Wulf Kaal: Infrastructural and Ecosystem Projects are More Likely to Succeed
7Seconds’ advisor Wulf Kaal shared his ideas about the current market movements in the crypto space, prospects for blockchain solutions in fintech and challenges in applying them.
Q: Could you briefly talk about your background?
A: I’m a law professor. I worked in New York as an attorney, then at Goldman Sachs in London in the securities division. I became a consultant in the crypto space about six years ago, and I’m a strategic DLT consultant.
Q: When and how did you get interested in blockchain and crypto?
A: I had a consulting business for hedge funds, and about six years ago, one of the clients started to look into the technology to do back office optimization, accounting optimization, not trading at that point. They saw that other people started trading it and started to look into it. The client abandoned the project, but I got hooked through the client by reading up on it and starting to understand it better. Then I started teaching it in Europe and then in the United States. That was my initiation into the crypto world.
Q: Do you share people’s concerns about cryptocurrencies losing value for quite a while now?
A: That’s the wrong approach. You cannot be discouraged by market movements. This is not about trading, really. This is about crypto infrastructure building. And one reason why the markets are reacting this way is because the markets start realizing that there are so many problems in this space. Use cases, Turing completeness — all these wonderful terms that people have been throwing around, and investors started to invest based on those promises. But now it’s the time when you actually have to deliver, and a lot of the technologies are just not ready or are not fully scalable or governance issues have not been fully sorted out. This is completely normal. This is a very nascent industry, and I actually prefer this current market movement because it gives the industry time to breathe and to clean out the rubbish.
Q: What aspects of crypto/blockchain do you find most exciting?
A: Most exciting to me are infrastructural products, like new consensus algorithms, optimizing scalability, optimizing governance, evolutionary products. That’s where the future is. That’s what we need and reputation verification is at the core of that. And, just for full disclosure, I run a startup that does that. So, for me, without reputation verification and decentralized autonomous and anonymous systems, which is what crypto and decentralized commerce is, there is no decentralized evolution. We need to fix and facilitate decentralized reputation systems, in order to evolve with the community and the technology.
Q: What does it take for an ICO to make an impact these days?
A: You have to be an infrastructure project where investor see: this is the next generation of decentralized products. If you are not that, you have to be at least an ecosystem, an ecosystem that is attached to a very promising underlying blockchain.
Q: What areas of the fintech segment are most promising for adoption of blockchain-based solutions?
A: The financial infrastructure is prime for blockchain applications, such as trading or loans. I am currently working on a project that does decentralized underwriting. So, financial products are still the prime market for this.
Q: Could you talk a little about the prospects of 7Seconds’ solution?
A: Using blockchain technology to facilitate loans and data for loan issuance is the core of the technology. And finding a decentralized way of offering this creates enormous synergies and potential for profit, of course. The key, of course, is that it has to be a decentralized system, and you have to explain to the legacy businesses why this solution is preferable. Based on what I’ve seen so far, it’s a prime application of the technology in a field that is bound to be disrupted in the next five years by this technology in ways that we can’t even imagine. So, being a first mover in this space and being able to offer a technology early on is a key distinguishing competitive advantage.
Q: What are the biggest challenges in applying blockchain solutions in the fintech sector?
A: One is scalability. Whatever you do, whatever you work with, you need to have Visa-level transactions speeds in the financial space in order to actually compete with other businesses. The other one is political risk and the ability to navigate the politics of this. So, I’m advising many clients in the loan trading business — several want to use blockchain technology, and it always comes down to: can they get counterparty banks to agree to use the technology and cut down costs. The only way you can get them initially is by cutting down costs ten times. The problem then, of course, becomes: how can you convince the people at the banks to cut personnel based on the cost savings that the technology facilitates. So, it’s a political problem. That’s why it takes so long. All of these issues have to be worked out in order to get to the next phase of the decentralized commerce evolution. You have to work through these issues with your counterparties, and you can’t do it alone. You need the input from all those centralized businesses.
