Benjamin Hauser is the CEO of Hyperlink Technology, a company focused on the development of innovative blockchain technology and security tokenization.
I had the opportunity to interview Ben to understand how Hyperlink aims to utilise blockchain technology in tokenizing global assets.
Who is Hyperlink Technology and what problem are you solving?
We’re a collection of nerds and cynics with a passion for blockchain, in search of a better way after the chaos we witnessed over the past year. We think that tokenization can have a profound effect on modern finance and we want to play a part in that.
At present we’re building the SFT protocol, an open sourced technical framework for the issuance of security tokens. Our basic philosophy is that the quickest way to advance the industry is the one that encourages the most participants at every stage, or to use a favored buzzword, the one that’s the most interoperable. Blockchain is supposed to be about decentralization, right? So we aren’t asking you to buy our utility token to use what we’re building. And we certainly aren’t hiding our cards where our tech stack is concerned. If a year from now we have direct competitors using SFT I’ll see that as a massive success, because it means we’ve managed to create something bigger than just HyperLink.
But it takes more than technology to grow an industry. A monkey with a keyboard and a github account will eventually commit a flawless protocol, but it’s all for nothing if the laws won’t allow it or the people don’t understand it. To that end we’re also working within the greater community, spreading awareness wherever possible, trying to help evangelize about the crazy things we’re all doing. We were present for the signing of the Millbrook Accord and are founding members of the Verified Token Framework, promoting an active dialog between industry participants to encourage interoperability. We’re also co-founders of the Georgian National Blockchain Agency, working with regulators to encourage blockchain friendly policy.
Ultimately these are the first steps of a nascent industry, and we’re still in a kind of exploratory phase. It’s impossible to predict where things will be in 10 years. Now is the time to be planting seeds, making connections, building and making noise so that when that professed hockey stick growth actually does arrive, we’re well positioned.
I guess you could say we’re here to play the long game.
How is SFT different than the competition? How do you intend to monetize your technology if your code is open source?
It’s easier to start with what we aren’t doing when talking about how we differentiate ourselves. We aren’t building a closed system and we aren’t trying to invent stories about the utility of our token. The first step in our business plan involves building, not going on a roadshow. We’re fully self funded and not looking to raise capital based on an idea. That should leave us in a fairly niche space already
Beyond that — we favour a decentralized (public) approach to digital assets, and keeping as much logic on-chain as possible. Of course we’re dealing with securities here, there is a legally mandated level of trust and authority required and some things will violate the principles of decentralization and trustlessness. But just because we’re allowing some trust doesn’t mean we should give up all of it. If you feel that way, then I would ask you… why do you want blockchain, exactly?
We want to make things more transparent for everyone and eliminate opportunities for acting in bad faith. We want to architect systems where companies are held accountable before the fact, through smart contracts that they themselves enact as a sign of good faith to their shareholders, saying “see? You don’t even have to trust us.”
As for monetizing, we’ll be announcing our business model somewhere in the next quarter once the protocol is complete. Our focus is on issuance and lifecycle management, but I don’t want to start selling anything until we’ve finished building.
What are some of the risks when dealing with tokenized securities that issuers/investors should be aware of?
For investors, especially those arriving from the ICO space, it’s important to realize that just because a project labels itself a security token offering does not immediately mean it is complaint and that you actually have the professed investor protections. The reality of securities law is that most compliant offerings cannot perform general solicitation or take money from non-accredited investors. I cannot stress this enough: If a security token offering will let you invest without onerous KYC and accreditation checks, there is a good chance that something is wrong. A 5.0 rating on ICOBench is a red flag, not a sign of trustworthiness.
For issuers I think it’s important to recognize that this is all relatively uncharted territory, and approach every aspect with a healthy dose of conservatism. Enlist qualified legal counsel early and listen to their advice! Ensure your technical provider understands and is capable of meeting your specific compliance requirements, whatever they may be. Be very wary of anyone offering you an all-in-one solution at rock bottom prices, claiming that issuing securities can be so simple.
Remember, an STO is not a rebranded ICO. Projects that decide to pivot half way through because STO has become sexier do not instantly have their past legal transgressions forgiven. ICO Advisors and marketing agencies with strong track records in 2017 do not necessarily have the licensing or knowhow to advise or market a security issuance. There is no such thing as an SEC stamp of approval.
SFT is built on the Ethereum network. What is your opinion on the permissioned vs public chain for security tokens debate?
We had a lot of internal debate when we first started building, and for a while I was on the permissioned side. In particular we were seriously considering Corda. My concerns revolved primarily around privacy and scaleability issues. All the discussions eventually boiled down the one core question: What are the benefits of a blockchain? What is blockchain’s USP that the existing systems lack, and why are we doing this in the first place? Trustlessness, transparency, disintermediation, and greater asset sovereignty.
All of the benefits of a permissioned approach — speed, scalability, reduced fees, privacy — these are enabled through the trust placed in those who operate the chain. In this model none of the middlemen in the existing system are eliminated, they just evolve and take a different form. Yes, the time between execution and settlement can be reduced in this way, but it’s still largely an opaque process that’s open to manipulation. Any discussion of on-chain / off-chain becomes irrelevant, because all the on-chain logic in the world means nothing if a node operator decides to censor or front-run certain transactions. And if you control the private keys where an asset resides, but moving an asset is reliant upon permissions dictated by a single authority whose decision making process is hidden from you, do you really control that asset?
On the other hand, a well designed protocol on a public chain gives anyone with the technical knowledge the ability to audit the entire process. Permissioning still exists, there is still a central authority dictating the rules, but once enacted these rules are visible to all and even the authority is beholden to them. Your transactions cannot be censored for arbitrary, unknown reasons. The old-guard middlemen are obsoleted by a series of smart contracts. The playing field is levelled, it’s rules freely visible for anyone who cares to read them.
…But will it scale? Not as efficiently as a permissioned model, no. But a permissioned system chain is still less efficient than a database, and in my eyes the benefits gained by the public approach significantly overshadow those of the permissioned one. We’re here to disintermediate and disrupt, not to make things efficient for the powers that be.
The potential market opportunity for asset tokenization is said to be in the trillions. When do you envisage the technology will be able to handle this level of volume?
The scaling concerns aren’t directly related to the value of the assets so much as to the daily trade volumes. I’m confident that many existing blockchains could handle the bulk of existing private equity, given its nature as a highly illiquid asset class. On the other hand, the trade volume of even a single popular stock from the Nasdaq would make the congestion from crypto kitties seem like the public sale for an All Star ICO in late 2018.
Scalability is a big issue that we will have to confront, and it’s a conversation already happening in developer communities across many blockchains. How to approach it varies wildly depending on the underlying ethos, as I discussed in the previous question. But really, when we hit scaling bottlenecks it means we’ve already collectively grown the industry substantially from where we are today.
Which jurisdiction is HyperLink Technology focused on?
One goal in building SFT is to make it robust enough that it can be applied to a wide range of jurisdictions. That said, we’re currently working with legal partners in the USA and the EU to ensure the ability to comply to the laws in each respective region. Right now we’re particularly excited about everything happening in Wyoming, especially the pending bill to allow for blockchain based certificated shares.
You recently released Brownie. What is it, and how can it help development of smart contracts?
What we can expect from Hyperlink Technology in 2019?
We’re currently hard at work on finishing the protocol after which we will focus on our business model. Soon we will have a few exciting announcements, including a couple of big partnerships, and will add new team members to help us create a better product.
Personally, I’ll be transitioning from full-time coder to mostly giving interviews and speaking at conferences. In March, I will be in Bermuda to present at the next BTA Security Token Protocol Summit, speaking about confidential transactions on public chains.
2019 is going to be a big year for security tokens and HyperLink is excited to play a part in that. Things are just getting started.