PTW3 058: Blockchain Technology - Trust and Financial Data with Dan Averbukh and Donna Mitchell

Thanks for checking in the Pivoting to Web3 podcast. Go to pivotingtoweb3podcast.com to download and listen or Web3 game plan to check out the videos. Thank you. Good morning, good afternoon, good evening. Welcome, welcome, welcome, welcome to pivoting to web3. And today is an exciting day because I have a CEO named Dan Everbuck. And Dan Everbuck, he received his MBA from Wharton and he started working in the investment industry focusing on financial technology companies. But he eventually it led him to Clerkenwell Asset Management, an investment fund which leveraged emerging technologies to find investment opportunities with asymmetric risk and reward.

Donna Mitchell

00:00:45 - 00:01:53

So at Clerkenwell it grew over 100 million in assets under management. He was also struck by the deep problems of trust and credibility that face both in the marketing fund as well as in having data vendors and potential partners marketing their track records. It's easy to get friends to trust you, but for good reason. People don't trust strangers and showing people that your insights are gold and not lead can be extremely difficult and a frustrating process. Validity base grew from this as I realized that blockchain technology holds the key for building trust among unrelated parties doing business over the Internet. The problems are general, but the solutions are specific. Validity base is building credibility solutions for financial data and financial track records with longer term view towards applying this technology across various industries. Now this gentleman is someone I'm excited to have he reached out.

Donna Mitchell

00:01:53 - 00:02:13

We haven't had this discussion before and I really am glad that he's here to give us some additional insight, insight on trust, validity, some of the solutions that they're creating. So Dan, say hello to your audience and ours and tell us a little bit more about what you're doing and what you're really excited about with these solutions you have.

Dan Averbukh

00:02:13 - 00:03:34

Sure. Well, thank you, Donna for that introduction and thank you for having me on your podcast. It's an honor to be here. So, yeah, I mean, kind of like you mentioned in the introduction, I started a fund that was doing systematic trading. So we were doing systematic trading in crypto, ended up doing a fair bit of trading in defi as well as part of the fund. And as the fund grew, I had people coming to me and saying, hey, you know, you have some assets in your fund. Check out this kind of other strategy I created that could fit under, you know, the clerk and all umbrella, fit under what you're doing. You know, would you be interested in hiring me or maybe kind of buying my strategy or seeding my strategy somehow? And the difficulty that we had in Evaluating people that, that came to us this way is, you know, how do you know if the person that comes to you is, is the real deal? Like, how do you know the strategy that you're being pitched is really kind of what you would have gotten had you been kind of invested with that person or if that, you know, if that person really ran exactly that strategy, or maybe they just kind of dropped their worst day of trading, you know, just by accident or, you know, whatever, right? All you're seeing is a spreadsheet.

Dan Averbukh

00:03:34 - 00:05:37

How do you know whether that spreadsheet is legitimate? And it's, it's kind of, it's like a known problem in, in finance. Like, you know, a lot of portfolio managers will tell you, you know, I've never seen a bad back test. Like, anybody who ever pitches me a back test strategy, it always looks great, but, you know, not everybody's making money. So kind of why is that? And so we started thinking about this problem and we realized the problem actually goes, you know, really deep. You know, just like you said, kind of like, you know, people trust, you know, their friends and people trust people they know. But once you're starting to deal with kind of arm's length parties and people with differing incentives, how do you kind of trust the data that you're receiving from them? How do you gain trust in, in what you're seeing? And in particular in finance, you know, you have to be very sure that the data that you're receiving is timely and complete. So, you know, when, you know, a particular piece of data was created or when a particular trade happened, and you know that there's no missing trades, there's no extra trades, you know, nothing kind of got, you know, smushed or smudged along the way and it's, it's a really sticky problem. As we kind of like started, you know, peeling the, the onion on it, we realized, well, this is actually really tough because even if it's my own data that I'm trying to figure out whether I can trust, even that's not trivial because, well, how do I know that I handled it properly? How do I know that when I, you know, transformed it and ran some function over and then moved it from, you know, Excel to PowerPoint or whatever it is, you know, that I didn't introduce some bug or some sort of artifact into the data? So even trusting my own data is not always that easy and trusting third party data is that much harder because you have to be sure that, you know, the third party you're dealing with hasn't you know, accidentally introduced an artifact into their data.

Dan Averbukh

00:05:38 - 00:06:31

And in addition to that, you know, they have different incentives than you do. You know, somebody's pitching you for money. So you know, it's in their incentive to make their track record look as good as possible, for example. And so we started thinking kind of hard about this problem and you know, like, well, how do, how do people solve this today? And mostly the way that this problem solved today is via third parties. So you know, if you have really valuable information, so for example, like you have a financial track record, you can get that audited. So you can pay an auditor, you know, 20,000, 50,000, $100,000, whatever it is, per year to go through your records and say, yep, you know, these records match the data that we're seeing. And then it's kind of the auditor's reputation that stands behind the data that that's being presented. And so that's kind of effectively how that problem in most cases gets solved today.

Dan Averbukh

00:06:32 - 00:07:06

You know, outside of this kind of audited space, you know, people do all sorts of crazy things. So if, like, if you go on these like trading websites, for example, you know, people will just on a message board, you know, post their daily trades and the timestamps associated with those trades or you know, people will share, you know, like years of old brokerage statements. And the problem with that obviously is like, well, who's going to sit there and validate all that stuff, first of all? And second of all, like, how do you know that those brokerage statements, you know, like Those are just PDFs, right? Like, you know, it's pretty easy to.

Donna Mitchell

00:07:06 - 00:07:20

So how does blockchain technology really enhance or change that? For those that are listening, that don't understand blockchain technology, how does that really come into that and, and, and fix those issues and those problems, let's say, to simplify it.

Dan Averbukh

00:07:20 - 00:08:30

So, so blockchains are kind of the perfect vehicle for solving a problem like this because they serve as a single source of truth that one could reference about any particular data or information. So I can take data, I can fingerprint that data or hash that data. So basically create this kind of like unique representation of my data and publish that fingerprint to a public blockchain. And when I do that, I, I timestamp, I, you know, I take, create this like kind of blockchain based distributed timestamp of when my data was in like, came into existence and what my data was at that particular point in time. And then for the rest of time I can point to that block in the blockchain and say, look, I could only have published this exact fingerprint of my data if I had this exact data at that time. So it's kind of the special instance of the double spend problem. Like, what was my data? And is the data that I'm showing you complete? What is all the data that my wallet or my blockchain address has published over time?

Donna Mitchell

00:08:31 - 00:09:18

So with that said, with it being immutable and you can have trust, like the Everybody knows that Web1 or some people know, I should probably say not everybody, that Web one was read only and Web two was read and write, and web three is read, write, trust and verify. So now you have the verification and everything, and that is set and ready to go. But in the finance arena, what challenges does that also bring? Because I wonder about the challenges because it doesn't seem to be a lot of mass adoption too quickly. It seems to be like it's stalled or it's moving forward, but not in mass adoption or at breakneck speed at a lot of facilities or organizations in finance. Can you help us understand that a little bit?

Dan Averbukh

00:09:18 - 00:10:54

Yeah, I mean, I think the kind of the blockchain adoption challenges are that until very recently, the technology just kind of like, wasn't fit for purpose for, like, true business use. You know, I'd say really until the last, you know, maybe 18 to 24 months. Like, the scale that, you know, blockchains had and the, you know, development tools and the development environments that were available were so primitive and so slow that, you know, you could come up with a lot of ideas in the abstract, but when you went down to try to implement them, it was exceptionally difficult to make something that a real customer would actually say, yep, this is really useful for me, I'll go ahead and use it. So, you know, we feel fortunate that we're kind of building on now an ecosystem that's had, you know, quite a bit of investment and development dollars and effort and lots of kind of, you know, really smart, talented, passionate people working on it for the last, you know, 10 plus years. And it's really starting to get to the point where you can build, you know, B2B, B2C kind of refined tools that people are actually kind of excited about using. And part of the thesis of our company is actually that we want to put the blockchain in the background. So, you know, we are building this kind of data provenance technology and applying it for trading track record. So we're saying, you know, hey, if you're, you know, like, you know, I'll give you an example.

Dan Averbukh

00:10:54 - 00:12:23

So let's say you're a. Some sort of, like, you know, crazy genius from, I don't know, name a country from China, right? And, and you come to the United States and, and you come up with these great strategies because, you know, you're, you're a genius and you know, you're making a lot of money and you go to raise money for your strategies and for your trading, you're going to have a devil of a time trying to do that because people are going to kind of evaluate you and say, oh, who is this person? I don't know where he's from. I don't know which school he went to. You know, there's no, there's no audits, there's no, nothing. Like, you know, sorry, buddy. Like, you know, we're not going to give you money to trade, and so you're not going to be able to develop your business. So we, we're kind of giving people the tools to create a fully verified track record of what they're doing in a way that with a single click, effectively it becomes verifiable for somebody who, you know, might consider investing in that person or giving that person capital to manage to see, you know, hey, did that person really make the trades that they did and did they do it when they did it? And by the way, you know, were they running 10,000 strategies and are they showing me the best one, or were they running one strategy and this is their only strategy? Because, you know, those two things have a completely different significance and context. And we're doing that with blockchain technology as the underlying core base technology, but without really surfacing the blockchain technology for the user.

Dan Averbukh

00:12:24 - 00:12:43

So you can use all, everything we're doing without really having to know that a blockchain sits underneath it all, without dealing with cryptocurrencies or wallets or nodes or any of that stuff. And all of that to kind of circle back to your original question is really not something that would have been possible, you know, even 24 months ago.

Donna Mitchell

00:12:44 - 00:13:24

So that, that, that's a really, a lot of insight. So when you do that and you have all these fabulous solutions and everything is really operable, is it interoperable as well? Or, or is there a certain process and, and you have to use a certain blockchain, or are there varieties with people with different businesses and different sectors? Because you have B2C and you have B2B, is all that flexibility there? So if someone wants to come, it's local. Can you give some insight on that? There was a time where they always publicize it wasn't interoperable. So can you share any insight on that?

Dan Averbukh

00:13:25 - 00:14:27

Yeah, so I'm glad you asked about that. So, so what we're, the way that we're kind of like structuring the underlying based technology is actually as a blockchain based protocol, meaning that like we validity base, the company like have built the protocol and we're building, you know, extensions of the protocol applications on top of the protocol. But effectively everything that we are building is kind of an easy button for using the protocol itself. And if we disappear tomorrow, you know, I get hit by a bus, you know, our team gets hit by a bus or, you know, I don't know, we raise our prices 100 extra or whatever. And people don't prefer not to use validity base, they can continue to create validated data using our protocol and to validate their existing data using our protocol. So part of the beauty of blockchain, part of the beauty of bitcoin is that you're sovereign over it. You own it if it's in your wallet, if it's your keys, it's your coins. We're doing the same thing with track records.

Dan Averbukh

00:14:27 - 00:14:52

So if you make a validity based track record, it sits on chain and you own it, you're sovereign over that track record. It's not kind of like sitting in some validity based database somewhere. And if validity based disappears, you know, you lose it. If you're kind of building a business on top of it, or if you want to build, you know, your own applications that kind of ingest that data and use it for something, you know, no problem at all. That's kind of a big part of the virtue of our technology.

Donna Mitchell

00:14:52 - 00:15:11

So when somebody approaches you, what, what, what is the process? How, how long is the process for them to come in and say, look, I want to get up to speed, you know, we've got the money, we've got the, the idea. How long is that process? What does that process look like for somebody listening and they're really thinking about it and want to contact you?

Dan Averbukh

00:15:11 - 00:16:16

Yeah. So, so right now we have our web application up and running@app.vbase.com so somebody could go to app.app.vbase.com and register for a free account and start stamping their data and validating their data. Today again, you don't need kind of any wallets, you don't need any cryptocurrency. It's all just, you know, like a typical Web2 email password type of authentication that's, that's kind of, that's required and that you create. And so somebody could do that, you know, literally in minutes. You know, I would suggest that if somebody kind of has a trading strategy that they want to create a kind of a verified track record for, they get in touch with us. Because there's kind of some way, some best practices that we'll suggest in terms of how you should structure your data before you stamp it to make it so that it's, you know, easiest for, you know, capital allocators to work with it on the other end. But effectively, you know, somebody could kind of get up and running in 10, 15 minutes.

Dan Averbukh

00:16:16 - 00:16:39

So we have kind of two main modalities for using our services today. One is, you know, the app@app vbase.com and the other is our Python SDK, which if you go to our website vbase.comv like validitybase.com and go into our GitHub, you can pull down our Python SDK and use that to both kind of both for stamping and for, for verification of data.

Donna Mitchell

00:16:39 - 00:17:01

So I'm kind of curious, what about the governance right now? Where's the governance at in this financial space? Or does it matter yet? Is it still the wild, wild west? A lot of people say it's still the wild, wild west. And I kind of feel like, no, there's a lot going on there in regards to governance. Can you give us any updates or what are the trends right now lately?

Dan Averbukh

00:17:01 - 00:17:07

Just to clarify, governance kind of what specifically?

Donna Mitchell

00:17:07 - 00:17:24

Basically the whole protocol, the tracking, the finance, the institutions that get involved with it. Where are we at on the compliance side or the governance piece?

Dan Averbukh

00:17:24 - 00:18:59

So, so, you know, we kind of are a little bit neutral when it comes to these things because since we're not, you know, we don't have a token, we don't ask people to kind of touch crypto directly. And so, you know, we're kind of this like blockchain, not crypto, you know, type of construct where, you know, some of the SEC type discussions, like, aren't, you know, directly relevant for us. I mean, where it's very relevant for us is, you know, if you're making a track record and publicizing it and you're doing it in the context of a regulated fund, you know, you'll want to make sure that, you know, you do that in a way that's compliant. And I think kind of most folks who run funds, you know, they, they get kind of advice from their council on, on how to do that in terms of the protocol. So we have a smart contract that is published. It's on our current kind of implementation of it is on the Polygon blockchain, although it's EVM compatible and it's actually kind of client driven. If we had clients asking us to put it on other blockchains, it would be fairly trivial to do that. And so it's that smart contract that kind of governs the stamping and the validation process and the permanence and immutability of that smart contract is what allows us to offer some of these really appealing guarantees that we do around kind of the tamper proofness of a track record and the ability to verify it for basically an indefinite period going forward.

Donna Mitchell

00:19:00 - 00:19:15

Wow, that's a lot. But it sounds like it's a wonderful solution to a lot of businesses out there. If one wants to reach you, what is the best way and is there anything that I forgot to ask that you want to bring to the table and make sure the audience is aware of?

Dan Averbukh

00:19:15 - 00:20:13

Yeah. So if you want to reach us. So My email is danvbase.com-a n b a s e.com and you can also go on our website, vbase.com and use our contact form there. So that's kind of the best way. You know, there's a, you know, one thing that we didn't talk about that might be interesting for some folks in your audience is, you know, we're focused on helping people create and validate financial track records. But the same technology, the same kind of like technology stack that we've built can be used for creating verified data in all sorts of domains. So, you know, you could use it to build verifiable digital credentials. You can use it to run experiments in a way where the experimental data that gets created is verifiable when you, you know, go to publish a PA or go to raise money or something like that.

Dan Averbukh

00:20:13 - 00:20:27

So basically like, you know, if anybody who's listening is kind of interested in creating, you know, verifiable data for business purposes, you know, it might be worth a chat. It's possible we could be helpful outside the finance domain as well.

Donna Mitchell

00:20:28 - 00:20:32

So I'm curious to know, would that be good in clinical trials on a pharmaceutical side?

Dan Averbukh

00:20:33 - 00:21:34

Exactly right. So, you know, a friend of mine once said, you know, if you based on all the phase one trials he's seen, cancer should have been cured 20 years ago. And there's a good reason why, you know, the phase one trials that look really good, you know, don't always make it all the way out of phase three. And you know, if you kind of, you know, some of that reason, I don't want to kind of over, you know, overspeak it. But you know, some of that reason is that there's all sorts of different ways that trials data kind of doesn't get communicated in a way that's, you know, complete and verifiable when it goes to people funding it, when it goes to regulators, etc. And if you were to kind of blockchain stamp data as it's kind of coming off the press, as it's being created, a lot of those problems become solvable. So that's, that's kind of certainly another area that, you know, this blockchain based data validation process could be applicable.

Donna Mitchell

00:21:34 - 00:21:36

What about medical records?

Dan Averbukh

00:21:38 - 00:21:49

It would depend on the specific problem that you're trying to solve. So, you know, certainly it could be applicable. I'd have to kind of like think about it in the context of a specific problem.

Donna Mitchell

00:21:49 - 00:22:32

I guess I'm really thinking about global records or where people could really track if they have the accurate record, if there were any errors or something was missing. Just the whole process of continuity of care. And in that continuity of care space, I think personally a lot of records either end up missing or getting dropped or maybe incomplete or may not be sending or transmitting what you thought you should have received because it wasn't everything there. So then the diagnosis changes and it just seems like verification and trackability would really help and that healthcare arena as well. I hope I didn't overspeak, but am I, I think I'm understanding this. Really?

Dan Averbukh

00:22:33 - 00:23:35

Yeah, yeah, I mean, I think you're right on. So like, so I'll give you kind of like a specific example that's not quite medical records but, but you know, I think it'll tie back. So if you go to like our, again if you go to our application app vbase.com and you take a PDF, let's say you're Harvard University and you know, you have a PDF that says, you know, here's Donna's diploma, you know, graduated 20, you know, 4.0 and your Harvard University, you can stamp that PDF as Harvard University. And now what's really cool is because it's a blockchain based stamp and it's on a public blockchain, anybody now can validate that. Yes, this was Harvard that stamped this exact PDF. So now when you pass the PDF, you know, from you to you know, a potential employer to, you know, they pass it on to like, you know, some background check service or whatever it is everybody all along the way can validate. Yep, this is, this is a Harvard diploma. There's no question about it, because it was self assigned with the Harvard wallet.

Dan Averbukh

00:23:35 - 00:23:59

The exact same process operates in the context of medical records. So, you know, if you were to have doctors using this system, you could see, oh, yep, this came from this doctor. It came at this time. So you know that this is the record that this doctor created at this time. No matter how many different hands it passed through, you know, later on, or how many different kind of, you know, EMS or healthcare systems, you know, that record touched as it went, you know, from A to B to C to.

Donna Mitchell

00:23:59 - 00:24:29

D. So then you have the integrity and you have the accuracy and you have the thoroughness and everything that you need in care today, especially with all the movement and mobility, continuity of care can really be a nightmare when the patient is really having a lot of difficulties on multiple physicians. I think that's awesome ability that you have for your company and the product and services, and it should go a really long way. Do you have anything else that you'd like to add before we close?

Dan Averbukh

00:24:30 - 00:24:34

No, that's it. I really enjoyed the conversation. Thank you, Donna.

Donna Mitchell

00:24:34 - 00:24:59

I really enjoyed it too. This was different for pivoting the Web3 podcast. So everybody, thank you so much for listening. Good morning, good afternoon, good evening, have a nice evening and thank you for Shaping Tomorrow together on Pivoting the Web 3 Podcast. Thanks for checking in the Pivoting the Web 3 Podcast. Go to PivotingTheWeb3Podcast.com to download and listen or Web3Game Plan to check out the videos. Thank you. We're Shaping Tomorrow together.

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