Blockdaemon's Konstantin Richter on serving 70% of top 500 crypto institutions and the coming DeFi pivot

Dam, how you doing? Welcome to the stream. Hey guys, how's it going? Thanks so much for joining. Uh, would you mind kicking it off with a little bit of introduction on yourself and the company just to get us started? Yeah. Yeah. No, listen, it's a it's a great question.

Block demon uh you know the word Damon uh means in computer science and operating system that runs silently in the background and that's really uh what blockdemon is we connect institutions to a blockchain networks and we allow for compliant and secure monetization of the underlying fee and earn structure right and so uh translated it means we run nodes uh for institutions and so uh we're pure B2B play and uh and so we run core infrastructure we run around 250,000 nodes across 40 different data centers around the world.

Uh enabling basically institutions to purchase and hold uh assets in their respective consumers. Um that has been the the the large sort of activity over the last 5 years.

Right now we're sort of uh pivoting more into the DeFi area of things where the next few years are really all about allowing people to borrow and lend against the assets that they're now, you know, able to hold and buy a little more easily. And so Block Demon is an enabler.

Um, uh, we're really purpose-built to meet enterpriseg grade demand for infrastructure. Um, couple of things that are special, I guess, is that we are doiciled in the US for better or worse.

Um and uh you know we've been um uh able to attract uh very institutional capital and so on our board governance we have people like JP Morgan and Goldman Sachs and City Bank is another uh large institution with major shareholder um uh status and so we've got um a really unique investor and partner group.

I'd say out of the top 500 institutions offering crypto 70% are customers of our infrastructure. And so, you know, we're we're very foundational to the space. We've been around for seven and a half years.

Um, we, you know, raised a bunch of money um from, you know, said institutions in order to really, uh, bring institutions to crypto networks and do it in a way that's, as mentioned, secure. Um, I'm from Germany. Uh, I've come from the cell network world and I always nodes a cell network. Who's that Nokia? Yeah, Nokia.

Deutsche Telecom actually is my uh claim to fame.

I worked for uh back then a young man called Nika Shaoa who uh you know for a moment was president at SoftBank and now runs Palo Alto Networks and also was chief business officer at Google and so there's been a lot of people who started in cell networks and figuring out how too make that data work one network one type of network to another well can you give us a temperature check on the enterprise um in the last cycle a lot of the pitches for the enterprise it was a lot of exploratory budgets a lot Oh, maybe we can put our uh our inventory on a blockchain and we'll store the data, you know, and and but now are institutions coming around and are they more up to speed on what crypto can do for them?

How are they thinking about plugging in and what what is what is kind of top of mind for crypto amongst like the Fortune 500 from what you from what you've assessed? Yeah. Um so I think there's different categories, right?

And so first off, obviously the core financial institutions, the Robin Hoods, the PayPal that enable people to purchase crypto and hold it are now all investigating, you know, how do you earn uh using these assets, right?

And so I think um um you have existing uh uh fintech players that have offered basic crypto services that are now uh feel a lot more empowered in in uh you know what we call staking or um DeFi uh to offer sort of earn adjacent um products to their customer base. I think you'll see a big trend there.

Uh in the trady world, I think you're going to see um a lot more interest in wallets specifically. And so they're really at that stage of like figuring out hey um how do we actually what technology do we use in order to custody crypto assets in our own infrastructure.

And so I think um you know in the past basically you didn't really want to touch crypto or if you used a third party uh that you could point to if anything went wrong.

And so now I think in the current iteration all these institutions are really figuring out what their own proprietary uh basic solution setup is in order to custody assets and then also offer um adjacent earn potential here.

Um, and so we see a lot of that and with the sort of more Sony-esque type of companies in the world, you see a lot of interest in building their own version of a blockchain, L2s.

You know, I don't know if you remember the good old days when everybody had a totally permissioned little Hyperledger thing uh going I think uh we've made some progress there. It is a funny thing.

It's like we should we should pay attention to this crypto, you know, thing and then oh, we should just make our own blockchain. That's that's the that's the way to get involved. It's it's Yeah, it definitely was a Yeah, we should start our own Visa network competitor. Like, yeah, why not? Why not? What um go for it.

Yeah. And that has changed with like the you know the optimism, the ZK zinc, arbitrums, like you know people being able to easily spin up um a sort of permission chain on a public network, right? And so there's been some progress there. Um and uh we see quite a bit there.

And then obviously all the ETF stuff and and and technology that's that you need in order to basically custody these assets and offer yield over time.

what what legacy you know the we've had a bunch of interesting conversations today and different perspectives and it feels like in many you know the the irony of stable coins is that in many way they actually sort of expand and support the dollar right so this crypto being this sort of disruptive force is at the same time propping up uh this sort of legacy system what areas of traditional finance do you feel like are are most prone prone to disruption uh over the next decade.

Yeah. I mean, well, because and and the context is like those legacy institutions are coming to you now or they already have and they're saying help us not get disrupted, right? Like we don't want to be Nokia basically. Yeah. Yeah. Well, I think interestingly enough, everyone is uh and thank you for pointing that out.

I feel like I joined Nokia in 2005 on top of the world. I left in 2010 after I ran it into the ground and so lucky, hey, at least you could joke about it now. Yeah, exactly. Uh, no, I mean I was obviously a, you know, small little figure there, but it was an interesting learning, right?

Because ultimately you had an entity that was very, very good in building really complex technology in thousand different versions, but very very bad in streamlining singular software tools across its platform. And so I think you'll find that financial institutions have a sim similar risk, right?

like the the IT stack of a large Treadfi is insane. Um, you know, I mean, it's probably akin to what Elon Musk when he talks about Doge. Uh, you'd be surprised about how arcaric a lot of these systems actually still are. I mean, if you look at the structure of the Swift network, um, that obviously is one. Sorry guys.

Um and then you also uh just the ERP systems underneath it are so complex and you know JP Morgan has 100,000 engineers and they keep on building and doing stuff and so pivoting away from that occur infrastructure is really really difficult. Um and uh you know they're starting to do it.

I think frankly I think we're we're all way behind here, you know, even as institutions because the beauty of AI and blockchain and um uh the opening up of financial systems uh via Bitcoin uh is going to accelerate um the movability of money and so remittance specifically are sort of areas where I think time's running out for institutions.

you know, it's like either you can innovate really really quickly or people are going to find other ways to do it, you know, and let it be a Coinbase issue with stable coin or something like that that uh can actually take care of a lot of these things.

And so it's going to be really really interesting how uh financial institutions hold on to also the custody component, right? And crypto has a self-custodial cryptographic sort of component. And if you think about what you pay your bank first and foremost, you pay them so they hold custody of your assets, right?

And so often custody can be fairly acaric but with that custody you also obviously lose a lot of control and um you know you have technology and solutions today that can replicate basically what an institution offers here for zero cost right it's really the the the consumer that is nervous in touching them and and and the infrastructure currently is way way too complex for anyone to use uh but you're going to see a lot of improvements there uh on the user experience front also with AI I heard You guys mentioned AI and obviously you know you got to pivot into AI every 3 months but um I think one use case that I kind of want to point out that we're working on that I think is really interesting on the wallet layer is using AI to issue very simple commands to crypto networks right to just say hey I just want to send Ethereum to this address you know like kind of and that can be an I it'd be nice if you could tell a wallet you know an agentic wallet just make me a 10% return daily compounded daily just forever please don't make mistakes just give me a 10 bag 10x this correct um but you know but basically make the interface that simple right hey wire securely $100 uh to France you know I don't know if they need it but um you know we can uh those type of things I think are going to be real improvements on on how this works how what's happening with emerging markets we've talked about uh with other guests today around the risk that certain governments might not want their citizens to be you know uh uh selling their native currency for something like stables or or other assets.

And so how much attention are you paying to the policy decisions in markets outside of the US or is that not a focus for you right now? No, for sure.

I mean the outside of the US um is still our largest market um because we were in the US and and obviously got clobbered by regulators and and by basically operation chokepoint um 2. 0 0 and so uh we expanded massively into Asia. Asia is a really exciting market for us.

Um you'll see a you know Asia is lots of things uh lots of different technologies and and standards and and you know you have the full spectrum of really really um dogmatic and and suppressive uh systems and very very open ones technically. And so yes, we follow this uh uh very closely.

I think um if I may age myself again um you know it reminds me a little bit back in the day we were trying to figure out how to distribute music via digital channels on and sell networks right and so once you pixelate stuff in ones and zeros it's just really difficult to contain it right and and you're going to see that with currencies on a very basic level as well right like it's just like you can try and do the China and ban Bitcoin and things like that but the reality is it's a temporary solution um um people are going to find ways around it and So, I think we we've we've Yeah, like the the p uh piracy, media piracy has not been solved, right?

Like at all. Not even close, right? It's probably easier than ever to get movies online that that that uh uh without, you know, paying for them. So, the idea that you're going to sort of regulate crypto out of existence is is a bit silly.

Uh last question for me, MCP, people have been talking about potentially integrating stable coins into that standard. where how do you see it evolving? What are you excited about? Or do you think it'll just live side by side with crypto rails? I mean, it's a good question. I mean, I have a preference, right?

I think um what is your preference? Well, my preference is that it's all integrated in one, right? Like I really want to u uh ultimately I'm I'm a old school crypto guy. I want access and and inclusion via crypto rails for everyone that no single entity can control, right?

And so uh uh my job is to uh bring a substantial amount of uh volume from um hardcoded institutional rails into open-source onchain networks, right? And so that's my preference.

I think um it's uh going to take a minute uh with regulators um even though we have a much better um administration that's a lot more open to thinking about um how to regulate this and a market structure bill coming that we're working with and and and trying to ensure um that this gets done correctly.

Yeah, I I think um it's going to take a few iterations, you know, like we're going to get something done, some regulation at first and some of it is going to be good, some of it is not going to be so good and then we got to uh see how how how much support the industry can can continue to garner across also the aisle.

Basically, it has to be a bipartisan issue um on the regulatory front as well if we want to real see real real progress. And so, but you know, obviously we're we're very optimistic here that we can come up with something um that is as open as possible and replaces as many of the legacy rails as possible. Fantastic.

Thank you so much for stopping by. Hope you have a great rest of your day. We'd love to get the update from you as as things progress and we get more clarity on the regulatory side, too. Um but thanks so much for stopping by. We'll talk to you soon. Cheers. How?

Uh, next up I got to tell you about numeral sales tax on autopilot. Spend less than five minutes per month on sales tax compliance. Benchmark Series A. Benchmark Series A. Yeah. I wonder how sales tax. Well, you know who has to pay sales tax? Pudgy Penguins. Because they sell real things in the real world. Oh, yeah.

They do. They do. They do. Uh, and we have Luca from Pudgy Penguins coming on uh the stream next uh talking to us. You just make the next 20 minutes. Exactly. Exactly. How you paying sales tax? Let's get to the really important questions. We don't want to know about the NFT market. People want to know.

We want to know about your sales tax stack