Good afternoon Rick! How was your morning and what else are you up to today?
Fridays are always busy. We close the most amount of partnerships and deals on Fridays. I was at AXVECO this morning and had a great conversation there. I’m unfortunately not allowed to talk about the details, but suffice to say it’s exciting stuff!
Update: Since the interview was completed, a few more details have now been shared (https://twitter.com/LTOnetwork/status/1130494425749217282)
Rick, thank you for your time. Can you give us a glimpse into your educational and professional background?
My pleasure! I studied Tax Law at Erasmus University in Rotterdam. After that, I worked in the real estate division of Deloitte. During a discussion with my team at Deloitte, we talked about new upcoming laws for startups. This inspired me to start my first company together with my partner Martijn Migchelsen, called Firm24. With Firm24 we use technology to help people incorporate their new businesses and navigate the associated legal processes.
We kept growing and in 2014 Arnold Daniels joined us. He championed the idea of using smart contracts (Ethereum’s ICO was happening around this time). We were sort of ignoring him until we came across a client that actually needed a decentralized solution. That’s when we decided to build the private layer of our workflow engine. This allowed different partners to share data with each other through decentralized workflows, and that ended up being a critical breakthrough for our organization and the direction we decided to move with it.
This success story started to spread, which caused the demand for our product to increase. This forced us to focus on privacy and security and implementing the “anchoring” part of our software which is critical to our platform today. When just a few parties are working together it’s still relatively easy to manipulate data. This is where we implemented our public chain, which completes our idea of a hybrid blockchain. Parties work together in the private layer and that data gets anchored in the public layer.
Can you explain “anchoring” for people who aren’t technical experts?
Anchoring is making a digital fingerprint of your data which you put into our blockchain. If you have a copy of the data, you can compare it with this fingerprint to check whether any changes were made. You can also see when the fingerprint was made (timestamp) which prevents any manipulation or antedating of data.
As CEO, how do you run LTO Network and how do you motivate your team?
In my opinion, the most important thing is that your whole team wants to head in the same direction. You need a clear vision, mission, and strategy to accomplish that. If a captain doesn’t know where he’s heading, his men and women don’t know where to sail. Your employees have to be part of your story. I think a CEO shouldn’t tell his employees exactly what to do. I try to set goals and let my employees walk their own paths towards that goal. It’s like what General Patton said: “Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.”
With Arnold, we made our visionary paper. We worked out how we wanted to accomplish our goals. How we wanted to get to the point where everyone needing to work with decentralized workflows will come to us. Secondly, we wanted to get to the companies that might want to do this in the future and already want to start small.
Adoption was a very important subject in our strategy. Many projects you see are essentially very big ideas that nobody uses. Nobody wants to tokenize their mother-in-law. No one is really using blockchain right now, but lots of people are already using IoT and AI. Anchoring has existed for quite a while now but it was just never really applied because it lacked an approachable interface. We created a lightweight solution for this.
So how are you realizing adoption?
We build something that companies will actually use, not something big and special just for the hype like many other projects. We have been called “the boring chain” during a conference in London, and I agree. We’re doing something which is possible right now, not some kind of dream vision for the future. We are tying (or should I say anchoring?) those clients to us now and will be looking to expand their utilization into more complex use cases in the future.
Nine out of ten projects in the blockchain space are run by children. They raise insane amounts of money and suddenly have to run a big company, which they can’t. They can’t carry out a vision because they lack real world business expertise. Instead, they hire 100 developers to build a mega product that no one uses. This is a huge waste of capital that could have been used to build lots of projects and products with actual usage. From the thousands of cryptocurrencies right now, I think less than 30 will still be here in 10 years. Those will work together and keep the ecosystem alive.
LTO Network has a special strategy dedicated to realizing adoption. We try to increase adoption by making our technology easy to understand for companies and we have different steps to gradually expose a company to a more complex solution. That method is based on the “Land and Expand” theory, also called SaaS.
The first step is Anchoring. Anchoring is very easy and fast to implement, and it instantly adds value. You can do Anchoring for timestamps (Sign Request), audit reports (Capptions) and a bunch of certificates, just to name some examples. The next step is checking credentials, validating if a certain action within a process is allowed to be done at that certain moment by a certain person. This is where we introduce private and public keys to that partner.
LTO in its full potential is implementing decentralized workflows. This is a combination of the two previous steps in which you add the sharing of data between different parties, a small final step. This way we can create early adoption and bind our clients for future projects. System Integrators often implement all three steps at the same time for a client, since they are looking for big results and large long-term projects.
Recently LTO Network has been designated a top-20 blockchain project based on network transactions. What an incredible accomplishment!
It’s absolutely amazing to see our adoption strategy pay off that way. It means people are actually using our product. We’re definitely on track to meet our goal of 15 million monthly transactions by December this year. This would put us in the top 3 projects measured by blockchain activity with real transactions! I truly think we’ll make it!
Why did you do an ICO and how does it complement your business model?
We wanted to switch to open source to increase adoption, with the goal of making our platform self-sustainable in the future. We needed a good token economy – which is at least as important as the product – in order to put decentralization at the forefront. By creating a big public layer we guarantee the security of our private layer. Doing an ICO was the perfect tool to grow our community and the number of validators on our public layer. With decentralization, people have an interest in pushing the number of validators on our network, which is important for our adoption strategy. Everybody gets involved, which creates a snowball effect. The Game of Nodes actually increased the number of operational nodes from 50 to 80. That’s a 60% increase. These nodes are now engaged long-term with our project, which is amazing and again shows that our adoption strategy is working!
Our existing business model changed tremendously with the transition to open source. We will monetize it in the future with a commercial open source strategy, leveraging the network effect. This means that we’ll be able to build services and products around our network that we can monetize. Examples of this would be an enterprise license of visualization tools like dashboards to monitor anchoring transactions. Integrators will make these deals with clients and we will work with those integrators.
Do token holders often approach you with potential clients?
Yes! This happens quite often actually and leads to collaborations in many cases. It’s really cool seeing this kind of engagement with our community, together with the added value of that engagement!
Was it hard to become GDPR compliant? What are the legal obstacles you had to overcome?
Regulations are especially hard to comply with and, unfortunately, regulations are always lagging behind technology. Our product only had to deal with GDPR and we knew that would be coming since I’m still a lawyer by training. I already knew that Ethereum would have problems. If you run a node on Ethereum you have a copy of all smart contracts, all of which can contain confidential and sensitive private data. We solved the GDPR problem when we were building LTO Network. We call our solution “privacy by design.”
We’ll face more hurdles when we start to use our platform for other goals. For example, if we want to start doing STOs, which is a very real possibility, there are a whole host of other challenges we will face. With Firm24, we have a very nice opportunity to use the existing platform for doing STOs which we can integrate with LTO Network. Traditional venture capital fundraising is making way for a new and attractive method of fundraising via STOs. Firm24 has actually been doing a lot of transactions on LTO Network since the very beginning which has helped in building our trustworthiness.
How much data can nodes see from one another? How do companies choose how and what they want to share data?
You can define a process and within this process you choose when and what information is needed for a certain action. This is where GDPR comes in again. You can do this in two different ways. First, you can share data with all partners collaborating in a process when privacy is not an issue, such as an open system. You can also share the fact that you have certain data and then share that data when another party needs it for a certain step in the process. Since the process and actions are pre-defined, the data can only be used for that purpose. Our system doesn’t allow the usage of data for actions that were not defined in the process, which makes it very secure.
How does using LTO Network change the way an organization operates and what’s the impact on day-to-day processes for those organizations?
As a company you don’t want to see or feel the use of our blockchain. You want to keep working with the same systems and not have to turn everything upside down. By automating some triggers and workflows, LTO Network allows them to retrieve data more efficiently from other parties that they are collaborating with. That’s the perfect outcome. The only thing they notice is that data suddenly appears in their systems automatically, and only the data to which they were allowed access.
Integrators make sure our software works for clients. Clients are not confronted with actual tokens since the system integrators buy and manage these tokens for them. The client just pays the system integrator for their services as usual. The system integrators are also the ones that lease their tokens to their clients, which they manage themselves. An added perk for these integrators is that they are buying relatively cheap. If the usage of the network goes up, the value of LTO goes up as well. The price of transactions in LTO will then, of course, go down, since it’s fiat-pegged. This allows for a balanced system.
A lot of the system integrators we’re working with are located right next to us in Amsterdam. Accenture, Cap Gemini and CGO just to name a few. LinkedIn is a perfect tool to find these integrators. You can just search for integrators and filter for “blockchain” and “the Netherlands.” Then we make an appointment and get them enthusiastic with a demo. We’re the only ones that are able to go to their offices, build some smart contracts on the spot, connect systems in a sandbox environment and run an actual demo in less than 3 hours. CORDA and others can’t do this and a demo from such parties is very very expensive. We’ll be doing these demos for AXVECO and Novum soon and have already done them for Boston Consulting Group (BCG), NEN and Xurux.
Would you mind telling us more about your team? Are you looking to expand in the near future?
We currently have around 25 employees, including 10 developers. We’re always looking to attract new talent but we’re not actively hiring at the moment. We’re mostly focused on selling our existing product. We’re working on making tutorials, step-by-step guides, and demo workflows. We’ll always have our community workforce to help us out, in exchange for tokens and reputation points. A 3rd-year student actually completely built https://explorer.lto.network/dashboard, which synchronizes with our blockchain. He also joined us in the hackathon. Seeing engagement like that in our community is amazing.
One of the most impressive components of LTO Network is the people you have assembled in order to execute your vision. Are there any team members you would like to highlight?
Yes, definitely Ivan Golovko. Ivan is a Russian street kid who was studying law here. We met him during a NEO conference and had a great conversation. He was surprised about the fact that we had a solid product and team, and wanted to help us establish more connections in the space. He believed in our project and wanted to help us. Since he joined, we really rose to another level thanks to his connections. This made us known in the blockchain space and this connected us with real businesses, too. Ivan is very smart and I’m grateful that he’s a part of our team. He made a very positive contribution to our success.
I would also like to highlight Rick Ros. I’ve known Rick my whole life. When we met he was selling software to bailiffs, a very boring job. I then asked him to come join us, which he did. I immediately threw him into the deep end of the pool and gave him the mission to make System Integrators use our software. He worked out the strategy for this perfectly and investing in his vision has paid itself back tenfold.
What’s the difference between LTO Network and Hyperledger? What sets you apart?
There is a very big difference. We have a public layer which makes sure the private layer is secure. With Hyperledger you have a small group of parties that form a consortium. You can debate whether this is actually secure since the small amount of parties involved in a consortium could allow for manipulation, when there is no public layer to verify things. That’s substantially less secure than LTO Network’s approach.
What we have in common is the sharing of data between different parties. LTO Network is a system that always works peer-to-peer. You can create groups of different parties by yourself. With Hyperledger you have a group where you’re always sharing your data with everyone involved. They can be a useful application for those companies, if they’re not worried about the privacy and security of their data.
Does that make Hyperledger obsolete?
LTO specializes in decentralized workflows and anchoring. If you’re thinking of financial transactions and the exchange of assets, LTO might not be best suited for your company. You could still debate if Hyperledger would then be the solution to choose. A centralized system would work the same, it just depends on how many users you have on a blockchain.
What are you exactly doing with Capptions?
We anchor their audit reports. They have an inspection application with lots of users, with the final result of an inspection getting anchored on our blockchain. After that, it gets sent to a centralized database where they make a timestamped audit. They also provide this application to the Division of Waste Management within the Dutch government.
Will there be a continuation to your waste management pilot program for the EU (the Netherlands and Belgium)?
We hope there will be. The EU has put a new project lead in charge to scale things up, and we, together with Capptions, are of the opinion that we are the perfect candidates for the job. If Capptions gets the job, all those transactions will be done through LTO Network. Apart from that, Capptions is definitely a partner that will grow and bring on lots of usage to our network.
Do you have a closing statement for our readers?
Look beyond the hype and judge projects based on their real-world value. If something doesn’t add value, it’s a bad investment. Keep your community engaged! I really underestimated how important community engagement actually is. It must start right after your ICO. You have to keep adding engagement so your community stays interested, otherwise you will not stick around for long.