other. And there are many such applications, for example, supply chain management, when you share shipping data, or when you want to have proof of origin of whatever it is, or the EU has just recently introduced a new law. They have to prove the origin of your raw materials, not just the origin, also the entire history, right? Where it comes from, where it goes to and why. Because you need to prove that you are using a certain amount of recycled materials. And all this would not necessarily scream blockchain, but blockchain would be or is actually a naturally fit, a natural fit for this problem, natural solution. So there is a market, it's a difficult market. So I Mean, I didn't know this before we started collection.

Johannes Schweifer [00:08:52]:
So it took us really years to get the business really going. And I'm now happy that that's actually running in the way how we envisioned it would. But nonetheless, it was a tough way. I chose that way because I'm an engineer. I'm never shy of difficult problems. I never fell for the easy money. I should have, in hindsight, would have been a much easier life. But it's what it is.

Pivoting to Web3 Host [00:09:17]:
So core ledger, the infrastructure is blockchain technology. And then with that said, do you have interoperability at this point in time? What direction do you see that going.

Johannes Schweifer [00:09:30]:
With core ledger interoperability with what? With Bitcoin or what with.

Pivoting to Web3 Host [00:09:35]:
With. With other blockchains in regards to develop direction.

Johannes Schweifer [00:09:42]:
Cor Ledger is not a blockchain. It's. It's actually an unfortunate pick of a company name. But we only realized this later. The pick, the decision. Why we chose Cord Ledger as the company name was because it was more about documents. So a ledger is as a book where you write whatever, all things that happen. Right.

Johannes Schweifer [00:10:06]:
Like an audit trailer, what else? And that's exactly what the blockchain originally was and actually still is. I mean, a ledger where you have all kinds of transactions which prove where some values came from, where they went to. And core ledger, because we, in a very first step, developed a way how assets can be traded, multiple assets actually, between multiple parties at the same time, without a risk, without counterparty risk. That was and still is a huge innovation. And this could also span technically, theoretically different blockchains. And therefore there's one core ledger which combines all them, which is not necessarily a blockchain infrastructure by itself. Right. But actually a protocol.

Johannes Schweifer [00:10:57]:
So what we built is what we call an operating system, token economy operating system.

Pivoting to Web3 Host [00:11:03]:
Okay.

Johannes Schweifer [00:11:04]:
Can run on different blockchains. It's blockchain agnostic. Imagine it like the. The blockchain being kind of a computer hardware, but you need some logic in order to run more complex models, more complex business models. This is us. So coiled ATAOS is the operating system for token economy models. We have now expanded it. It's also a data economy operating system because we are transacting also data nowadays when we talk about supply chain management or the proof of origin, proof of authenticity, it's just data.

Johannes Schweifer [00:11:38]:
There's no token involved. So it has evolved a lot.

Pivoting to Web3 Host [00:11:45]:
So the audience has an idea on what you're really communicating. Can you share with us a use case or an example of the difference of what it does and what it didn't do like a situation that didn't use it. And now what it does using core Ledger.

Johannes Schweifer [00:12:05]:
Yes, typical example. Of course you can tokenize everything with our technology, but we are not doing meme coins because there are other infrastructures and platforms available to just issue quickly a meme coin. But what you can do with Corolla, I mean you can issue meme coins, but there's no, I mean it's not exactly the right platform where you would do it. But what you can do with it is, for example, generate a timestamped proof of a document that you hold. Right? Now imagine you sign an NDA with somebody and an NDA is always problematic when it comes to penalties. But if you have to pay money if you violate the NDA, but the difficulty is proving that you already had some information before signing the NDA. How can you do that? Blockchain technology is perfect for timestamping things. You cannot change the timestamps, it's impossible.

Johannes Schweifer [00:13:06]:
So if you have something at time A, which is prior to signing the NDA, NDA is here, it's time B, you have that, you timestamp it. You don't put actually the document on blockchain, it's not necessary. You just put the fingerprint of the document, it's called a hash on blockchain timestamp B, later you sign the NDA timestamp C, somebody says I sue you because you used this information. You can go back and point to blockchain and say, look here, I already had the information. I wouldn't have been able to insert it here if I didn't have it. So blockchain helps you to prove a timestamp. That is one, one thing we can do a thousand things like certificates, certificates of education for example, or also we have a very powerful tokenization engine. But for things like real world assets, one of our customers is digitizing gold.

Johannes Schweifer [00:14:05]:
Gold is very important asset actually because it's one of the most elemental stable values in terms of value, not currency. It appreciates of course, because the fiat currency depreciates. So gold is a very stable asset, it has always been. And therefore everybody wants to somehow bring gold on blockchain. But that's difficult. It leads to a so called security token which is under regulation. You need licenses, you need what are those in order to do this. Our technology allows to create something totally new which is called a non fungible asset.

Johannes Schweifer [00:14:42]:
So we create storage certificate, which is essentially a document with a variable how many units of your own asset you hold and the Storage certificate is issued in the name of somebody. In other words, if you were to find some private key of mine, which is actually the non fungible asset document, it's useless for you because it's just a document which says, oh, Hannes owns 100 ounces of gold. Right. So you cannot use it. And this is a, this distinguishes it from a normal gold token, which means it doesn't need any regulatory approval, it's not under any license. If somebody already trades gold and stores gold, it doesn't need any additional license to make it to turn it into a digital product. That's a real life example.

Pivoting to Web3 Host [00:15:34]:
Yeah, that's a really good example. So somebody that's listening, that's an entrepreneur, and they're not really understanding tokenization and tokens. Can you help us with that? Like an explanation so they can clarify that in their minds? I've had some questions about that. I think it'd be great hearing it from you.

Johannes Schweifer [00:15:53]:
There are so many explanations for tokens that you can.

Pivoting to Web3 Host [00:15:58]:
Like the tokenization piece that's with you.

Johannes Schweifer [00:16:02]:
Well, you create a digital representation of some, some form of value. Normally it's also digital value. So the token itself is a representation of whatever people say it would be. A real world asset token would have a backing in the form of a real world asset such as gold or real estate. The token only turns it into something that is digitally transactable. So a token normally has a holder on, on blockchain. The holder is an address, digital address, whatever. I don't go into details here.

Pivoting to Web3 Host [00:16:36]:
Okay, yeah, but that's a good detail because you said some things and I know that's gonna help a lot of people. So when you talked about the governance, what have you seen some of the main things that's blocking adoption of blockchain technology and just this whole governance piece. Do you see a clear difference or what would you recommend or what trends are you seeing and what do you think is a way out to get things moving forward?

Johannes Schweifer [00:17:01]:
That is also a vast and difficult topic. I mean, effectively at the very beginning, regulators did not understand blockchain technology and Bitcoin was seen as some funny new geek technology, but nothing serious. And then it became serious because a lot of people got interested in it and regulators realized there is no way to control it because it's decentralized. There's no way to stop it, to block it. That's also in the white paper. Basically. They should have just read the white paper. Maybe they did at some point.

Johannes Schweifer [00:17:39]:
They also realized. Wait, wait, wait. There is a way to stop it or to actually control it. And this has become a huge bottleneck. And you can imagine what it is, right? It's the banks. So Bitcoin has often been tried to be used as a form of currency, but in order to use it as a currency, you always must calculate the current fiat value of it. And in order to guarantee that fiat value, somebody has to convert it. And in order to convert it, you need to go through institutions.

Johannes Schweifer [00:18:16]:
So you need a bank account. By controlling the access points to banking system, they also control practically bitcoin. Who is they? Regulators or banks that have a say in what goes into the laws and whatnot. And then of course the governments because the government is ultimately interested in collecting taxes. And if there is a way to just move values from one point to another point unseen, that is always a red flag. Therefore they are interested in regulation. What happened in the EU is actually bad. So MICA is in my opinion over regulation.

Johannes Schweifer [00:18:57]:
Then comes even something worse. The AC8 which is reporting of all the transaction, but it applies to Europeans. The problem is just also other countries voluntarily comply with it because they want to retain this market. And we are talking about who, 500 million. So really many people. And they would lose access to those people if they would, if they, if they refused to be MICA compliant. Therefore. So this is one of the showstoppers also finma, the Swiss regulator, they of course have to comply with the whatever international financial organizations they are member of or supervised by.

Johannes Schweifer [00:19:42]:
So it has always been a hard thing to communicate, I mean to talk with them. You could never talk on kind of equal level. Therefore, we went to Liechtenstein, by the way, because in Liechtenstein the FMA is much smaller, just a couple of people and we could really communicate with them kind of on a very, yeah, let's say open basis. In Switzerland we also submitted actually our concept for approval, but we didn't need that approval because we are based in Liechtenstein. But we just tried it and in, in Switzerland it took 18 months until they come came back with questions and I was making. Then we had a meeting and I made a joke and said I have the impression it's you have a pile of papers. And every time we came up he looked at it and oh, college again, put it to the bottom of the pile. I mean, I don't know why they didn't laugh either because they are Swiss and well, Swiss rarely show humor.

Johannes Schweifer [00:20:46]:
Right. Or I suspect it was just the truth because we have a very complex technology for enabling seamless transaction sequences that goes too much into Detail. I don't want to talk about this.

Pivoting to Web3 Host [00:21:01]:
Audience, but if there's businesses that are listening right now and they're interested in getting involved in blockchain solutions, what would you recommend? What's the first step? You've, you've, you've been involved for a while, you've seen it from different perspectives. If someone is starting to think about it because, you know, it's just starting to talk about blockchain economies and it's starting to ramp up. It's not mass adoption yet, I don't think anywhere at this time. But of course there are markets and populations that are moving forward. But for those businesses that are saying, well, versus me looking at Web2 Technologies, I think I need to start looking at blockchain. It's coming, it's going to be here sooner or later. What do you think are the top couple of things they need to keep in mind as, as they start moving forward. What do you recommend?

Johannes Schweifer [00:21:57]:
It depends in which industry they are engaged and what they're interested in. Many people believe they can just do a token sale and everybody will buy their token because, well, it's a token, right. But these times, they are long gone. 20, 17, maybe 18, then that was the end of it. Industry adoption works in a different way. As I said before, use cases where you need decentralization, where many parties working in the same field would not trust each other or one single party to maintain control over a system or platform. And there are many examples where it failed. Exactly.

Johannes Schweifer [00:22:37]:
Because there was a central party, regardless whether or not there was blockchain involved. Right, but there was a central party controlling the software. So if you need this collaboration without one party in control, blockchain is one way to go. Or tokens are no bad things. I mean, you can use them for payment purposes, offer your own utility. It's much easier to use that instead of fiat money if you know what you're doing. If you're your own primary market, that works, or fragmentation of investment possibilities such as equity. If you do it right, it works.

Johannes Schweifer [00:23:17]:
Real estate, very interesting. I mean, there are a lot of opportunities, A lot of people do it wrong by just believing you can tokenize the ownership. That's not true because ownership would mean you're also registered somewhere in the, in the land register. No, you're not. So normally it's special purpose vehicle, SPV in between to the company. The company holds the real estate and you become kind of a shareholder through tokens of that spv. That's how it's often done. But still ownership alone is not interesting.

Johannes Schweifer [00:23:51]:
What you need is something that lets you actually appreciate, I mean participate in the appreciation of value. So what is interesting for real estate and there are so many real estate projects out there, you wouldn't believe it because there is a lot of value. People sense we can somehow monetize this, right? We can use fragmented ownership to our benefit somehow. But how? And this how? Well, okay, I don't want to speak openly about it because we have our own solutions that we suggest to our customers. But effectively there are ways how to do that. It needs to be done properly. It's very important to think first about the investor Persona. So who is going to buy that? To whom am I offering it? And then next step is to shape the offer in such a way that people can buy it to make it legal so that it complies with local regulation.

Johannes Schweifer [00:24:46]:
And then, well, the doing the actual software is an easy part. Especially when you use us, right, because we have software as a service.

Pivoting to Web3 Host [00:24:55]:
So, so that's my, that's my next question. You, you, who's your best customer? Who you. Who do you like doing business with? Who do you want to do business with? And how does one learn more about core ledger and your company? You and connect.

Johannes Schweifer [00:25:15]:
I mean our ideal customer for corledger as a company are of course mid sized or even large companies who have already realized blockchain technology might solve the one or the other problem and need us in order to first of all explain to them how blockchain solves their problems and how it can be implemented, what it costs and then of course also doing this implementation so we can actually offer a 360 degrees solution starting from the ideation to the implementation and then also maintenance of that system. Whether it's something, I mean some, some legacy software that they want. Normally large companies prefer software as a service. So that's exactly where our token economy operating system will be used. But we can also build some, some custom software.

Pivoting to Web3 Host [00:26:08]:
What do you feel comfortable with? I guess what I would like to have in the, in the podcast is I support a lot of businesses. There's a lot of things I'm going to be doing going forward in the future. Academia seems to be very interested in pivoting to Web3 podcast because of the format, because of the diversity of guests and it's educational and I think what I'm trying to hear from you in your business is what are your proudest moments? What do you want to share with us that you might be able to give us a little Peek on and pique interest. So people are curious and want to go to your site or find out more information. I'm starting to with particular guests, especially in the web. 3 I believe in it because what struck me was that people didn't have identity and it was helping underprivileged and underserved with those with identity. And then as I learned about fintech and blockchain and the benefits, that's what really piqued my interest. Now with you being so far involved from the development and founding side, I think what would be great for them to know is what were your aha moments that you're excited about going forward? What's happening that you see that people are going to love or want to adopt or think about or share or want to look at for investment or why they want to contact you because of the solutions that they might need or the type of solutions they might need.

Pivoting to Web3 Host [00:27:57]:
Or maybe there's certain industries or certain companies that you work better with or would prefer to work with or work better with your blockchain than others. When you were with bitcoin, Bitcoin Swiss. It seems to me that the little bit that you've shared that that is part of your past, your history and foundation on the road and journey to core ledger. Can you give us some additional insight? Usually I get a good feel with my guests. Is there a story there that you really didn't share yet before we closed?

Johannes Schweifer [00:28:37]:
Oh yes, of course. One thing that was really an eye opener, let's call it this, was that I tried to teach people how the technology works, how bitcoin works, why it is actually good. Because they were buying bitcoin and spending actually tens of thousands of Swiss francs on it. And I thought these poor people, they need to know that it's really good, right? I mean, yeah, how. How it works and why it's good. They were not interesting interested in that. I mean we had hundreds, thousands of customers and I got only 10, 20 in those seminars that I offered. They were only interested in the bitcoin price and will it go up? I don't know.

Johannes Schweifer [00:29:20]:
But I can tell you that it's a good technology. So you can judge for yourself whether or not to invest and how long you want to hold. And that actually also shaped our current business because is about technology, sound technology, things that really work. No, let's say day flies or something. We build software for industry and the industry is normally slow to pick up on a new trend, but once they do, they want to have really reliable enterprise grade Software and that actually differentiates core ledger from the rest because we already built that software and it can be used as a software, as a service. So same way as you have Windows now as an operating system for your computer, we built an operating system for business applications that run on blockchain. And here we have also made a lot of experience with startup projects, of course, novel ideas, things where we gave guidance and the guidance was always backed and based on by this experience that I made back then at Bitcoin Suisse thread, doing things in the right way, giving an understanding of what the technology can be used for and what not. So for example, we are working now on a game and the original idea before the game concept came up was making a movie and selling tokens to investors to fund the movie.

Johannes Schweifer [00:30:46]:
And well, actually I was involved in this part. I said it will not work because it's hard to get people invest in such a movie and why would they buy a token? They can as well just give you money if they like it. So token doesn't really make sense. And then out came a concept which is actually different. We said we have so much so, so rich history here in Crypto Valley. Why not let people who were part of this journey tell their story and their companies participate in the game so that they can use the game as a platform to promote also the product. This means they get a value out of it. And then we can have not 10 or 20 token, I mean sponsors for something, I mean, or investors in a movie, but hundreds of companies, hundreds of private persons, even thousands actually to be sponsors of the whole project.

Johannes Schweifer [00:31:43]:
And we don't need a game, we don't need a token. We don't run into regulatory issues. It's a clean process and it's a game. So it also makes fun. So that's one of the examples of. For a manufacturing company in Germany, we designed a novel way how to use certificates which are independently verifiable in order to increase the value of the products. And that is a huge deal because you can imagine Germany is it has very high quality standards. So competing against countries and so companies in countries like China is hard because they can produce at a very lower price.

Johannes Schweifer [00:32:26]:
So the only way of competition is actually quality. But proving the quality is important. And for this blockchain technology can be used. That's a perfect example. So that's one thing.

Pivoting to Web3 Host [00:32:39]:
Well, thank you so much for that. I. When you were talking about the gaming, I have a few guests that are interested in coming back on pivoting to Web3 and they want to come in with other guests that are in the gaming space. So sounds like I am glad that you mentioned that you're doing gaming. Gaming is very big and I'm going to be very interested in finding out how that's going and maybe having you back if you're interested. So how can someone reach you? What's your website or how do you want to be contacted?

Johannes Schweifer [00:33:11]:
Yes, you can reach me. Basically you can find information about our company on the website HTTP corelger.net you can reach on LinkedIn to me. I think that's the best way to contact me. Just refer to the podcast here and then I know the context in which you want to contact me.

Pivoting to Web3 Host [00:33:37]:
So Hans, I'm really glad to have you here. I really like to also add the blockchain is really evolving and in an unprecedented space. And with your leadership and drive and innovation and everything you've done in Core Ledger, we're going to be keeping our eyes on you. There's a lot to leverage with blockchain and for those who are following Johannes, feel free to contact him. Core Ledger has a lot of benefits and take the first step into The Future with Web3 with Johannes Schweifer and pivoting to Web3. Thanks for joining us in Shaping Tomorrow together.