Episode 1 – Sharpe Capital Transcript

James Butler:                    There's always going to be circumstances when markets behave in an irrational way. And, to really solve that, you need to find an explanation for why it's behaving that way and often the human mind and sentiment is still sometimes more powerful than a computers.

Doug Bridges:                    You're listening to the Blockcast Show where we talk with the world's leading entrepreneurs and innovators regarding Bockchain technology in business.

                                                I'm your host and technology lawyer, Doug Bridges, partner at Capital Legal Group.

                                                Today on episode one of the Blockcast Show, we're speaking with Lewis Barber and Dr. James Butler of Sharpe Capital about how they are using Blockchain technology and artificial intelligence to create a community and platform for predicting future asset prices.

                                                All right, so today on the Blockcast Show we have Lewis Barber and James Butler from Sharpe Capital. How are the two of you doing today?

James Butler:                    Yeah, very good thank you.

Lewis Barber:                     Yeah, we're glad to be talking with you.

Doug Bridges:                    Good to be talk with the two of you as well. Um, I've seen Sharpe Capital being pretty active in the recent days getting ready for pre-sell which you're having. So why don't we talk a little bit about what Sharpe Capital is and what is leading the company?

Lewis Barber:                     Do you want to get that James or shall I?

James Butler:                    Okay, so fundamentally, Sharpe Capital is aiming to develop a mechanism to understanding better sentiment in a manner that doesn't rely on traditional sentiment analysis, that hedge funds and so on use when they apply natural language processing to understand how people think towards different assets and instead we directly crowd source the sentiment from people that have a proof of state mechanism using the Blockchain.

                                                So, by determining peoples' response and based on what we show in terms of news and price action on Blockchain assets and global equities we can then infer a general sentiment which then feeds into our large quantitative trading models and helps us build data feed products and signaling services that we can then provide to various investment funds and other interested parties.

Doug Bridges:                    So, so at high level you're working with sort of an integration of both Blockchain technology and with some artificial intelligence, and your own networking technology to try to predict what's going to be happening with both Blockchain base assets and with security assets?

James Butler:                    Yeah, that's an accurate description.

Lewis Barber:                     Yeah, I think that an interesting thing sort of on the sentiment side as well so when we really realized the power of crowdsourcing this information from 1,000s, 100s of 1,000 of people and, is when we were building our initial models some of our proof of concepts earlier in the year, we found that the constant modeling and, and the machine algorithm machines that we're using can actually be a very accurate 90% of the time using fundamental data and company reports, various things like that. But, there's always going to be circumstances where markets behave in an irrational way.

                                                And to really solve that, you need to find an explanation for why it's behaving that way and often that's not really, even with the most cutting edge technology out there, in terms of machine learning and in terms of machine learning, and artificial intelligence, and such so it's something that you can easily do.

                                                Um, but you know, the human mind and sentiment is still sometimes more powerful than the computers, and so we've designed mechanism whereby people are incentivized to provide the very best sentiment that they can, um by using Blockchain technology.

Doug Bridges:                    It sounds sort of like a new tagline, introducing irrationality into your neuro networks.

Lewis Barber:                     Yeah.

James Butler:                    And that's a very good way of putting it.

Doug Bridges:                    So before we get into, a little more into how the Sharpe Capital platform will work, why don't go a little bit into what your background is and what the two of you are each doing with Sharpe Capital.

                                                And Lewis, why don't you go first. What's, what's your background and what's your role inside Sharpe Capital?

Lewis Barber:                     Yeah sure, so um, my background has primarily been in consultancy um, and software development with financial services. So, I've worked for retail banking clients, and capital market clients as well. Both consumer facing projects and back end systems for a number of years.

                                                I've been, yeah, I've always had a keen interest in economic theory and financial markets. Um, and kind of, I suppose, an entrepreneurial spirit to one day do my own thing, and and, yeah. I've a patient for Blockchain technology as well, as that sort of came along in recent years so, uh that, yeah that's my background.

                                                And then James and I just happened to come together and, and have some ideas about the project that has now become Sharpe Capital as, as we refer to it these days. Yeah, um so I suppose that my role, um obviously as one of the co founders, um James and I co founded the business together, is really taking the vision that we have and trying to build a team and trying to build on the capabilities statutes that deliver it.

                                                So, I kind of have my finger in all the pies, at the moment. Whether it's marketing, or infrastructure or coding smart contracts so I'm kind of helping, helping that capability.

Doug Bridges:                    James, why don't you talk about your background a little bit in that how di you and Lewis meet and start coming up with this idea for Sharpe Capital?

James Butler:                    Okay, I'm going to answer that question slightly backwards. So, Lewis and I actually met back in 2008 so we both graduated college together, we both studied electronics. And, then we went down very different routes. So, as Lewis just, said he went into consulting for capital markets and investment banks.

                                                And, I went into academic research working on development of machine learning and artificial intelligence technologies primarily working for the pharmaceutical sector and, and working to develop drugs and how can we better design and predict what drugs will work with what diseases using all of these different algorithms and methodologies. But at the back of my mind, I always wanted to apply this to capital markets.

                                                So, Lewis and I have always had this strong interest in capital markets and we've been arguing for several years, or we were arguing for several years, over whether markets are fundamentally predictable or whether, the whether the efficient market hypothesis holds true and it's all just random and eventually we just came to this con censes that actually, we can predict the markets. Machine learning can take us 90% of the way there but we really need to crowd source this market sentiment from actual humans to really sort of cross the threshold and be able to deliver an algorithm that can provide better risk and adjusted returns than say, standard industries like the S&B 500.

                                                With regard to my specific role at Sharpe Capital I've been developing the urgent proof of concept algorithms and the neuro networks and adaptive boosting type neuro machine learning technologies which uh take all the fundamental date from our enormous database of assets and try to predict where they'll be one quarter or two quarters down the line.

                                                So, that's really where we started and since then um, I've had to learn how to be a marketeer and that led up to quite a lot of new areas in business, especially coming from a very academic background.

Doug Bridges:                    It's amazing the amount of things that have to get done, isn't it?

Lewis Barber:                     Yeah, oh yeah.

James Butler:                    It was a whole lot of new skill sets that you have to very quickly-

Doug Bridges:                    Well, what led the two of y'all to start up Sharpe Capital? To ... I mean you were, friends, you both had background in technology with slightly different backgrounds with the academic side and the sort of the more corporate consulting side. What brought y'all together to say, this is ... we want to start a Blockchain company?

Lewis Barber:                     Phew, good question! Um, yeah. I'm trying to remember how it happened, it's been so busy, it's sunk very deep in my mind.

James Butler:                    I mean to my mind, it really started about two years ago, Lewis and I were having an argument in the pub and we were trying to determine ...

Doug Bridges:                    That's how it usually starts right?

Lewis Barber:                     Yeah, I remember this day.

James Butler:                    Yeah, so Lewis was essentially telling me about this approach to automated trading algorithm and it could predict the market. And, I said, no it can't, the efficient market hypothesis, etc. etc. Um, you're not going to outperform the market.

                                                And it kind of just went back and forth like that for a while. And then, about 12 months ago, Lewis approached me asking for a little bit of help with some of the statistic sides for these models. And, um specifically, we were trying to predict the price of Limbo as a function of um growth in construction markets, and um, new hospitals and so on.

                                                And my first question to Lewis was why just Limbo, why not just do this for everything? So, I took Lewis' fantastic data base of um economic fundamentals that he'd built and threw it into a very basic machine learning algorithm. And, we found actually, we were doing a remarkably good job of forecasting asset prices and it kind of snowballed from there. Um, so we started doing some research and trying to understand how we can you know, cross this threshold as I talk about um, going from tracking though slightly forming the market to really understanding what's going on.

                                                And the breakthrough really came um, when I was um, at UC Berkeley, I became very good friends with a forensic linguist whose interested in how um, language primes peoples decision making processes and shapes their sort of cong native decisions and that led to this idea that we can measure peoples' sentiment towards news articles and so on in real time. Blockchain was the best way to do that and it's just since snowballed since then over the last 12 months or so.

Lewis Barber:                     Yeah, I think it would be fair to say, right that, the Blockchain piece came second for sure, when we started to look at ways in which we could fill the missing piece of the puzzle. So, yeah, as James has obviously outlined, sort of how we got to where we are today, at a very high level. But, we were kind of a bit stumped in looking at some of the results from the pure quantitative modeling, um and saying well, this is good, as I said before 90% of the time but there were just these anomalies and, and, we're like no amount of extra data is going to fix that problem.

                                                And yes, we can optimize the models to a certain amount but like, you know, we had certain assets where they would predicted to be like 10 times what the actual value was. So, it's like, it's just way off. And yeah, the Blockchain piece just seemed to really fit very well when we were trying to fix that problem and build a mechanism in which we could have maximum incentivization and yeah, it snowballed from there.

Doug Bridges:                    So, how are you integrating the Blockchain technology into this sentiment analysis? What led you to bring it in and how did you finally get to the point, and I know, it's changed over time and that's one of the things that I want to talk about later is, how you've been adapting to changes, but where did you see the Blockchain technology kind of filing the gap in your machine learning?

James Butler:                    So, as I just hinted there were certain assets that we simply couldn't predict the price of. And, off the top of my head, two key examples were Google and Amazon. Our models would just never come even close to predicting these prices and yet for lesser known assets, we were highly accurate. And this led us to realize that very prominent companies that retail investors are interested in, are harder to predict and that's because that subjected more a rational sentiment than perhaps the major hedge fund that has the large infrastructure.

                                                So, we really wanted a way to measure that and to do so we really needed a proof of state mechanism to understand the level of confidence that someone has in what they're saying. But, we didn't want this to be like a prediction market because there's plenty of evidence out there that shows that when you derive odds from people making, placing bets or making predictions, they don't really correspond very well as opposed to say polls and statistical modeling. So we developed this lossless proof of state mechanism in which ownership of the Sharpe Capital platform tokens SHP represents a participants level of confidence in what sentiment they're providing so that's a key input into our machine learning algorithm along with the proof of repetition that reflects the historical accuracy with the sentiment it provided, and the proof of work, which tells us that sort of level of commitment to using the platform.

Lewis Barber:                     Yeah, and another key point, I think just to, to build on top of what James has touched on there, is that um, it really was a case of saying how can we maximize the incentive to make people work as hard as they can? And, this brings in an interesting element to what James does, which is if you create a system where things can't be undone, where you have a certain, where there's a certain amount of scarcity and where that work, and that record, and that reputation, you can't just throw it away and get a new one.

                                                Then you're intensifies ahead of the time, you know, because the ecosystem in which this operating is not just disposable anymore.

                                                If we just built a normal, traditional web platform that wasn't tied to a token scarce, an immutable reputation score, or a history, an immutable history of reputation, um if it was a normal web platform where you could just go to Google, create a new email address and create a new account and you're, you know, you're back to where you started.

                                                Then the whole kind of incentive to work as hard as you can, to do the best research, provide the best incentive just goes away. Um, and Blockchain really gives, us through, as I said, through immutability and scarcity a system where we can be sure that the people providing the information are doing it as. as a result of their best knowledge and research, and the most amount of effort on their part.

                                                And, therefore, that sentiment data will be higher quality than any other mechanism we can think of.

Doug Bridges:                    Okay, so why don't we go through sort of how the Sharpe Capital platform would work on a day to day basis for traditional use once everything is built and running as you expect it to be.

                                                So, let's just sort of explain to somebody whose listening what, what the Sharpe Capital platform will look like once it's fully operational.

Lewis Barber:                     Well, let's talk about the vision of things that we're building so they'll be ... we have some designs in our medium page as well for the moment for the mobile app so it will be a mobile product. It will be a digital product so that you can use it, hold in your hand a website on which you know, you sign up, um, and you have an account, and you use that registration to go through information that's presented to you and indicate your sentiment towards assets on there.

                                                And, we'll build that out to have lots of interesting features such as maybe, users' historical reputation scores so they'll be able to see how their performing over time. Um, when we have a service fee allocation on a quarterly basis, we'll probably, you know, that will be announced on the platform and they'll be able to see their estimated service fee for the data that they're giving us.

                                                And we're just going to build it out, as I suppose as a traditional digital product offering but underneath it is , uh at the bad bones of the platform is a token model with scarcity that means, as I said before, users are incentivized to give the best data they can.

                                                So, um when you're signing up for the platform ... for example one of the things you would have to do is provide your Ethereum address that holds tokens that gives you access to the platform and almost reserve your capacity in that platform. And then confirm ownership of that Ethereum address so, in uh in the slightly less traditional way, right, you're linking access to the platform to an Ethereum address that has, has some of our tokens in rather than just saying anyone can just spin up an email and sign up.

                                                And, yeah, but apart from that component it will be like any other normal digital product that, that exists today.

James Butler:                    So, just to talk about the day to day user experience, of that platform what a participant or a user will see as that we show them an asset, this could be Apple, Google, Bitcoins, Zcash, whatever and they'll see recent headlines and ... scraped from the web about the asset ... recent price movement, sort of month to date, year to date and so on.

                                                And, they'll be asked to indicate sort of their, gut feeling if you like, towards that asset based on the news that they see. And this allows us to measure the impact the news is having on people's perceptions of these assets so this data becomes really valuable to us as can understand how news primes investors to make decisions. So, as the user goes through they'll see an asset they will indicate whether they're bullish or bearish towards an asset. And, over time this will learn which asset classes or sectors you are best at predicting at.

                                                So, if you come from a technology background and you're great at predicting what the technology stocks are going to do, but you're not so good at predicting what retail stocks are going to do then you'll see many more technology stocks and so on which both maximizes the user's reward service fees and also maximizes the quality of data for us then.

                                                Within the app there will be various features such as managing their wallet so they can increase that proof of stake if they wish to, or decrease it using our liquidity reserve, and they can see how much they earned in service fees for every indication they provide.

Doug Bridges:                    So, how is your system using their proof of stake in it's machine learning and, and neuro network analysis?

James Butler:                    So, neuro networks are just one of the many machine learning algorithms we're applying here. But, essentially we'll take the indication they provide and couple that with a reputation score which is a number from 0 - 1 which represents the historical accuracy and that proof of state which is the ownership of SHB tokens, and the proof of work.

                                                And, these all feed in as inputs to a neuro network or an attached boosted random forest or whatever algorithm we're using. I'll talk a little more about how that works in a minute.

                                                But, um so essentially we can wait and use a sentiment based on the historic accuracy and their own confidence represents it by the proof of state.

Doug Bridges:                    And so, then you mention that there would be service fees associated with this. What are these service fees that the users receive and how's all that calculated?

James Butler:                    Okay, so the service fees are a function of the, I should say, the service fees are paid um quarterly so they accrue over the course of a quarter and then they're distributed to users at the end of that quarter. And their a function of the number of correct indications that they provided so the number of times they were correct about what the NASDAQ would do. Their reputation score, the amount of work they've done, sort of proof what mechanism and ... the stake. So the amount of SHP they own relative to the rest of the community that's currently participating.

                                                So, essentially we have a capital allocation to distribute to the users and then this is divided amongst users as a function of their utility to us and the quality of data they have provided individually.

Lewis Barber:                     Yeah, so it's really, it's a payment for ... proportional to the value of the information, and the information ... at an abstract level is made up of three different areas.

                                                One is the amount of information and obviously, the more information you provide, the more valuable that is and so, the larger your payment. Um, the accuracy of that information and the more accurate, again, obviously the more valuable so the larger payment and then the confidence indicated in that information. More confidence indicated obviously the more valuable that information is and so again, that makes the payment larger.

                                                ... So there are kind of the three pillars that effect the size of the service payment that the user would receive.

Doug Bridges:                    It seems like a lot of what you're trying to do is create an ecosystem or an economic model to bring in users who can provide this sentiment now. What has it been like trying to design this economic model, this whole ecosystem to incentivize users to give the correct, or give quality information, and give it often and still be able to judge what they're giving so that everything flows correctly with the inputs and outputs from the token pool?

James Butler:                    In a word, it's been complicated.

Lewis Barber:                     And challenging.

                                                So, we started with this idea of the reputation score, so every time the user makes a correct prediction their reputation score goes up a little bit. Um, reaching maximum of one. And, every time they make an incorrect prediction, if you will, that reputation score, goes down. But, then you're confronted with an issue of, well what if their reputation goes, becomes too low. How do you incentivize users to continue participating rather than just giving up or spinning a new Ethereum address?

                                                So that was one of the first major challenges we had is, what's to stop a user from transferring all their SHP to a new Ethereum address and creating a new account? That's where the proof of work thing comes into this. So, the service fees that you approve are also a function of how much you've utilized the platform. So, you have to continually provide sentiment to keep your overall um, what we call success metric, high.

                                                Which means if you try to cheat the system by moving your SHP from one Ethereum address to another, then your proof of reputation score might go back to the default of 0.5 but your proof of work score will fall right down to zero. So, that dis incentivizes people from trying to gain on the system.

                                                And so, we've been dealing with lots of issues like that and it's been a difficult process of the last four or five months of really sort of nailing down the mathematics behind that. But, yeah, I think we've finally cracked it.

Doug Bridges:                    I would think that it's as someone ... with an academic background this sort of work would be quite interesting combining economic theory with gamification as terrible as that word might be. Plus, with the ... artificial intelligence work it seems like there's just a lot of different areas that are often spoken about theoretically which are sort of coming to a head to work together.

Lewis Barber:                     Yeah, I think ... the thing I really like about what we've ended up with, and I'm saying ended up with, because it's worlds away from where we thought it might be a year ago. But, it's ... it works and we've had to adapt, but anyway, yeah, I think the great thing about what we've ended up with is the fact that it is a totally self sustaining ecosystem in which users are fairly, you know rewarded, or they receive a fair payment for providing real value to that ecosystem.

                                                And, it brings together all of the ... novel technologies in the industry at the moment in order to do that. Um, it's very hard to find a project or a company, or a start up, that ... offers all those different pieces. And, we didn't set out to include all of that at the beginning but we've ended up in a position where it makes sense to have all those components, to achieve our goal.

                                                ... It's a unique opportunity and we personally really sort of happy to be involved with it and to have ended up running a project, a company now that's doing that. And yeah, it's great so it's ...

James Butler:                    I would say the intersection of all these technologies really drive from that one key question that I mentioned the start, is the market fundamentally predictable so we started with machine learning? That was the logical choice for me with my background, and Lewis with his capital markets background but it's just bloomed from there as we've had to incorporate new technologies and new approaches, and new science even from from cognitive science and neuro science, and linguistics, to really sort of tie everything together so we can say yes, the market is predictable and this is how you predict it.

Doug Bridges:                    Well, so now you are coming up to um, approaching the date of your opening, of your presale for your token the SHP token. Um, what did you do to get ready for the presale and sort of how has that effort gone?

James Butler:                    So, the most important thing in, um, what we've been doing so far in terms of driving interest in the product and the token, has really been community engagement from a grass roots level. I mean, aside from listing on a cornucopia of token sites, we haven't really spent a lot on marketing.

                                                Instead, we've been focused on directly engaging with the community from telegram and the social media channels and really sort of trying to communicate what we're building and trying to spread through, essentially through just word of mouth and that's ... really been a successful strategy for us so far. I mean, we've filled up the Wyatt List for our pre sell of 8 million dollars within a few weeks and 30 days before the sale even begins so that was fantastic.

Lewis Barber:                     I think yeah, certainly ...  getting ready for a token sale, or presale or um, these days you're inundated with people trying to sell you services and you could spend hundreds of thousands of dollars on marketing, and Pay Dad's and P.R. guys and you know, you name it, there's a service for it and they'll take loads of your tokens or they'll charge you a fortune because they know that you don't have any capital but you're going to be doing a token sale.

                                                And what we've tried to avoid is, entertaining that really, at all. Um, because the markets' flooded with new start ups every day and that's why it's so expensive now. And, we didn't want to do it that way, not just because it's expensive but also, I don't think you end up with necessarily a particularly well engaged community who are passionate about your product and really you want to use your product, and tell other people about it.

                                                And so, yeah we've got a good team of social media moderators and marketing guys um, early on. Um, the company is named AmaZix but they manage social media channels basically and they've been really instrumental in helping us to navigate the social platforms and kind of, the key outlets that we should be present on and should be engaging with people by those. And, we've just kind of stuck to doing it like that. And, that's sort of yeah, as James says that's worked for us.

                                                And, I would personally encourage anyone else who's thinking about getting involved in Blockchain to do it that way, because it is definitely still possible.

Doug Bridges:                    I know that was one thing that surprised me was the amount of personal involvement the two of you have on your Telegram channel. Uh, and how active that channel is with people who are interested in what's happening with Sharpe Capital and I mean, how things are going along as it moves forward.

                                                It's one of the most active, I mean, company based channels I've seen plus it's interactive in that you don't not allow people to post on there. I mean, there's a lot of back and forth going on on your channel.

Lewis Barber:                     I think it's a funny, yes, it's a funny thing in how you define active. Like, we have big spells where there's nobody really writing messages but there's a few, there's a few hundred, there's 5 or 600 people there now and that's all organic growth. We haven't paid for that at all. And, people come in and a new person pops up and they ask a bunch of really, really hard questions and uh, ... Sometimes I give up a whole evening to just answer one person's questions and James and I are messaging each other privately like, oh boy, how are we going to answer that question, we hadn't thought ... and then we work stuff out, and you know, and ... we engage with people and that builds a better product and that builds a more informed community.

                                                And, other people that are watching that as well are chipping in from time to time. But, yeah, it's totally different dynamic to most of the other Telegram groups where you go in and you, it's like you know ... it's 100 five word messages that add no value and say nothing.

                                                In ours, when there's a conversation it's blocks of text you know, really detailed analysis of our business model and ... really lengthy answers from both myself and James. That's been one way we've tried to certainly differentiate from all of the other companies out there who have social channels and communities is to put a lot of effort into that.

                                                I personally, have found it becoming kind of addictive. So, I said we had social media managers who we hired early on, a couple of times they've messaged me on Telegram in private chat saying you guys are just too quick to answer. I saw the message and you're typing already. Let us do our job.

                                                But, um, we enjoy it as well so ... that's important.

James Butler:                    Yeah, I mean community governance and ... is one of the key sort of pillars of what Sharpe Capital is building. So, we really need to be engaged with the community from day one for that to be a success. I mean, our success is dependent on the success of community engagement and that really sort of drives our desire to reach out directly and not just rely on middle management and support staff to answer questions for us.

Doug Bridges:                    So you mentioned that your white list filled up. When does your presale start and what is the sort of goal to use the capital that you receive from the presale?

James Butler:                    So, the presale starts on the 6th of November, um and it will run for a week and then the token sale, the main token sale, starts as soon as the presale ends and that runs for 30 days. And, in terms of use of capital ... for us it's really mobilization of the business and how we rapidly scale so we can deliver our platform features, you know as quick as possible.

                                                Um, we will have a version of our sentiment platform online as soon as the token sale concludes and people will be able to use our ... utility tokens straight away to earn service fees for giving sentiments. So, that state we're really happy about and we're already working hard on building everything out. But, yeah, we'll focus after the token sale on just the products at the moment. There's obviously lots of distractions from the token sale and um, and kind of promoting that side of what we're doing.

                                                But yeah, it's scalability becoming operational that's going to be key. And as we build new product features we'll certainly look at creative marketing campaigns that we can run to increase the adoption of the platform. And, there will be some work on making connections with hedge funds as well so that we can sell them our data feeds as those mature.

                                                Yeah, yeah it's really just going to be all of the normal things that go with growing a business I guess.

Doug Bridges:                    How much were you expecting when you decided to start this to have to spend time wise on marketing and non sort of, development and implementation work? It always seems to me that people always underestimate the amount of marketing that's necessary when working in a business.

Lewis Barber:                     I mean, I was expecting there would be a lot, and I remember saying to James when we decided to a token sale, this is going to be marketing now. And then we both sort of agreed, yeah this is going to be marketing and [crosstalk 00:32:54] product and that's how it's going to be for the next however many months.

                                                But, we've both been very lucky in that we both have good networks of colleagues and friends who we've worked with over the years who saw what we were doing and really wanted to get involved. And so the team's grown quite a bit since then. And, actually that's allowed James and I to do a lot of the community engagement and marketing side of things and we've been able to bring in other skills to continue building the products that we thought we might have to kind of slow down on for a bit.

                                                And so, we've managed to keep the pace up, in fact we've probably accelerated the pace by two or three times as more ... people have joined. We have, I think a team of six on the website now on terms of courting members plus our advisory team but there's a few other people that are helping us out on kind of a casual, free lance basis who are just doing a bit of work here and there.

                                                So, yeah we've ... been lucky in that sense. But yeah, the marketing is intense and if you're ... two or three co founders building a product you're not going to get very far with that once you start marketing it.

Doug Bridges:                    Well, let's talk about some of the issues with respect to security that you've had to deal with um in your crowd sale and just as a Blockchain company. Obviously, there's been a lot of issues that other companies have had dealing with security and presales and with full token sales plus, I mean just we were talking about he Circle Channel using Telegram. I know you used to have a Slack channel that you've shut down and a lot of companies have shut down on Slack channels because of their inability to properly secure them.

                                                Um, how much of your time and effort has had to go into cyber security for ... your efforts?

James Butler:                    I think we recognized this from the get-go. I mean, we had the benefits of hind sight from all of the other hacks and so on that have occurred. So, we really built our infrastructure form the get go with um, absolutely security in mind.

                                                I'll let Lewis talk a little bit more about this as he was really sort of hands on in pioneering this side of things.

Lewis Barber:                     Yeah, um, well, they get you from any angle and that's really the sophisticated thing about these ... attacks is it's not just technology but it's social engineering, stuff like that. We've seen some where founders have used the same password that they used on a site that was hacked for their domain registrar and then they changed the DNS, the hackers changed the DNS because they worked out what the password was. So you really need to think about the whole footprint that you might have left on the net as well.

                                                It's not just sort of we've got a Sharpe Capital website how do we make sure that they don't hack that. But, they're going to come after you as well and anything they can find and use. And it's impossible to remember everything that you've done online. So one of the things that we did very, very early on is said to anybody whose remotely involved with anything that ... could be technical or whatever, an admin, first kept we've kept that to a minimum number of people that we really need ... But we've also said, you know, two factor of authentication on everything is mandatory, change your passwords so that they're different for every single account, very long, random passwords with hi-entropy and just made sure that all of our bases are covered.

                                                I mean, I won't say what I've changed personally. But, I have changed passwords to the most obscure websites because ... because of the lengths that they'll go to to ... attack um, what you're doing from a social engineering perspective. So, that's been one thing that we've put a lot of time and effort into right at the start and ...

                                                And on the technical side, that I was less concerned actually, because we know how to build secure systems and that's what we've been doing for our jobs, some of us, for a number of years. And, so we just did that. I mean, you know, we had some funny things where ... um, Amazon web services, so we're using Amazon web services and we're hosting our website on Lambda functions which is new technologies, server less technology where you don't have a server. There's no server to hack. Amazon spins up a server on demand to serve the traffic and then they throw it away after. It's just fantastic for scaling technology and it's cost effective.

                                                But, um we didn't even think about this at the time, this was so great, if somebody decides tries to and attack your website because there's nothing for them to target, they're actually targeting Amazon. Good luck with that.

                                                Being a focus for us right from the beginning and time and attention has gone into it. And yeah, it's all to protect our business, and our reputation and also people who are purchasing our tokens when the event actually happens.

                                                ... and to come back to the Slack thing as well, actually, just on that. That's a brilliant example of, I suppose, us acting on things that we saw that we didn't like which was just how crazy the volume is of phishing attacks that you get on Slack. So, we just decided it wasn't worth it since we have Telegram. All righty.

Doug Bridges:                    Now, I also saw an article which you put out regarding a security analysis of your um, Blockchain code itself.

Lewis Barber:                     Um yeah, so that ... that's pretty standard in the industry to get a security audit of your smart contracts because they facilitate financial transactions effectively. Or transactions in which value is transferred from one person to another. And it's totally open source ware so yeah, you've got to be really careful.

                                                We used good security standards, there's some open source frameworks that are widely reviewed by the technology community so we tried to stick to those but we had some bespoke functionality around white listing and stuff like that so yeah, we've got a security [inaudible 00:38:35] whose worked for a number of successful token sales in the past and he reviewed that for us. And yeah, he writes up a report on any issues that he finds.

                                                There were no critical issues in our code, according to him, so that's really good. We're happy to see that. But yeah, he made a number of recommendations that we've ... now gone ahead and implemented most of them if not all of them. Some are just not critical or not even minor, they're just semantics and so we maybe haven't implemented everything.

                                                But the blog you've seen is probably a write up of things that we have changed. So yeah, that's there for people to see, they're interested in that side of things. Um, to give them any assurance that ... we're operating in the best sort of ... the best according to security standards.

James Butler:                    It's worth also adding we announced our book Bounty Scheme a couple of days ago, so we're paying up to 25,000 equivalent in SHP tokens to individuals that find from vulnerabilities and bugs within our smart contracts and report them to us. So ... any solidity to the developers out there, we encourage you to try and find the problem with our contracts.

Lewis Barber:                     Yeah, but tell us please.

James Butler:                    Yes, and tell us.

Doug Bridges:                    Why don't we talk about the involvement, the Tass have had with respect to Sharpe Capital? I know you announced a partnership with them, how did that come about, and then how are they involved with you?

Lewis Barber:                     Yeah, do you want to go on this one, James?

James Butler:                    We went to the decentralization with d10e conference and these major uh, major Blockchain conferences that happen every few months all over the world. This one was in Kiev, in Ukraine and was co hosted by Taas. And we met Dmitri, one of the co founders there and we were talking about our product and about potential partnerships and collaborations and they were very open to that. So, they've joined us as advisors and they've been really sort of, instrumental ... I mean, they've been down this road before so they've been able to perform excellent advice on community engagements and ... these sort of key events that you should be looking to go forward to meet the right networks and to be relevant service providers within the Blockchain industry.

                                                And, we're such a growing out our network of contacts to make sure that we can really deliver an exceptional product.

Lewis Barber:                     Yeah, I think ... it's certainly as we sort of alluded to, before, we didn't necessarily set out a year or two ago to build a Blockchain company. Although, we'd both been following the set for a number of years and been very interested in the technology and the innovations that are going on but we haven't been active in it. And going back to our point about community led marketing, it helps if you have connections in an industry and TAAS is very well respected, and they have a fantastic, in my opinion they have a fantastic business and product and there are lots of symmetries between what they're doing and what we're doing.

                                                And when we were doing, I suppose, competitor analysis back in the day we found TAAS and we saw that they had similar business, by no means the same, they are very ... different model in terms of what they do. Being focused on chain assets and purely on the investment side. Nonetheless, we really admired what they'd achieved and kind of, I suppose held them up there as a company to aspire to so when they joined, we saw Dmitri joined our Telegram group, I think was probably what happened, we reached out to him, you know and said we'd love to meet up at some point and they invited us to Kiev. And they've helped us foresee a lot of the things that we might not have thought about and that's been really helpful.

Doug Bridges:                    It seems like one of the things that successful Blockchain companies had to do was to be very nimble in changing how they react to the changing landscape with ... as anybody who works in this industry knows, things change daily.

Lewis Barber:                     That's right.

Doug Bridges:                    How have y'all been able to react to what changes have been happening and make changes in what Sharpe Capital is doing because you've seemed to be very responsive to what things have been happening these days.

James Butler:                    Yeah, I would say my number one piece of advice to anyone looking to start a Blockchain company is to find a fantastic lawyer who knows the space well. And that's really the best way to ensure you can react to changes in the landscape on the, as you say, day to day basis.

                                                I mean even, I think yesterday, [inaudible 00:43:08] announced the plan to ban bitcoin mining and so we've really got to sort of be on the ball there. And, if you don't have a good law firm that are familiar with the space and following the news on a day to day basis, then you can very easily miss important things.

Lewis Barber:                     Yeah, I would say spend three or four times the amount you're spending on marketing on your legal team.

Doug Bridges:                    I, I like that idea. I just want to say.

Lewis Barber:                     Everyone out there does it the other way around, and it's just crazy.

James Butler:                    I was just going to say, I've seen a lot of bad advice out there, and we spoke to a lot of lawyers before we settled on the direction we were going to go to. And, probably the most, it is, the most important thing is to ensure you're compliant and have lawyers that understand the technology.

Lewis Barber:                     Yeah. And, and that's also the way that you get the most value from technology, in my opinion, because ... like you were referring to earlier when we were explaining our model and you said it sounds like you built this whole ecosystem and actually, we have and there are much easier models that might not be legal to adopt but the thing that we're really proud of and that we feel is really valuable is that ecosystem that we've designed and that, in part, has come out of our determination to stick to various legislation and ... laws around the world that sort of govern this space.

Doug Bridges:                    Whatever those laws might be on a day to day basis.

James Butler:                    Exactly, yeah.

Doug Bridges:                    So, I mean, you're building this system and you're building, I mean the ... token layer to it but that token layer, the point of that is to sort of bring in a community um so you can get the community involvement into your financial models. How do you manage the community at the same time, sort of incentivize them to stay involved with the system and? ... It seems like there's a lot of moving parts to working with an engaged community on this.

James Butler:                    Yes, so one of the key things we um innovated in this area is what we call a community governance model and this was a nightmare to design, essentially we're designing a governmental structure. Uh, essentially what this allows um SHP on us to do is to table motions and then vote on them. So, if they want to sort of guide or change the direction of the capital they can table this motion and provided it's seconded by a number, a certain percentage of tokens then it can go forward to a full public vote and we will implement changes as suggested by the community.

                                                So, we went through various iterations on how that will work and the dynamics and sort of vaguely based it on how Parliament would work and Congress versus Senate using community as the lower house and then our advisory board as the upper house so they can sort of back and forth between motions. It's kind of like a, not just a tokenized economy, but a tokenized internal governance structure for the management and Sharpe Capital.

Lewis Barber:                     Yeah, and I ... that keeps the community involved for sure and I think um, long term that we would like to have is to be able to move towards a totally decentralized organization in a way. So we're laying the foundations now, me and James and the team that we're building. But ultimately we're building this ecosystem and ... you want to lay the foundations for something larger ... that can sustain itself long into the future.

                                                And a big part of doing that is keeping the community engaged in that ecosystem all along so they perhaps build other products and services that bolt onto that, that ecosystem. And build something better than we could conceive on our own. Um, so yeah, I mean with that in mind, you know, we're building the tools and the functionality and the structures for people to feel like they have um, they should, not just to feel, but to share a part in developing whatever that bit comes in the future.

Doug Bridges:                    And so is that were you see, sort of, I don't want to say the end goal, but the mature Sharpe Capital, when it's ... you're going to be interactively developing and increasing your community and changing how things are done much like you've had to do over the past year working on this.

                                                Where ... what would you love to see Sharpe Capital to be like five years from now?

James Butler:                    Uh, so I'll go first here. So, what I would really love to see is um, as you know, we're developing these data feed products that will um make themselves as hedge funds and other investment funds and at the moment, we're not going to get them to adopt um pro-tokerens, SHP over night as a payment mechanism. I'd really love to see this community economy grow to include not just the participants providing sentiment but also the hedge funds and so on that are buying these products from Sharpe Capital if they would purchase them using Sharpe tokens through the platform and then you have decentralized smart contracts that distribute service fees and essentially create this entire ecosystem of uh, FinTech technology and quantitative trading and data sources all sort of coupled into the Blockchain using the SHP token as the sort of pilar.

                                                So that's really where I'd like to see Sharpe in the next five years or so.

Lewis Barber:                     Yeah, I have nothing to add to that. I mean, that's the end goal for sure. I think it varies from sector to sector but certainly with our sector, there's a certain amount of decentralization that can be achieved from day one. That's what we're proposing from next year, which is on the sentiment crowdsourcing side of things. But, total decentralization is the model that James just described.

                                                And that will totally change the capital markets industry and that would be fantastic. But, you know it's going to ... it's not going to be an easy process. And ... as James said, it requires a large established organizations that typically are not the most nimble at adapting new technology. It requires them to actively engage with and pay for services with a ... in what they would perceive to be random crypto currency token that they've never heard of.

                                                And, you know, we're seeing the crypto currency markets go crazy this year, but it's, in my view, it's the tip of the iceberg. It's when you get those long established organizations that what we've created there is really valuable and we want to be a part of that as well. Then you can start to move towards the model that we aspire to five years down the line.

                                                And, hopefully we can help them along with that journey by being sort of pioneers in this particular space.

Doug Bridges:                    And so, I mean, that's five years from now. Where, what's your roadmap for the next six months or so with Sharpe Capital? Obviously, you have the token sale coming up but then where do you go from there?

James Butler:                    So, it's going to be product focused in terms of building out. So we'll have our web platform on line the 7-11th of December but the six to 12 month horizon is building the team to increase our capability to build more products and more digital channels such as mobile applications for Android and iOS as well. And then gain those in as many global app stores as possible.

                                                And at the same time as exploring the revenue streams on the hedge fund data feed side and also mobilizing our own product to investment fund, which will probably specialize in XE markets to start with but we ... will have an allocation for Blockchain assets too so that they're the main things for us probably over the next year.

                                                Um, and then as we build out those relationships with our financial services companies and asset managers and funds, we can hopefully bring in partners from the Blockchain sector and ... start to move towards our five to ten year vision as well.

Doug Bridges:                    Okay, well it was good talking with the two of you today. I know that you're very busy trying to get things done and get ready for the token sales. Is there anything else you think people need to know about Sharpe Capital before we sign off for the day?

James Butler:                    Um I would encourage anyone that wants to learn more about the things that we've discussed today to come join us on Telegram and speak to us directly and you can check out our website. There's some things specifically that I want to push other than to find out what we've building and how you can be part of it.

Lewis Barber:                     Yeah, definitely, I would say the same.

Doug Bridges:                    Yeah, I'll definitely have links to both the Telegram channel and to your very active medium channel in the show notes for anybody to follow to be able to log in and speak with you and see all the different things that Sharpe Capital is doing.

James Butler:                    Lovely, thank you.

Doug Bridges:                    Sure thing.

Lewis Barber:                     Great, it's been a pleasure talking to you

Doug Bridges:                    It was a pleasure talking to both of you. Like I said, I was impressed with the work you're doing and I'm sure that we'll hear more about Sharpe Capital in the days to come.

James Butler:                    Great, thank you.

Lewis Barber:                     Thanks very much.

Doug Bridges:                    Thank you.

                                                Thank you for listening to the Blockcast show with Doug Bridges of Capital Legal Group. If you like our show and would like to know more, please check out Blockcastshow.com or Capitallegalgroup.com.

                 Also, please leave us a review on iTunes. You can also follow us on Twitter @BlockcastShow

About the Author Douglas Bridges

Doug is an experienced technology and intellectual property lawyer. A former UNIX and telecom programmer, Doug uses his technical and legal skills to assist clients in the complex challenges they face on a daily basis.

follow me on: