LET’S TALK BITCOINEpisode 121 – GENERcoin & SWARM

Participants:

Adam B. Levine (ABL) – hostAndreas M. Antonopoulos (AA) – co-hostDavid Tyson (DT) and Lloyd Davis (LD) – co-founders/creators of GENERcoin (GENERcoin.org)Joel Dietz (JD) – co-founder of SWARM, XCP-based crowdfunding/token-creating-and-distributing platform. (swarmcorp.com)

ABL: Today is June 24th, 2014, and this is episode 121 of Let's Talk Bitcoin. This program is intended for informational and educational purposes only. Cryptocurrency is a new field of study. Consult your local futurist, lawyer, and investment adviser before making any decisions whatsoever for yourself.

Welcome to Let's Talk Bitcoin, a twice-weekly show about the ideas, people, and projects building the digital economy and the future of money. My name is Adam B. Levine, and today, we're visiting with two new user-created asset projects. These interviews should not be taken as endorsements, and if something piques your interest, you really need to do your own due diligence on the opportunity. Ironically, and just as with early miners of new altcoins, the people who know best the value of these new projects are also the ones who, if the project isn't really a good one, benefit from it being misunderstood. Our interviews aren't scripted, questions aren't given in advance, and they're edited only for content density and presentation, though they sometimes are edited quite a bit because people tend to ramble on and I tend to trim it down quite a bit.

That out of the way, we have a really interesting lineup for your today. Andreas is back and recently sat down with Joel Dietz, co-founder of the upcoming SWARM platform. They talk crowdfunding, swarm intelligence, golden tickets, and more.

First, I caught up with David Tyson and Lloyd Davis about their project, GENERcoin.

ABL: Today on Let's Talk Bitcoin, we're joined by David Tyson and Lloyd Davis. Gentlemen, thanks for taking the time. Can you introduce yourselves to our listeners?

LD: I guess I'll begin. My name's Lloyd Davis. I'm a researcher up here in Canada working in solid and liquid biofuels for about the last seven years.

DT: [Transcriber's note: David has a thick Canadian accent my US ears, even though in Michigan, can't make out. I'd appreciate and pay for any corrections sent to Benjm00@gmail.com relating to DT's dialogue] My name's David Tyson. I have an economics background. I've been a trader most of my life. Now, I've turned entrepreneur. I've been in real estate there until the last bubble burst.

ABL: We're here to talk about GENERcoin. Since user-created assets have started coming out, we've kind of had to start re-orienting how we've done these interviews. The first question I've been asking is what's the value concept behind what you're doing, and why aren't you just using bitcoin instead of creating a separate token to represent this kind of value?

DT: I guess how I got into the whole Bitcoin, cryptocurrency field was when I was building a house which'll be done at the end of this month, and I became aware of Bitcoin like most people did – last year, once bitcoin had a rise up out there with Cyprus. Banking got shut down there for three days and a lot of [inaudible] Bitcoin, but I realized I could advertise my coin for sale in bitcoin, whether I ever did that or not... I'd get a lot of media attention. I proceeded to go down that road. In my writing, I've learned more about the cryptocurrencies I came across. Mastercoin [inaudible] in bad data. That was when the bells and whistles went off. I saw many more of these altcoins or appcoins as they now seem to be called, could be created. I started to go down that road to create another. Because of my economics background, I really see bitcoin as a great innovation, but there's – also mastercoin as well – but a lot of these other cryptocurrencies I see as kind of a crypto [theater?] occuring there, almost like a crypto sprawl. There doesn't seem to be too much a rhyme or reason for a lot of them. With an economics background, I lean a lot into intrinsic value, so I want to look at creating currencies that are asset-backed. That was a long-winded answer to say - where's the value of this coin? - it's asset-backed. It's a lot of intrinsic value most of these coins don't have.

ABL: To be clear, when you say “asset-backed,” is it redeemable? Can I actually redeem a token at a fixed rate of some thing in the real world?

LD: Yes, it is asset-backed. My involvement in Arterran Renewables was just – we were just in the process of putting together a convertible bond issue to go more Wall St / Bay St., traditional-type sales. That's when I got a – David and I basically found each other over a few coffees. This whole idea of producing an asset-backed coin came together. In this regard, what we've worked it out to is each GENERcoin is the equivalent of 10,000BTU worth of biofuel, which for – if you need to visualize it, it's about a pound, so think of about a pound of coffee grounds, and that's the energy backing – or the physicality backing the coin. Yes – is it redeemable? Absolutely.

ABL: So--

LD: Just give me your home address and I'll ship it.

ABL: Okay, so it's redeemable for a type of biofuel. Tell me about this biofuel.

LD: What Arterran has done in the seven years we've been in the lab working is we've created an alternative biofuel that's a direct replacement for coal, period, full-stop. We can

mimic all the positive attributes of coal – there's only about three, and they get rid of all the rest of the crap that comes with combustion of fossil fuels.

ABL: What are the advantages of combusting coal that you've managed to replicate and what's the material we're actually talking about here?

LD: The advantages of combusting coal are its energy content in the 9-11kBTU range for thermal coal.

ABL: -So it's very energy-dense.

LD: It's energy-dense. Coal is hydrophobic in that if you leave it out in the rain, it's just going to get wet and dry off later, and it's transportability and the infrastructure, the transportability – so the rail lines are already in place, the material handling place to handle with material like coal are already in place, and because we mimic them on those three levels, we can directly substitute ourselves in the logistics chain quite easily. Whether it's going to an alternative or renewable fuel pick-up is – our product is made from one of the most common substances on the planet: cellulose. Cellulose is in your front lawn, your grass, it's in the leaves, it's in the trees, it's in your municipal solid waste. It's in your sewage system. Every feed, loft, or chicken producer out there is producing several tons [tonnes?] of it on a daily, if not hourly, basis. As far as feed stocks and renewability, it's everywhere. When you make a biofuel out of a renewable, you closed the carbon loop from a hundred to three hundred years to a fossil fuel's down to how long it takes to grow some grass or produce more municipal solid waste, or how long it takes a cow to process and perform their function in this value change. There's just no end to the feed stock. It really does start putting chaps on the amount of CO2 that's going to be emitted into the environment. Moreso, and this is my knock on the combustion of coal, it's the other 68 toxic elements that're aerosol-ed when you burn it, or it becomes part of the ash after it's burned. There's just so many problems with coal going forward, I'm really pleased when your president announced, “yeah, there is actually – I was listening to the head of the EPA, and yeah, there is a war on coal because it's about time.” These people that know we can't eat too many fish because of the mercury – where do you think the mercury came from? It's absolutely time for people with asthma, people with health issues because of the downstream effects of coal.

ABL: -So you've developed this alternative and you've connected it to this user-created asset called GENERcoin. How did these things – one is redeemable.. what is the goal of adding the token into this? What's the goal of making it redeemable? Are you fundraising with this?

LD: We're pre-selling production and then a portion of the fundraising's going to be expanding capacity, so Arterran Renewables and David's company, Industrious Industries, have a contract to produce 800,000 bags of biofuel. A bag of biofuel is 300,000BTU per bag which equates to 30 GENERcoins. That way, the altcoin community that's getting involved in this – I'm brand new, I gotta admit this right upfront – I'm brand new to the altcoin... I'd heard about Bitcoin in the news and didn't give it a lot of thought – I'm busy. Since my introduction to this within the last 90 days, it really is, maybe not one of those “holy crap” moments, but there really is something to this cryptocurrency thing if you have international commerce, which we have – transferring money to vendors out of the country in larger-than-$10,000-amounts – it's a pain. The banks, every step of the way, decide to take a little piece of you, so I was intrigued just from that point. Then, I thought about it more and, doing some research, there are no real asset-backed coins that I can see. There's a couple that're

speculating on metals, so there's silver and there's gold. [audio cuts out] seems to be much substance there, so I said, “well, here's an opportunity to combine renewable energy, green technology, and new technology, and exciting technology” - both of us having that disruptive capacity, putting them together and seeing where it goes – I'm quite excited about the prospect.

ABL: You came to this solution, you said, after you'd been looking at conventional Wall St. / Bay St. types of fundraising approaches. Can you kind of talk about – what was the thought, there?

LD: The thought was, and I don't – hopefully there's no vulture capitalists listening to your show, or maybe there hopefully are – we were going to go the traditional route. We just started down this process. We have some capacity now, but we're absolutely looking to expand on that.

DT: When I came across, by accident, Lloyd Davis, [inaudible] I was in sustainable [bull?] aspirations to kind of revamp how society lives, so I made [a son in?] biofuels, and I was like, “okay, give me a call.”

LD: In dealing with the venture capital community, they tend to be a bit of a greedy, demanding lot. One of the things I'm fully aware of – and I've been contacted by some big companies – yes, they have their desires, their wants, but my desire, my want with what we've created here with Arterran Renewables is for our fuel to completely replace coal at some point in the future, and the possibility for it is there. If you go to the website, there's a lot of information on the website about how we do it, what we do, and the results we've had independently verified with a coal manufacturer, actually, way back. We combined our product with theirs to see if we could empty a tailings pond of their waste. We had an independent lab go over what we produced, then, and the results came back great, so we know we can go 50/50 with their tailings and get rid of that environmental hazard, but we also found out from that process, we can 100% replace them. From that point, they went from being a potential client to a competitor. In dealing with the traditional Wall St. / Bay St. types, they all understand oil and gas, they understand coal, they understand energy, but renewables is a really fast, fast-growing, emerging market. Next-generation renewables, the category we fit in, there's a lot of number of players in our space, but what we're doing is taking on two industries. We're taking on the wood pellet industry which I'm completely happy with – I like these people – and we're taking on the coal industry. With wood pellets, we make a superior product. We have at least 50% more energy than they do per pound and, again, come back to – let's get rid of coal – okay, we can do this, now.

ABL: Going back to the token for a second. You're building this on the Mastercoin platform. Can you talk to us about how you made that decision and what the experience has been so far?

DT: How we made that decision was by [inaudible] Mastercoin, part of 2013 tomorrow. Like I said before, we affiliated bad data into their [inaudible] mined a whole host of [inaudible] that can be created for them. They allow us, as part of their Master protocol, the issuing of coins itself. Me not having a coding background and definitely not being a techie – having an avenue to create new coins, kind of a new one that we're coming out with now with regards to Ethereum, and I'm sure I don't know a whole lot more about them – but they weren't around at that particular time, but I was already going down the road of creating another

asset. Silver, actually. We developed a relationship with a few of the people there, mostly their programmers, so that's sort of how this came about. Of course, there was Maidsafe's sale, and it had some issues but it was a resounding success. We're very pleased to launch through Mastercoin.

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ABL: How much are you trying to raise, what are the terms you're offering to people? You mentioned there was a fixed BTU-amount fuel figure. Is that something that's going to change over time, or is that just the rate it's always going to be?

LD: I don't see how that would ever be allowed to be changed. What could change, though, is the value – the content – the value of those 10,000BTU, and that's dependent on the market, which, of course – with renewables, [inaudible] we'll be heading to a world of non-fossil fuels, and the [inaudible] of renewables is going to keep going up and the price should, as well.

DT: I have to echo what David said there. 10,000BTU solid biofuel is actually a very significant number. I've been doing this for a long time and I recall a couple years ago, the Wall Street Journal announced a “super pellet,” and it was a wood pellet manufacturer that announced a 10,000BTU pellet, but upon further examination of their claims, they were using diesel fuel as a binder to hold the material together, so a bit of an erroneous claim... To come up with a truly innovative process, and we believe that's what Arterran has done, we have the ability to make between 10-12kBTU per pound, so we can replace the softer coals on the bottom end, but we're also approaching the level of replacing anthracite on the high end. We picked the 10,000BTU as a number because 1) it's a significant number in the energy industry. It matches the BTU of the coal that we're using in most of the thermal coal plants around the world. Just to carry on, as far as an asset backing it – currently, the GENERcoins, as far as the issue price, I'll let David explain that, but at $.062 per GENERcoin, what that works out to – and the price of bio energy is a commodity, and there're a number of companies out there that track it. The one I prefer is Argos Market Reports. Currently, the price of biofuels, renewables is going up, so that 10,000BTU of renewable fuels, were at about 1.5:1 – the biofuel's worth about 50% more than the coin is right now.

LD: Yeah. It's actually lower. It's a lot closer to 9.4 – actually 9.38 US cents. Trading back [inaudible], I'd like to say a 51% return on equity, or return on investment... we're gonna call it a discount.

ABL: One of the interesting thing about GENERcoin compared some of the other types of tokens I've seen – like there's a company called Digital Tangible Trust, and they essentially let you buy a gold bar, or a gold coin, or some other type of precious metal, and instead of them taking possession of it, they buy it from a dealer and then you have it sent to a vault. Then, instead of your name owning it, the token essentially owns it and it can be controlled and reclaimed with the token in real life, but its ownership can trade otherwise. That's a non-fungible way to do one of these tokens, where every single bar is a different asset. What you've created here is something where you have a very energy-dense substance that is incredibly granular – you're talking about pellets, so this, I imagine, can go down to a gram's worth of fuel, so it's a very interesting – I really do think you have the first really redeemable, granular – you don't need to get $100,000 of it to do it – token. Let me ask – as it stands right now, you have production capacity.

LD: Yes.

ABL: When will you have the ability to actually deliver on this forward production you're selling in order to fund the expansion? How long is that gap?

LD: Between 9 and 12 months, so between 3-4 quarters from now. We're anticipating – for those who want their fuel redeemed now – in discussing this, we though there're going to be people in the community... maybe they heat with wood pellets and they'd like to buy a bag of higher-density, better fuel. We can make some sort of accommodation – if someone wants to buy a 30lb bag of biofuel, great! They can buy their GENERcoins, and we'd be constantly updating the website, and those people that want to redeem their tokens for the fuel, give us a shout, let us know where we're sending this stuff. For those that wanted to buy larger quantities, they typically take, up here in the Northeastern states, you might go through a ton [tonne?] a month to heat a regular-sized house, great! Purchase enough tokens to cover a ton [tonne?] and let us know where you want it to be sent – we'll make those arrangements for you.

ABL: Does it include delivery?

LD: No, but one of the things, and we thought about the logistics of it – container's approximately 28 tons, so, for example, let's say there's a lot of interest in the Northeastern states. We put together a container, bring the delivered price down to an additional dollar per bag, and it'd still be an affordable biofuel, because basically our arrangement with David, Industrious Industries, is at the wholesale-wholesale price – so about $2/bag for biofuel equals about $5.

ABL: Are we talking about the initial price or how the market is determining the market it should trade [at] once it's out there?

DT: The way we priced the fuel – the way the coin gets valued against the fuel is – electricity is a commodity. Current pricing for electricity is around the $31/MWh range. In our case, when we produce fuel, a ton [tonne?] of our fuel – a MWh is 3.4M BTU. Our biofuel is about 22M-28M BTU per ton , so we're in the six to seven MWh per ton of fuel. That's a

commodity price that's fixed that the coal industries use it, the wood pellet industry uses it – there's no reason we can't apply the same kind of math to our fuel, and I'm going to stop there because that's just gone down a rabbit hole. It gets very geeky and very math-y.

ABL: Is it safe to say you guys feel like this is a very good value that you are offering to people and that they are wise to take you up on it before it's properly understood?

LD: Well, I couldn't agree with that statement more. The current valuation of the token – and that's a fixed price – so the 6.2 cents per coin, that's fixed. Since we've started down this process, the biofuel based on its energy content should've been, when we first started this conversation 60-90 days ago, would've been close to 8 cents, but the rise in the economics of biofuels – we've gone from ~8.2 cents, we're now around 9.35, probably heading for 9.4 [cents]. With the heating season coming up and the purchase of material plus all the facilities that're switching to renewables, we're – well, it is what it is. It's 9.35 [cents] now, but anybody who wants to look – don't take my word for it, go check. It's quite on the rise. There's a lot more, just with the recent announcement from president Obama, with coal on its way out, the prices are even gonna go higher, so we're totally comfortable in how we're backed as far as from Arterran's perspective. We're totally comfortable in how we're backing the GENERcoin and the value we offer.

DT: I can expand on that a little bit. Currently, out the port of Vancouver, the price per ton [tonne?] is about $155 per ton. If we were to price at that, we'd be $206 per ton because we're more energy-dense, but it's still the same math that goes into determining why wood pellets are $155 – we'd be $206, so out of the port of Vancouver, you have wood pellets at $155 per ton, but [??] Reports has already reported there've been six containers so far this year that've gone out to Southeast China at $200 per ton. This is the direction the market's heading and we keep pushing away the production from electricity, from coal, as we need another... solar isn't about [inaudible], though solar's taken off by leaps and bounds. It's [inaudible] natural gas in terms of electricity production at the end of last year. In the US, [inaudible] work with them, all the energy we've created so far in the first [inaudible] year. What we've seen with Arterran and solar and the other renewables... the days of fossil fuels are really coming to an end. To expand on it a little bit more – in terms of Canada, if just the manure in Canada – I don't want to make it sound like we've got shit laying all over the place (LD: well, the best!) – just the manure in Canada in 2006 was turned into Arterran biofuel, it would fuel the whole 60M homes for one year. That's almost twice that population, so this truly is an abundant fuel source, renewable source of energy. The cryptocommunity really has an opportunity to get behind this and help bring an end to coal and really an end to fossil fuel altogether.

ABL: Talk to me about the legality of this, because you guys are real companies. A lot of times, when we talk to people starting user-created assets, they're individuals, or musicians, or things like that, and I'm curious what the process was on that and how comfortable, frankly, you are. Is this a risk you feel like you're taking at all, or do you feel like you're on really steady ground?

DT: No, I don't feel we're at risk. I've had so many appointments with the lawyers and [inaudible]. There's a certain way we gotta go about this, and there's a way we [inaudible]. There's probably [inaudible] we've only been at it [inaudible]. … would've been willing to do that, waiting for either Wall St. or Bay St, but [inaudible] the crowdsourcing route. You're not allowed to offer up equity, although that is changing in the very near future, so that is

exciting. That would've been exciting if we could've offered up a coin where you could've had some interest on it, and it could've been convertible into some other equity shares. [inaudible] general public got to own a piece of this, and cutting out the venture capitalists, or vulture capitalists as Lloyd says...

LD: While you guys were talking, I shuffled across the office and grabbed Plan D. One of the things, going forward with this, is if the regulations allow it, and things change, I think that would be a wonderful opportunity for the coin community, that if you didn't want to take your biofuel or didn't want it redeemed in a way where you're gonna take it home and combust it or use it for those purposes.... it changes. I would be totally fine with doing something like, instead of redeeming for the fuel, we could work out some form of formula that allows you to return it for equity, because I think the potential partnership going forward, with the coin community... there's so many positives to it.

ABL: Perhaps people could buy the equitycoin with the fuelcoin.

LD: If that's allowed. Again, David had his conversation with his lawyer, I had it with our general counsel, and the gist of it is this – we cannot, at this point in time, say this is a potential investment opportunity, but have we given it some thought? Oh, yeah! We've given it a lot of thought and thought, “yeah, why wouldn't we want to do something like this to the benefit of more, and make it more of a distributed opportunity?” For the general public – for the little guys, not the VCs, not the brokers and Wall St – but for the little guys to get in on this opportunity at this early stage, there's a tremendous upside to renewables. Anybody that's familiar with the renewable market knows that it's double-digits and exponential growth, so why not bet a – you know, I have to backtrack on all of that and say, as it sits right now, legislation in Canada, legislation in the US prevents us from even having this conversation – but if it does change, we're gonna have this conversation, because I think this is just a tremendous opportunity.

ABL: The pre-sale is ongoing. You just started a couple days ago. What are the relevant places people can learn about this if they're interested?

LD: Well, Arterran Renewables has the FAQs and most of the business plan summary on there, but I think it does, in simple terms, explain the renewable fuels market. It also explains our positioning in that marketplace, so Arterran Renewables as it sounds – I don't know if we're gonna publish this, but for those of you publishing this, Arterranrenewables.com or even simpler, just go to the GENERcoin site, and the GENERcoin site has links back to the Arterran Renewables site.

ABL: -So the GENERcoin site is GENERcoin.io or GENERcoin.com?

DT: GENERcoin.io – more in regards to [inaudible]

ABL: How long does the sale go on? What are the specifics of it?

DT: I guess we should discuss a little bit about what the future could be, and I think you alluded to, Adam – you brought up a very good point. Down the road, if the law allows for it, the asset-backed coin could be swapped for an equity-backed coin, I guess. The potential future of this coin [inaudible]. This is just a single issuance, up to 39 coins at what we've traded... 35 million. We were only expecting around 30 million of them. The potential is

more Arterran plants are deployed around the world. Again, the same model can be used, where the fuel is pre-sold to generate the money to build those plants and, in the process, more coins are issued which are now tradeable or redeemable for fuel, or it turns out being an equity proposition at a [inaudible] time. As my website alludes to there, there's a white paper out which talks about the benefit of having an energy-backed coin because of the utilitarian factor of energy. It's spread out across society. It's way more defensible against inflation or inflation spikes and deflation spikes. Not so much so with gold or silver where... more spikes [inaudible]. Everyone has gold and silver. [inaudible] I see the long-term potential of bitcoin on its own, becoming a future currency for the world.

ABL: Is there any fixed supply limit to this, or are you essentially saying you'll create more as production expands? -So the supply grows numerically, but you're not actually inflating because it's all backed by a redeemable, fungible commodity, which is this fuel. Is that right?

LD: Yeah, you're 100% correct on that. As far as any restriction on supply – no. We talked earlier about [Mennairs?]. As I look out over our storage lot, I have about 2,000 tons of cattle manure, and some time in the near future, we're gonna start processing it, and the cows just keep making more. Trees grow, lawns grow, people throw away paper and cardboard... all of these things – it's an absolutely mountain of available feed stock for our –

ABL: Available feed stock is different than currency amount. Currency amount is at the root of what I'm trying to get at here. What I'm asking is - when you expand production, are you going to expand the number of tokens that are created or are you going to just resell the tokens, essentially, that people redeem with you as... – do you understand my question?

DT: I think I do now, and I would suggest that as we redeem the tokens, we'd just resell the tokens again.

ABL: One of the things that help people know how they feel about a coin is whether or not it has a good forward-looking schedule for what the currency issuance will be because that kind of tells you how much, relatively speaking, they're being diluted. -But in the case of your case, that's not necessarily true, so I'm just trying to figure out if there're any unsustainable venues that need to be brought up...

LD: From my perspective, there's gonna be no dilution – period. As I've said, we've created 35M tokens, 30M of them are available. That's it – done. There's no reason to issue more, but as the coins are redeemed and come back to us, that's when they become available for resale, but never exceeding 30M tokens.

ABL: Given that – given you've said they're now fixed to 35M, and you've also said the amount that the value is fixed at 10,000BTU, doesn't that mean you've essentially capped your ability to expand BTUs? It seems like the amount of BTUs itself has to be floating once you've passed a certain point. It will want to float up, right?

DT: All that has to happen here, Adam, is he will have to make sure he makes as many BTUs as the amount of coins that are issued. I think that's 11,000 tons, so yeah, he's gonna produce probably much more than 11,000 tons.

LD: Yeah, that's not a very big pile in our world. That's – I would suggest, going forward – when all 30M coins are out there, we can satisfy the asset backing of that, somewhere around

18-19 months from the end of the crowd-sale and the start of production to satisfy the asset-backing. It cannot be business as usual, and Arterran is a boat, not business as usual. This is time for a change and we believe we have a part of the solution as part of the total energy that's required for everybody. I can be reached on the website on the “Contact Us” page. My direct cell number is there for anybody that wants to have a conversation. We have a Facebook page if you want to come communicate that way, but we're here to answer questions. We haven't published all the answers, we haven't been asked all the questions. If anybody wants to get in touch with us, go ahead. Feel free.

ABL: Gentlemen, we look forward to your continued progress in this space.

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AA: With us today on Let's Talk Bitcoin, we have Joel Dietz, who is the leader of SWARM, a new crowd-funding platform that uses cryptocurrencies in order to enable various organizations or companies to crowd-fund. Is that a pretty good description, Joel?

JD: Yeah, that's pretty good, Andreas. Thank you.

AA: SWARM is something that just launched, but I know you've already raised some money behind it. Can you describe what SWARM does and give us a bit of history on SWARM?

JD: Yeah, absolutely. I got very interested in the whole Bitcoin 2.0 stuff a few months ago and was poking around with Ethereum stuff, but my own background is sort of engineer who likes to shift things, and have the whole kind of product, so that stuff wasn't really ready to go just yet – wasn't production-ready, you could say. -So I was poking around various parties, including Adam pointing me to Counterparty, and I was looking at functionality there. I talked with a bunch of people involved in smart contracts and it was clear this new technology set was enabling a new type of crowd-funding that was potentially much more effective than the old way of doing crowd-funding, like Kickstarter or other modes. The kind of ability to easily create assets – and these are things that are easy to do in something like Counterparty, to create your own asset and raise funds, and have it represent some kind of project or product, or even kind of equity in the company – so I realized the technology's

available and it just needed this usability layer people could easily access and get information around it, these kind of Kickstarter-y things. A lot of people were interested in this, and there was a lot of positive energy that just seemed to come out of this particular use case. I was also just really liking this idea, in the past, of creating coins that have different utility without creating your own blockchain to support them. I liked the Bitcoin blockchain and don't want to see it fail, even though there are problems, obviously, with the 51% and other things.

AA: I was part of SWARM today. Yourself – are there other founders in the team?

JD: Yeah, that's right. Jeff Collins is a designer from Belgium – he did a lot of educational stuff for Bitcoin in Europe, and we met in San Francisco and kind of hit it off. Obviously, there's not a lot of designer-usability folks in the Bitcoin community and we kind of had a similar mission for setting a very high bar for really good user experience. We were joined, later on, by our COO, Ben Ingram, who's a sort of serial entrepreneur, does a lot of things in cloud computing space. He's kind of leading the operations in the sale side of things. We also have a couple other people helping us in a more limited capacity, community engagement.

AA: In a similar fashion to Let's Talk Bitcoin's LTBcoin, I understand you're using the Counterparty metacoin, or platform, in order to base SWARM on. Is that correct?

JD: That's correct.

AA: Tell me a bit about the choice of Counterparty.

JD: There's one really killer feature in Counterparty, and that is the Dividend feature – and that is that you can issue an asset on top of any other asset to someone who has this asset. We just saw a really compelling potential way to have this long-term incentivization for different people and different projects. I think [audio cuts out] that any of us looked at Mastercoin or Counterparty that people give in to it, expecting it to go up. There's sort of this use value of the currency within the network, but sometimes that's not really enough for long-term incentivization, so if you want to bring on really – and I think Mastercoin has had this problem really clearly – you want to bring on really talented developers and offer them 10 mastercoins or something, it's not really... [laughs] efficient incentivization for them to stick with the project for a year of full-time effort that it takes to build a really good product. We're looking at this, instead of just having one coin, to have a lot of different coins and then use Dividend feature to give people who have our coin, SWARMcoin, a little portion of all these other coins.

AA: A person who comes to SWARM looking to raise capital in order to, say, launch a new product, or service, or financial service, or some kind of company.. they would issue their own company coin and part of that would be SWARM? Can you explain a bit how that works?

JD: Yeah, absolutely. You come to us and say, “we want to launch on SWARM, some small portion of your initial coin offering is going to be distributed back to people who have SWARMcoins,” and that may not be a massive economic impact for people who have SWARMcoins, but it does have user engagement, where every time someone is launching, they're giving back to the whole SWARM network, and everyone can – it has a marketing effect, as well, where everyone who's part of the SWARM network can see what kind of projects are launching via SWARM and get some kind of information about them, and

potentially also participate, and the crowd-sales themselves. That's the secondary benefit – you're getting these coins back, but you're also getting early access to these crowd-sales that're happening on our platform. What we're expecting is that there'll be a lot of things that come out, and people in the SWARM network, they kind of cover the crowd-sales themselves so there's never – it never goes to a larger, public...

AA: Why would a company choose to use SWARM vs. using Counterparty directly to launch their coin?

JD: We're building up some really interesting – I guess you could call it IP, but it's really just intelligence, SWARM intelligence – around how to structure crowd-sales. We're launching this paper for the SWARM intelligence-fest academic conference in Notre Dame University on the crypto-economic systems and how they've evolved, and using user-agent modeling, so I think we're gonna have a good idea on the data we're gathering now – like optimal way to structure crowd-sales. That's one aspect. The other aspect is having a usable interface allowing people who may not be technical to get in on the sale. In fact, on our own thing – you can look on our website – we have these instructional videos that didn't exist prior in the Counterparty world... We've had a ton of people, also, who were not part of the Bitcoin world before, who said, “I want to get bitcoins to order to participate in this SWARM sale,” so I get a couple messages of this every day from people that, “oh, I thought Bitcoin was interesting before, but I never thought it was worth it to actually get bitcoin, and now I want to get them so I can participate.” In fact, just before this call, I was walking it through with someone to do that. If you want to reach a wider audience, you would probably want to do it via SWARM. If you do have a very core crypto audience, that is very savvy with these things, you probably don't need us, but even then, you might reach out of your core audience to reach out to a larger audience because you're doing it via SWARM.

AA: -So if Counterparty's a platform, SWARM is a reimplementation building on top of that to provide more niche services around crowd-sale. Would that be a good way to understand it?

JD: Yeah, exactly.

AA: Let me ask you a more poignant question. Essentially, a company that comes to you to do a crowd-sale in order to raise funds to do some kind of venture that sounds very much like an IPO - how do you feel about the legal implications of that and are you having any concerns that if that is seen as an IPO, as we've seen in previous cases with the Bitcoin community, the SEC might get rather interested in your activities and ask you some poignant questions, too?

JD: Yeah, I absolutely think we're gonna get hauled in front of the SEC at some point. There's some things that did a lot of due diligence before deciding what we're doing, to see what we think is possible to do and what not to do. Some of the things we're doing I think are very clearly okay, but some are definitely in a grey area that I think there's no real definition around from the SEC side. I'm sure they'll bring a definition at some point and we'll all be part of this conversation. I hope we get out of it without having fines or something, but I'm willing to take these kinds of risks because I think I'm moving the whole space and technology a step forward, and it's just a very, very clear use case for this kind of stuff that has a broad benefit to society. The other thing – one of the core things we're building out at this point is decentralized due diligence. I think there's a huge problem right now in this

space with these altcoins that have no real value, scamming people and all of this, but the other alternative is – okay, the SEC decides, or some centralized organization, decides what should be listed and what shouldn't, and there's a lot of friction around that. If we can build a system that [audio cuts] and say this is a legitimate project that has real people behind it, they're building a real product at the end of it, or attempting to, I think that will be a very compelling use case to say, “look, this community has the ability to regulate itself. It's not going out and defrauding people. We're providing this real benefit. It's not some kind of new scamcoin.”

AA: Are you going to be doing due diligence on companies that are submitting for crowd-sales on your platform, and in that, if you do due diligence, you expose yourself to – “you should have known better” - and if you don't do due diligence, it's open to anyone.

JD: We're trying to do neither of those, really, in the sense of allowing – Idunno if you know how eToro works, or some of these other platforms, but allowing people to show up and say, “look, we know these people are associated with this project, and looking into it, we're basically endorsing this project,” and you can see a number of different endorsements from different parties. -So Adam or you, Andreas, could show up and say, “I'm endorsing this particular addition to the Counterparty platform because we know these guys, they're good, and they're actually going to build this,” and then [audio cuts] endorsements other people can see, and people can see the track records of all the endorsers. You can go and say, “okay, this guy endorsed these 10 projects in the past year. Three of them died miserable deaths, but five are still around and doing well. Two of them did really, really well.” -Allowing a person to make this decision on this decentralized due diligence...

AA: From my perspective, I can tell you I generally don't do endorsements – well, rather than not generally – I don't do endorsements. Even not doing endorsements, people sometimes take the fact that I Tweeted about a company because I find it interesting to be an endorsement – or even that I consulted for a company to give them technical advice to be an endorsement. Then, if things go bad, they expect me to've done some kind of due diligence, which is ridiculous, but that's the risk of endorsements. I don't do endorsements explicit because I don't have the time to due the due diligence to do a required endorsement, and because I'm worried people will listen to me and not do their own due diligence. There's certain risk in putting trust in endorsements. How do you feel about that?

JD: I feel that, in the early stages of this, it'll kind of be a free-for-all. We'll have to probably spend some or a significant amount of effort kind of vetting things and projects so we don't lead to things that're defrauding people. Eventually, I think that system will be very effective, and I think one of the really exciting things about it, and this is one the things I learned from looking at platforms like eToro, is that there can be some 17-year-old in Bulgaria who's just really good at evaluating jobs, and he can go out and get a really good sense – kind of sniffing - whatever intuition that something's gonna do well or not, and then other people can see the success of these different people and kind of follow the people who're consistently successful and then... longer-term.

AA: So you're looking to do “wisdom of the crowds” together with “funding of the crowds.”

JD: Exactly. Something like what that will look like is something we're planning to release at Coin Summit at London. We have pretty good specs on the backend stuff, but we're gonna put a little more definition and actually push that out so people can see what that part of it

looks like. It's very Quark, what we're doing – it's not like anyone can just invest, but then nobody knows what they're actually investing in.

AA: This is still in the early stages, from what I understand. You've started raising money to build the SWARM platform, but you don't have any crowd-sales, yet. When do you expect the first crowd-sale to happen on this platform, or beta?

JD: We expect to announce some on July 10th and we expect to actually start one sale by the end of July, so probably July 23rd, 24th.

AA: Just to wrap things up. If people want to get more information, what's the website to visit to learn more about SWARM? -And how can they participate? How can interested parties participate in this if they think they want to?

JD: Our website is swarmcorp.com. The instructions are there if you want to participate in the crowd-sale. It's ongoing. We've done a pretty substantial amount so far, but all you really need to do is create a Counterwallet, put some bitcoins in it, then send it to the address that's on the site, and then you get SWARM.

AA: Is there a minimum amount?

JD: There's no minimum. I guess the exchange rate is 5,000 SWARM per bitcoin, so if you do less than 1/5,000 of a bitcoin, you won't get any SWARM.

AA: Alright, so 1/5,000BTC is the minimum investment. Any projects coming up that you'd like us to preview given this program won't air for two weeks – we'll announce more detail about upcoming plans for SWARM?

JD: Yeah. One of the reasons we agreed to do a very large cap – so our total cap is 21,500BTC – is because we got a lot of interest from experienced investors in the Bitcoin-based model, and we've had a number of people in different cities... right now, we have four different cities that're committed to doing coin-powered accelerators where it's very much like a yCombinator for a crypto – creating an accelerator-coin for the network, and we'd actually finance a good portion of that coin, starting off, and then that coin, which is going to represent an accelerator in a particular city, is then going to have an application cycle for 30 days to take other startups, and then each of those startups will do their whole structure via coin. I think this is going to be really compelling as far as network effect, where people are participating in the success of these startups, even where they aren't physically located. We've seen a lot of interest in that and we'll be making some announcements related to that on July 10th. Very, very impressive people who come to support these projects and've agreed to be mentors, already.

AA: Do you want to talk a bit about golden ticket, and what that is?

JD: Yeah. One really interesting thing about SWARM is we're very interested in building up this kind of network. If you read our description of what you get out of SWARMcoin – obviously, you get this other product and preferred access to sales and other things like that on SWARM. You also get entrance to these SWARM-related events and we're throwing a really big party in London, so people who have the gold ticket get special access to certain

things in context to these parties. I can't reveal all the details at the moment, but that's part of our SWARM vision.

ABL: Thanks for listening to episode 121 of Let's Talk Bitcoin. Content for this episode was provided by David Tyson, Lloyd Davis, Andreas M. Antonopoulos, Joel Dietz, and Adam B. Levine. This episode was edited by Denise Levine and Adam B. Levine. Music for this episode was provided by Jared Rubens, General Fuzz, and Gurty Beats. Any questions or comments, email Adam@letstalkbitcoin.com. Have a good one!