The Tokenization of Everything — A Talk with Circle’s Jeremy Allaire & Sean Neville
Jeremy Allaire and Sean Neville, Co-Founders of Boston-based Circle, recently attended the (Off) The Chain Summit presented by Pillar to share their story about building one of the biggest crypto-finance companies today.
Founded in 2013, Circle is a technology company with a mission to change the global economy. The company’s major products, Circle Pay, Circle Invest, and Circle Trade, make it easier for consumers and commercial customers to buy and sell crypto assets. The company has seen tremendous growth in the past few months, raising an $110M venture capital round in May, valuing the company at $3B.
Circle is the third business venture Allaire and Neville have partnered to bring to life — the two previously teamed up to build two pillar companies in Boston, Allaire (one of the first internet companies) and Brightcove (an online video platform that still exists today). In 2012, both Allaire and Neville caught the crypto bug. As they began to notice a new infrastructure layer emerging, they began to form ideas about how to add new types of assets, such as tokens, to the current financial system.
“Our belief was that over the next 20 years, there would be a restructuring of how the financial system worked all over the world and that new technology companies would emerge, with completely different economic models, business models, profit margins, and software powered by crypto and AI,” explained Allaire during the talk.
That’s exactly the goal they set out to achieve.
Blockchain Enables Value Exchange In An Entirely New Way
Many people have been calling the trend towards decentralization the Third Internet Wave. As someone who lived and breathed the first internet wave, Allaire says there are lots of analogies between the two.
During the past 20 years, a lot of work has been done to build the protocol layers and technical architecture that would allow for the free exchange of data, information, and communication across the globe via the Internet. Now, the same thing is happening around the blockchain.
“We have a new protocol layer that is not about data exchange or information exchange, or communications, its about value exchange” — Jeremy Allaire (Co-Founder, Circle) -Click to Tweet
Beyond data exchange, blockchain enables the ability to send and receive value. No longer are we restricted to just the exchange of information.
While financial applications have presented the largest and most clear use case of blockchain technology so far, Allaire says, “Every record keeping industry can be reinvented with this infrastructure.” From governments to civic society, to accounting firms, to banks, this technology enables us to “re-conceptualize and rebuild how society actually works on a global scale.”
Taking a Proactive Regulatory Approach Pays Off
There’s also a big difference between the evolution of the web, and the evolution of blockchain when it comes to the regulatory environment. “The web was left unregulated for a long time,” noted Neville. “It’s very different when it comes to financial contracts.”
While the SEC was at first quiet on the topic, we’ve seen new signals in the form of subpoenas and public statements about security and utility tokens. In fact, many founders and investors have been eager for regulators to speak up, setting clear operating guidelines — without guidance, innovators have been forced to make decisions without an understanding of the repercussions, using a “best guess” approach to determining how the SEC will respond. Though it may feel like a hurdle to some at first, regulatory clarity could help speed up the pace of innovation by surfacing the important information we all need to make informed choices.
While many companies have taken a conservative regulatory approach and sat by the side or hid their heads in the sand, Circle took the opposite approach.
“We took an aggressive posture,” said Allaire. From the very beginning, Circle was determined to follow all the proper rules and regulations set forth by the US government — no small undertaking. Allaire shared that the company’s strategy was to “walk in through the front door of every government agency, of every law enforcement agency, and do the heavy lifting to actually make this a mainstream phenomenon.”
“When we started the company, one of our biggest concerns was are we going to go to prison. We didn’t want that to happen.” — Sean Neville (Co-Founder, Circle)
For precisely this reason, educating regulatory agencies and important government stakeholders became a top priority for the company. “Educating that group is an ongoing challenge,” Neville added. “It never stops, but it is the only way to move this forward.”
With the constantly changing regulatory environment around cryptocurrencies and crypto assets, a large amount of time and resources is still spent towards education.
Tokenized Assets Are the Future of Finance
Neville explained Bitcoin as a “mashup” of three things:
- Transaction ID
As the token economy evolves, however, these specific use cases have begun to break off into separate tokens, with some looking more like securities, and others providing some type of utility. Neville believes, “There should be tokens that could be considered securities, and equities that represent ownership in networks or in entities and business.”
“Property [for example] is a huge opportunity.” Allaire adds, “Whether it is virtual property like a cryptokitty…or actual property, we believe every form of property will be a crypto token.” (Think houses, buildings, and more.)
While this may be a big concept for some to grasp, Allaire explained that in reality, property is simply a title that someone validated affirming you own your piece of property. It’s a contract. If we can move this to the digital era, we can create better ways to securitize and finance property on a global scale — and this has huge implications. He added, “We can have billions of people participating — and that opens up participation in the economy and not just value exchange, but value creation for an individual in ways that just aren’t possible today.”
“The Tokenization of Everything”
Circle aims to make the tokenized economy easier to navigate for businesses and individuals alike, enabling people to “send money like a text.” At the beginning, this meant building lots of different tools — a transaction banking platform, a ML-powered risk engine, a trading operation to manage convertibility between fiat and crypto, and more. Armed with these tools, Circle first launched, Circle Pay, a free, consumer finance product. The core principle was “sharing value,” said Allaire. “We wanted to allow money to be more like data and content on the internet.” Open. Accessible. Interoperable.
With the consumer market tackled, Circle went on to launch their second product, Circle Trade. Instead of taking the consumer approach, Circle Trade was built for high net worth individuals and institutions looking to invest in crypto by providing large-scale liquidity in a way that won’t substantially move the market.
More recently, Circle launched their third product, Circle Invest. Incorporating the learnings from the first two products, Circle combined the best of their licensing, risk engine, and their status as a large liquidity provider, to create a differentiated consumer experience for investing in digital assets. Built on the assumption of the “explosion of tokenized assets,” as Allaire calls it, Circle Invest allows consumers to buy and sell cryptocurrencies without the hassle of an exchange.
The same logic also prompted Circle’s acquisition of Poloniex in February of 2018. As Allaire explained, we believed that “the tokenization of everything is going to happen and that there needed to be market infrastructure and marketplaces for these tokens.”
As for what is next for Circle? Neville says, “The payment starting point was always meant to be a leaping off into other interesting and more engaging experiences on top of finance.”
After building three successful tech companies as two founders who didn’t come from computer science backgrounds, Allaire and Neville had sage advice for those looking to learn more about the blockchain industry —you don’t have to be a computer scientist to get involved in blockchain. You just have to be interested and willing to learn.
“Read stuff, talk to people, get involved in communities… Educate yourself, be competent, and connect,” said Allaire.
Neville added, “Just build something. Create something that functions. That’s the way to move things forward.”
Written by: Katie Mulligan