SANTIAGO VELEZ: Welcome to Real Vision. My name is Santiago Velez. I am co-founder of Block Digital Corporation. Today, I am pleased to have with us Mr. Gilbert Verdian of Quant. Today, he is going to be joining us and talking about the Overledger project, and hopefully an amazing future that you will find very compelling. Without further ado, welcome, Mr. Gilbert Verdian.

GILBERT VERDIAN: Thank you, Santiago. Great to be here. Thank you for the opportunity.

SANTIAGO VELEZ: Great. I came along your project on the internet, just researching different efforts to bring interoperability to the space with regards to tying in traditional systems, and new distributed ledger technology systems, blockchains. For us on Real Vision, we have had conversations along the way regarding interoperability as a concept. What I would like to do today is do a deep dive into your project, and how you can tie in all of these things. Before that, I would like to start with a little background on yourself and how you got into the space. Then a little bit about your company.

GILBERT VERDIAN: Absolutely. Thank you. The story goes back actually quite a long time, 1998. The internet was quite early in terms of the commercial internet. The 1990s, we had the dotcom boom. I have been working in cybersecurity for quite a long time. My background comes from the real core of security, where we are pushing boundaries, we are testing limits, where we are finding out how things work and trying to improve them. That is the methodology of what security really does at its purest form.

1998, I had a problem with the internet. It was really bugging me that we had not included the need for cybersecurity in the protocols that we were using, in the applications that we were using, the web was quite new, we were having lots of security problems, and even back then, vulnerabilities, data breaches, it was just common. My thinking was, we have got the internet wrong. The decisions we have made back in the 1950s, and 1960s, the architecture and the technology, and they just did not include or factor in the need for security and everything.

My vision was to create a complimentary secure internet that sat next to the normal internet and allowed us to do sensitive transactions in a more secure manner. Back then, the technology was not there. This was very early on. Firewalls, I knew there was stateful inspection, and they evolved into deep application, deep packet inspection, firewalls, and the technology was not there, it was very early, so I had to be patient. As I waited, and continue working in cybersecurity, very technical.

Then I eventually became C level in cybersecurity. I have worked across consulting at CSC where I had a [?] security architecture and then moved between countries. I then moved into the big four. I worked [?] in cybersecurity, leading on a lot of financial services, government projects, and then eventually, I became C level in government, and banking. Around that time, I was working in the Treasury in the government here in the UK, and it was 2008, and it was the financial crisis. I was head of security and CTO there and during the storm of the financial crisis, this Satoshi paper comes up, and I saw it weeks after it came out, it was very good. Being a security person, you are always in the underground forums and seeing what is going on, and you have your contacts and your connections, and this paper came out.

I saw it, and it interested me because it reminded me of what we tried to do in the dotcom days with e-money, and there was beenz and a couple of other initiatives that did not work. They just were not right in terms of their velocity, their adoption, the economics of it, etc. This interested me because it put together a whole bunch of cybersecurity technologies and created this thing called Bitcoin, and I liked it. I actually liked it and I brought it to the attention of the rest of the government. I spoke at a conference. This is 2008, this is very early. I think the UK was the first government to take this on in terms of looking at it.

Brought it to the attention of the rest of governments, I spoke at a conference where I was the only government people, and said, look, this is something we should look at, it should be of interest to the nation. We did a policy on it, and the conclusion was, it is early, it is not going to impact the country, which was correct. At the time, there is a global financial crisis happening. That was my introduction to blockchain. I kept looking at it and working on it in the background, as I said, it interested me.

Then things evolved. 2014, Ethereum, Ripple, new technologies started to come out, we had blockchain being used a bit more than the Bitcoin in terms of the word. The industry was looking at it interested financial services a lot. Around that time, I moved government departments and then I went to the Australian government. I started thinking about how to use blockchain for cybersecurity reasons, because it is a secure rail. I was chief security officer at the Department of Health, and I wanted to interconnect health data between different jurisdictions and different systems.

I started talking about how we can use the blockchain overlay as a secure means to transfer and hold very sensitive patient data, which is, if you look at the dark net, patient data is the most valuable. Health data cost more to buy than financial data, credit card numbers, etc. The problem is, if you lose your financial data, you can ring the bank and you get a new card, or you can do other things. If you lose your health data, you cannot ring anyone and say, can I change my DNA? It is very valuable.

I wanted to do it in a more secure manner. I started talking about the overlay, which led to the idea of Overledger. How do we have a blockchain overlay that could interconnect different networks and different systems? I started talking about it from a government perspective, the standards, people approached me. They said, this is really interesting. Can we turn this into an ISO standard? What that means is standards create economies, because you are allowing people to communicate and talk the same language, and in financial services, in payments, and all the messaging systems, ISO 20022 is the standard. The old one was 8583, which is the old payments standard that everyone has been using, like Visa, MasterCard, etc. It is evolving into ISO 20022.

For me, it was a great way to define and fix the problem with blockchains, because I had a problem with the way the ecosystem was growing, because we were making great technology, proof of work, proof of stake. We had great adoption, because Ethereum was quite big at the time, Ripple had just started to do some aspirational things, but they were making all this technology in isolation. I did not want everyone to make that mistake again, because we made that mistake with the old internet service providers of the first internet, where you had an account with one ISP, you could not talk to anyone else. You were stuck with CompuServe, you are stuck with AOL, for example.

I did not want the industry to make that mistake again. I established the ISO standard back in 2015, did all the work and we have got it approved. In early 2016, it kicked off April 20, 2016 as the first plenary. That was a great way to bring interoperability, security, privacy, smart contract governance, all of those important topics that make blockchain work with each other to the global playing field. Now, today, there is 57 countries and organizations working together to do this. There is a huge, huge push behind standards.

This is the future. Standards are going to enable the mass adoption of the mass implementation of blockchain because people can trust the technology. If you think about IT, as a decision maker in technology, you do not want to pick a particular product or a vendor or technology that locks you in. The industry made that mistake with mainframes. You buy a mainframe, you have it for life, for 50 years, you cannot go off of it. It gets very expensive to maintain. Once you have standards and once you have interoperability, it is easy to interconnect and change technologies to be able to move so it is easier to adopt.

SANTIAGO VELEZ: Let us hone in on a few key learnings there, I guess. First, for me, it seems that the internet, as we know it, really was never complete. As we have been going along, we have been amending to it, we have been adding e-commerce, we have been adding e-banking, social networks, etc. Some of the more fundamental structural issues were not fully addressed and security being one of them, and interoperability of value, these things are just now being picked up. The adage that software eats the world is true, it just it took a longer period of time to get to this point where we can start addressing these specific issues.

I find that very interesting, because it lends itself to-- you brought up the analogy of AOL or CompuServe and being essentially these isolated islands that people cannot escape from them. They are walled gardens, and they are trapped in that ecosystem. That is true, I think, for both the retail individual, but also for enterprise, for corporates, and for governments. That is obviously not an acceptable endgame for a blockchain. We cannot all be operating on the same blockchain and agree that the entire world is just going to use one blockchain.

I think you are on the money when you say that the solution to that problem is really starting with the standards. The standards are what sets the roadmap for the infrastructure, you build the infrastructure on top of the standard, because it is something that the whole world has pre-negotiated. You have sat down, you have put the thought into it, and you have done the work to agree, this is how we are going to talk to each other. Once you have come to that agreement, that consensus, then you can build all manner of infrastructure on top of it and not repeat the mistakes of the internet. Is that a correct summary?

GILBERT VERDIAN: Yeah, absolutely. The internet was never made to hold money. If you look at the core protocols, it was really for information exchange, and data exchange, it was never made for transactional or value exchange. E-commerce, we made it work on the internet, because of the merchant relationship. It is a client server. It fits the model of the internet. With real transactions, e-commerce and what happens on the internet is only 10% of world GDP. There is a whole 90% that is not done on the internet, or it does not use transactional systems on the internet that we still have not used, we have not digitized or we have not actually transformed to work on an automated way using a technology like blockchain.

Blockchain can address that gap because it is made in a manner where you can trust the network. The underlying protocols of the internet, we are not going to go and create new pipes and lay new cables. That is not going to work. What we can do is we can create a network on top of the internet network, which is made of blockchains. You are right, there is no one blockchain that everyone will connect to. It is the same analogy as mobile phone networks, not everyone uses the same carrier. You use the one that you want, because it has got a better deal, it has got better coverage, it has got better features, or you just like the color, logo, it does not matter.

We are going to have the same choice with different DLTs, but the important thing is they all have to intercommunicate, interoperate and transact between the different networks as seamlessly as the way the internet operates today. The flaw that I saw was in 1994, we put online banking on the internet. That is not transactional in the sense of e-commerce, that is core banking. Whereas before that, it was Stanford Union Bank, they were the first with Wells as well, Wells Fargo, back then, they created online banking, and the system was not ready for it. That is why we have been having the problems. There is a whole cybersecurity industry protecting banking, but we were unable to safely connect core banking to the internet. Even today.

If you look at my fellow CSOs in previous roles, one of them, which was I think it was either JP Morgan or one of them, I cannot remember, sorry. They spend something like $290 million every year just on cybersecurity to protect core banking. That is huge. Even with all that expenditure, you still have people clicking on links, and data breaches happen. The network that we are running on needs change and it needs transformation. What blockchain can do is it allows us to securely trust the network for the first time because we do not have to build all these firewalls, walled gardens as you said, to protect us from each other.

We can actually trust the network because we have the security embedded within the protocols of the network. When you are transacting something from A to B, you do not have to have SSL tunnels and IDS, IPS systems to make sure it happens. Then all this stuff on one end and reconciliation on the other end to make sure the transaction was settled and completed, you just send it to the network, and the network handles that for you. It securely transacts for you, which is the way Bitcoin operates, cryptocurrency operates, Ethereum, other blockchains operate.

The consensus and the security and the encryption built in is trusted because it is computationally heavy. It is a huge task to go and disrupt the integrity of that computation. Because the 51% attack, it is not cheap, you need to spend billions these days to be able to do that. If you are only doing a small transaction, it is not worth it. We are looking at a technology now that can solve the flaw and the gap that we had within the protocols of the original internet. Now, we can actually transact, automate and transact money in the way we are supposed to.

SANTIAGO VELEZ: It seems to me that from the traditional system, we would have this onion model. No matter how good you make your on your model, and you have all these layers that you peel away, at the core is that vulnerability, and so all the banks, anyone with any representative digital value has to worry about protecting that core. Even internal, as you mentioned, someone internally by accident could click a link or you could have an actor that is malicious, you cannot protect against those things with the existing model. Decentralization, a lot of people talk about blockchain is just a disrupter or disintermediater, but even for incumbents, that technology offers the ability to secure their own assets, take care of their own business processes, and allow them to interact with each other in a trustless way, without a third party intermediary, more efficient, low costs and more security.

That is what I see as the value added. However, those individual decentralized networks achieve consensus, whether it is a proof of work or proof of stake, whatever the consensus algorithm is, at the end of the day, it is really about transmitting value from one party to another safely. The next step, the hype is really around cryptocurrencies and about how those consensus algorithms allow people to store and transact value, but the next logical step seems to be how do we then interact between these networks in a secure way? Why do not we go into Overledger and your product at Quant, and talk about Quant and exactly how that all came about?

GILBERT VERDIAN: Yeah, I totally agree with what you just said. Definitely, we are on that track. What we set out to do at Quant, the idea was, as I said, back in 2015, I wanted to create an overlay on how to securely interconnect different DLTs whilst maintaining the rules and the governance and the security and integrity of all the underlying systems and to basically open up networks so they can communicate and have cross-platform applications, cross-platform transactions, and interoperate. It was a very simple idea, but extremely complex to accomplish.

After the role with the Australian government, I came back to London. I was the chief security officer of all the payments infrastructure for the Bank of England, so basically keeping the pound safe. This is trillions and trillions of pounds flowing through the network. My role as the CSO was to keep the economy running and to keep the payment network safe. Just as a side note, the amount of volume that just the UK Faster Payments network processes every couple of hours is more than what Bitcoin does in its whole market cap. Bitcoin is still small in terms of its volume, the financial infrastructure out there, there is a lot more and then there is a large value as well, which is the CHAPS system. That is the cross-border settlement, exchange settlements, settlement accounts with the Bank of England that are on the CHAPS system, which is even more.

There is trillions flowing through the system. What I wanted to do was-- I am an experienced enterprise guy that understands the system and I have seen a lot of utopian views of decentralization. I have to say, the world is not going to decentralize everything. It is a bit dystopian to think that we are going to turn everything that we have ever done off because it is centralized, and then go into a complete decentralized model with complete decentralized governance, and it is going to work. I do not think that is the case, because there is too much investment and processes that have been not just money wise, but have been built over the years that power economies, and health systems, government systems, cross-border trade, financial systems, whatever they are, we cannot turn them off.

What I wanted to do was we need to complement those. We need to take what exists already and allow it to benefit from blockchain technology and distributed technology without disrupting it and turning it off and making the sea level in those organizations uncomfortable. I know some organizations have come to a bank and have said, you need to use blockchain. You need to do this. You need to change your core system to work with blockchain technology. Those projects have not gone well. A good example is Ripple did this in 2013 with Westpac, which is a bank that is in Australia. They came in with a similar approach. They tried for three years, and then the project did not go anywhere. They did not put Ripple into Westpac for that reason.

One thing people need to realize is core banking systems are very regulated, very heavy to run and maintain, and very expensive. I worked at HSBC, and we spent something like 6 billion pounds every year just to keep the banking system running, just to keep the lights on. That is normal, that is normal for a global bank. You cannot come in and turn that off and change things easily, because it will break the core functionality.

The idea of Overledger was how do we build an enterprise system that can complement the existing platforms and technology that everyone uses and allow them