Intro: Welcome to the Collective Intelligence Labs podcast where we talk with the world's best leaders about an inevitable transition to the Web 3 century creator economy. Please welcome your host, CEO of the Collective Intelligence Labs, Alex Shkor.
Alex: Hello everyone! You are now listening to our regular podcast of collective knowledge labs today with us Professor Dr. Philipp Sandner, who founded the Frankfurt School Blockchain Center, and was ranked one of the top 30 economists by the Frankfurt, the major newspaper in Germany. What do you call this newspaper? Philipp, help me please
Prof. Dr. Philipp: Frankfurter Allgemeine Zeitung (FAZ). It's in Germany. It's a very, very well known Newspaper.
Alex: Cool. Yeah. So, I'm really pleased to have you here, Philipp. We have known each other for like, already a couple of years, but haven't seen each other for a long time. I'm sure we have a lot of things to discuss now in the Blockchain field, there's a lot of progress. I'm sure you have a lot of progress in both academia, teaching and the financial services you do. So, I'm looking forward to discussing it.
Prof. Dr. Philipp: Yeah. Perfect. Happy to be here. And thanks very much for asking. I'm happy to be here. Let's directly start about topics you want to discuss.
Alex: What I want to start first is what we usually do. We discuss your path to the Blockchain world because like you're quite known in the Blockchain world, especially in the academia side. And I'm really curious to hear your story, how you ended up in this wonderful space. And because for academics, I think it's a very interesting field and there's a lot of things to research.
But it's also, it's not also, not a trivial choice, right to be an academic in the Blockchain world. Could you please elaborate about this a little bit, like tell us the story?
Prof. Dr. Philipp: Yeah, of course. So, my name is, as you said Philip, I'm Professor at the Frankfurt School of Finance. The Frankfurt School of Finance is a small university in Germany, but a small and speedy University. That's why we have a Blockchain center and other universities do not have this.
The Frankfurt School is a university focusing on business and also IT, applied IT and therefore I think it makes very much sense to have a Blockchain Center at us. And among the 500 or 450 universities we have in Germany, the Frankfurt School belongs to the top 10. So, it's quite a good university, even though it's a small one. And maybe not everybody knows about this university.
I have gotten into the Blockchain ecosystem by discovering Bitcoin back in 2013, when the price spiked to 1000 US dollars at that point of time and then the tech media I have been reading, for example TechCrunch newsletter and measurable and other newsletters I have read that time. They wrote about Bitcoin all the time.
So basically, very tech oriented newsletters. And then I got curious, investigated, I read the whitepaper and I was very fascinated by the Bitcoin network from a technical perspective. And since then, it then became some kind of hobby over the years.
And since 2016, we have then set up the Blockchain center. And since then, I've been investigating Blockchain 24/7, day by day, and this started basically in, back in 2016, or 2015. So this is five or six years, since I myself am investigating Blockchain crypto assets now DeFi, NFT, digital securities, CO2 tokens and all kinds of things on a daily level. And I'm doing this of course not alone. We are doing this together with our entire team, which now has 10 people on the university side. That's basically where we are running all kinds of projects.
And what are we doing there? We are, for example, running a program which is called DLT talents. This is basically a program where we would like to empower women for the Blockchain field. And here we are educating at this point of time 200 women per year, based on 1000 applications we are getting per year from women who would like to get started in the Blockchain field.
From these 1000 applications, we are taking 200 of the women which we are accepting to the program. The program runs three months where people are getting some kind of coaching into the field. It's done digitally via two meetings where we meet every second week over the course of three months. And this way we are operating two patches per week, per year and in total, we are educating 200 women per year, this works extremely well.
And I would estimate that approximately 40% of these people very soon find a job in the Blockchain space. We have some people who have finished our DLT talents program, who have then gotten CEOs of crypto funds, other people now work in banks or startups, some of them have already founded their startup. So, it works extremely well. And similarly, we also have set up a program which is called DeFi talents in exactly the same way, but it's not gender restricted. So, we are accepting women and males there.
And again, here we are running two batches per year, 200 people per year, we have 1000 applicants. And again, it's a coaching mode over three months per year in a bi-weekly coaching session. And again, here, you know it's, it's a brilliant group of people, lots of technical knowledge. And I would also expect that many of these people very soon find a job in the DeFi space.
And that's just two initiatives we are currently running, we are doing a lot more, we operate one of the largest conferences on Blockchain and finance in Germany, we are helping operate the DEC Institute, which is out there for attestations of Blockchain knowledge. We are also helping to operate the DEA, it's called Digital Euro Association, where we try to really also push the European Central Bank to develop the digital Euro in the right direction, for example, caring about anonymity of transactions and data storage, and so on.
And finally, one of the projects I really like is the ITSA, the International Token Standard Association, where we are providing tools such as classification schemes to provide some structure for the ever-growing token market where we see dozens of new tokens being minted and generated and issued week by week.
And we see ITSA with classification of tokens. We provide some structure to get some clarity of what kind of tokens are out there. And therefore, we are taking any token out there on Etherium for example, we are classifying this token whether it's a utility token or an investment token or a payment token. We have a six-dimensional framework for classifying tokens. And we then also identify it and assign a unified number to the token. This gets even more important now that we see more layer one solutions growing. So, we need to have one unified identifier for tokens which are running across chains.
One example is Tether right, Tether is one line on the coin market cap itself, it tells us that the price is 1.00 US dollar, and the volume is x billion US dollar per day. But technically speaking, the Tether project consists of 14 or 15 tokens, because all these single Tether tokens are running on multiple layer one solutions. You have Tether on Etherium in the past, you had Tether on Bitcoin network. Now you have Tether on the Tron network and so on.
So, the entire Tether project consists of up to 15 tokens. And the same is true for other projects like Uniswap, where we feel that this project just consists of one token, but this is wrong. In the background, you have many smart contracts interacting with each other and many tokens interacting with each other.
And therefore, we are trying to create some structure here and help people understand that these projects which seem so simple, from the business perspective, are really technically structured in a very complex way.
Alex: Thank you, Philipp, it was really detailed and elaborated. And it's also I think, like incredible how much you're done like for last years. I'm really excited about your school. I think we really need more talent in the industry, like everyone tells us we need more talent in the industry. And not only programmers, but also product managers and leaders.
And also about diversity is also a big problem, like in the space, like most of the founders, most of the engineers are male. And we definitely need this diversity. And I think it will bring more collaboration to the space. If you know how the industry can help you. I think it's a good place to discuss it now. Like what, what will you need, do you think, from industry partners, to scale the school even more in ways to be creative and more talented? What do you think about this?
Prof. Dr. Philipp: Well, it's basically two-fold, like supply and demand. Like always, on the one hand we need to have people, young people, elderly people, everybody being more open and more curious. Because you know, nobody educated me in Blockchain, I did this myself. And Alex, you nobody educated you, you also did this yourself.
And why is this working? Because you have been curious and open, you have invested time. And at some point of time, you will get an understanding of what's going on in the crypto field. So we need to have more openness, more energy, and more curiosity on the side of young people and elderly people who want to understand this, right? Nobody can expect other people to educate them.
Education is also something you have people have to do themselves. And to be honest, it's all written on Google. You just go to Google type in Bitcoin, Etherium, Smart contract or whatever, and you hit the enter button and you start reading, it's not that difficult. It just takes some energy and some time, which needs to be invested. And then it can easily be done right, just take some time and some energy.
On the other side, of course, we also have to have universities and schools and other education providers who need to provide structures, courses, videos, studies, study programs, and so on to help people get more structure in the field with regard to education. This is slowly coming, and one important point is also at the end of the day, we need to, we need more funds, right?
We have now run multiple workshops, certificate programs. We also start a study course in the area of Blockchain next year. And we have very successfully established the DLT tenants' program for women and the DeFi tenants' program for those people, regardless of their gender, who are interested in the DeFi space, right?
And we have applied twice by the European Commission to get funding for them, for these programs. And they have rejected our inquiry to get funding for this, which is very, very, very sad. And which also partly makes me a little bit angry, because people are always saying that they are caring about education on behalf of politicians and authorities. And at the end of the day, we are presenting a program to educate women to get in the field. And then you do not get money from, from the European Commission.
This is pretty bad. But it also challenged us to create this program such that sponsors, like private sponsors, companies would be interested in it because we are educating people they can potentially hire. And we tuned the program such which is really good, that sponsoring companies are interested, they are paying us money to operate the program. And we are of course then placing them and their top offers such that ideally, companies are able to hire skilled people from our programs, right.
So, it does work, we do find private sponsors, it works very well. We are presenting excellent profiles of young people to the sponsoring companies who are then able to hire them, so this works very well.
But on the other hand, it's also not very easy to convince people sponsoring such programs, right?
So, we need more money for such education measures. And we of course, also need the energy and the time and the openness on behalf of people who want to investigate this technology.
Alex: Yeah, you cannot say better. And regarding the funding, I think it's also a crucial part, and it's really sad that the European government is not yet recognizing the importance of this field. But I think we can do as well with private money, rather well if we have the right tools.
And here I come to my next question, trying to go deeper in this educational part of your activity. Did you consider applying income share agreements for this specific course, we have a product for the accumulation of income share agreements, that's why I know it. And it's, this product is specifically done to help funding education for talents. And it's based on income share agreements, how it works is basically one student comes to any educational, traditional university, but mostly it works best for boot camps, where you have a short period of study.
And you can potentially get a job after like 3, 6, 9 months, and you study there for free. But you sign an agreement that you will be paying like 15% from your salary for next two years if you land the job in this space, in, in the space you've got education for.
And, but you cannot pay more than for example, some limit, some cap like two times for example of the cost of education itself.
So, and it basically turns this, I say into an investable asset because it can generate zero profit. You can pay for one student, for example, and it can generate zero revenue if the student doesn't land a job, but it can also generate like 2x.
And financial model is done in a way that it's like on a scale it generates 15% profit every year, so and when you tokenize this asset and open a secondary market, some companies can acquire this asset, especially if they're looking for talent in this field and they basically also can hire talent who has this asset. And it basically makes them not only investor but also employer to the seller.
Prof. Dr. Philipp: I think it's very interesting. But you know that, that's the money part, right? People also invest the time and the energy and the openness and the curiosity to get educated in the field. Right. So therefore, I think it's excellent that you provide such, such tools.
But sometimes it's also not about the money, it's more about the individual's ambitions to get into the field and really in. Okay, but in case people want to invest some time that sometimes involves some money. This is pretty sure. So, is it already working? Are people using it?
Alex: No, it's in pilot mode. But if you want to pilot it, we can do it rather fast. And it is not only us who provide the services, like we're providing the services actually on, on Blockchain. We use tokenized assets but there are a lot of providers who do it like, on a regular basis. Like some of them are already quite successful.
And there are also some in Europe, as the problem is that you need to check if it works for Germany, because the problem with, with ISA because it attached this income of a person to the agreement, it's not always an enforceable agreement in any jurisdiction. Like in some jurisdictions, it's not enforceable. So, this is like, what, what you need to check. But I think like in Germany, it works from what I remember.
Prof. Dr. Philipp: Yeah. Interesting. Yeah, it would be interesting to hear more about it, maybe you can send me more information about this. That would be very interesting. We'll see how it really works. It makes very much sence
Alex: Yeah, sure, sure. What about education? I really do agree with you that people also need to be curious about this, they also need to be brave enough to explore the space. But also, what I do see as a potential problem here in the space, is that the Blockchain field becomes more and more and more complex. And the knowledge needed to operate in the space grows.
But also from another hand, we'll have much better educational materials, like we didn't have these materials in 2016 when you entered space, right, like you had deep, really deep research in order to really understand how the thing works.
The amount of knowledge is growing. And I think what is needed, we need to kind of promote this message that Blockchain is not hard. It's not rocket science. It can be rocket science, if you go deeper look into how cryptographic primitives works in blockchain, but you don't need it. Like you just need to study it on a level to know how to use it.
So, what do you think we can solve this problem? How can we make sure that people understand that it's for everyone?
Prof. Dr. Philipp: Yeah, difficult questions for? I would perfectly agree, everybody can understand Blockchain technology. But yes, I actually, to be honest, you know, I'm not sure if we have to help you, if we have to do it, you know, we are doing this podcast. And we, education, are trying to disseminate this, this message.
In my mind, this is all that we can do, and we are doing fine in this field. And yes, we can do more. But on the other hand, you also want, again, need the openness, the time and the curiosity of those people who want to get educated because it's, there is, there must also be a demand side for this. You cannot push education, right? It's, it's but you can, but it's always difficult. You need commitment and to buy in to people.
Alex: Yeah. And what I like characteristic of people who are coming, like what is their main motivation if you'd like, did you just started this like, did you do any polls when, when you onboard people?
Prof. Dr. Philipp: No, we're not doing any polls, but we talk of course to people. So, I think what people have is a driving force, twofold.
First of all, some of them would like to simply make a good career in a growing field and other ones are working for example, in the financial industry, they see that their job might vanish at some point of time. And they then decide what should they do now. Should they educate themselves, such that they also have a job in 5 years and 10 years?
So, one is basically driven out of the opportunity which is there, and the other motivation is driven out of necessity which is also partly there, that some part, some people have to educate themselves, otherwise their job vanishes at some point of time, right? We see, we see both of this
Alex: Now I want to talk about another topic from yours, what you elaborated in the beginning is about CBDC, Central Bank digital Currencies. I myself am a big proponent of this thing, I think this is what can bring a lot of adoption. So, and once we have really worked in digital currency, even on permission ledger, actually, I think it should be permissioned ledger for, for any country, for any government.
And one, but this system still can be rather open, when people can start deploying smart contracts on these, so if I disperse my contracts. But it looks like they're still, we're still not there. You know, like, and we're still in there. And I think like, you know, much better than I do about the current status of digital Euro, DLT based digital Euro in the European Union. What is the progress? What are the main challenges? What can be a potential solution? So maybe let's go deeper in this thing and talk about this?
Prof. Dr. Philipp: Yeah, of course. So, the question is, what about the Euro in the future? Will we have the Euro potentially running on a Blockchain system or not? That's basically the question at the outset. And we do see some inflation with regard to the Euro, this is an entirely different question. So we are, you asked me about the digital Euro, this can nevertheless be dedicated to inflation.
So, we are not discussing here, Bitcoin versus the Euro. That's an entirely different aspect. But imagine you would like to keep the payment structure in Euro. Then the question is whether it makes sense to have a digital Euro running on Blockchain systems, right?
And then we see, for example, on the on the eastern side of Europe, we see that China is really pushing this topic, they have investigated this topic since 2014, they are really pushing this topic of printing their digital currency of China on some digital system, which most probably is some kind of Blockchain system. And they should go live probably in 2022. Right.
So, they are very, very fast, it works very well over there and it's government driven. We're not talking about privacy issues here; this is once again another topic. And then on the western side, we have the US, on the US side, we do not have the central bank, which takes action very quickly, like in China.
So, on the US side, we also do not have a government driven solution, for example, by the Fed or by other authorities. And therefore, we see some gap here right, some gap between the US central bank, which is similarly slow like the European Central Bank, and the Chinese central bank, which is really moving ahead.
So, there is a gap with this, for the Euro and also for the US dollar. And the question is now, what happens with this gap? For the US dollar, we already have a potential solution out there, it's called stable coin, and the US dollar stable coins, once they are regulated, maybe in a better way, then they might turn into something what we would call the digital dollar, right?
I think the stable minds of today are morphing into the digital dollar of the future. And in Europe, we have neither a government driven solution like in China, where, where there is really intensity and speed here. And we also do not have Euro referenced stable coins which could potentially morph into a digital Euro.
So, in Europe, we don't have this in my mind, that's, that's a little bit dangerous, because we do not have enough development power, visions and understanding in Europe to really see what is the benefit exactly from a digital Euro. And to elaborate on this, I think they are following domains where the digital Euro makes sense.
First of all, it would make sense for retail payments, that's basically payments among individuals within the same country. Then we have payments going on in the industry that, for example, in case an automotive supplier is paying BMW for something or the other way around. And we have the capital market where payments are being done to settle digital securities transactions. Then we have the cross-border remittance domain where the Euro is being sent overseas or coming back. And finally, we now have to define the crypto ecosystem where at this point of time, you have the US dollar reference stable coins.
In my mind, these are the key domains out there, where the digital Euro needs to be discussed. And based on these domains, multiple variants of the digital Euro potential are there and could potentially be emerging.
So, the European Central Bank at this point of time drives the digital Euro for the retail domain. So, the European Central Bank is trying to do something like credit cards. And this is something I do not really understand because credit cards and PayPal payments and also Apple Pay payments are working very, very well. So, I'm not really sure why the ECB is pushing into this direction, because we have a solution already. And nobody needs another solution like the one which is already working since years. Especially nobody needs a solution like this in case the solution is being developed and launching to the market by 2026, or 2028.
Yeah, so this doesn't really make very much sense what the ECB is focusing on. But they will probably tune their concept and then also have a better profile of what they are doing. But what is, what can be recognized is what they are doing is targeting basically the digital payments market of credit cards. Then we have the DeFi area in the crypto asset's domain. This is where US dollar stable coins are already existing and they work also very well, since the problem of volatility has already been addressed by US dollar stable coins, there is no problem anymore, right?
So, the Euro reference stable coins doesn't add so much additional value. Therefore, we don't need it necessarily, because the crypto domain is therefore populated by the US dollar stable coins.
Then we have Remittances. This is an interesting uprising field. So far, we have legacy institutions there, we are now discussing for itself. For example, in El Salvador possibility of transferring money via the Bitcoin network. But also, Whatsapp and Facebook on Beta are now exploring how to move your US dollar stable coins on WhatsApp messages. For example, So, they can hear that a Euro stable coin is not existing, and is potentially also not necessarily needed. And therefore, days wanted once again, a gap for the Euro.
And two domains left the capital markets and the industrial domain. I think here, we might have a chance in Europe producing solutions on behalf of banks, who are integrating their bank accounts with regard to industrial processes and capital, capital market processes. This I think works very well. And for this, you do not necessarily need to have stable coins.
So here, I think there will be good solutions coming from Europe, but not from the ECB, but rather from commercial banks, and also from private financial market institutions out there who are issuing the money, which can then be used on behalf of participants from the capital markets, and from industrial corporations. I think that's a very brief summary of what's going on here. And you see here, it's geopolitical by nature, it's very, very, very important.
And in Europe, we do see some progress on behalf of the digital Euro for industrial domains and the capital markets. But we are not seeing enough progress for the domains, remittances, or cross border payments, retail payments, and also the Euro in a format which could potentially be used by DeFi sectors and also to the crypto domain.
Alex: Yeah, and about capital markets. Why do you think these have some potential more than, for example, cross border payments? Is it because for example, there is already quite a good solution for cross border pay, payments in Europe, like SEPA? And it's already …