Web3 Breakdowns Ep 48 - Sergio Silva: Institutional Custody and Payments
Primer: What is Fireblocks? In this episode of Web3 Breakdowns, host Eric Golden speaks with Sergio Silva, the Senior Director of Web3 at Fireblocks. They discussed commonly misunderstood terms, NFT lending, Fireblocks, and how Mexicans view cryptocurrencies.
Background
Born and raised in Mexico
Graduated from college and joined Goldman Sachs
Subsequently, Barclays recruited him to build their Latin America equity sales desk
During the pandemic, he started looking closer at crypto
Read an article about someone spending $140,000 on a CryptoPunk
Went down the crypto rabbit hole. Spent 10k on a CryptoPunk
Senior Director of Web3 at Fireblocks
NFT Royalties Going To 0%
The “Why”
Big misconception to rely on marketplaces to pay royalties to creators
The market will tend towards efficiency as traders are looking to profit
New marketplaces are popping up that are catering to traders, providing the ability to trade without honouring royalties
There’s plenty of sites where you can do OTC trades without paying royalties
Outlook For This Direction
Have to differentiate between collectible projects, avatars, PFPs, and artists
Artists come into the space and are able to tap into a new audience
For some of the largest collectors and artists, their pieces are traded OTC to cut-out the marketplace fee
Some artists happened to mint their work at the right place and the right time. Must not confuse this with the tech enabling you to build a community and enforcing royalties
For successful collectible PFPs like Bored Apes, they found a great community and were able to monetize
Artists should interact more with collectors and have some business experience
Spending $10k On A CryptoPunk
Initially, he found CryptoPunks the silliest thing ever
When he joined their Discord, he realized that the community was full of OGs and builders
“When I'm on the Punks Discord those early days. And I get that same feeling of like, wow, this is obviously technology that's going to change the world.”
- Sergio Silva
Shift In Community
The community has shifted
Punks’ mission is to be very inclusive and to help onboard more folks into NFTs
That openness backfired
Influencers came in to create conflict or to sell you stuff
People left. Friend groups were created and little DAOs were formed
Fireblocks
What Is Fireblocks?
The largest provider of digital asset infrastructure in the crypto market
The founders saw that crypto infrastructure have been created for retail people, but not for enterprises
Uses multi-party computation (MPC), a cryptographical tech that enables users to have distributed sets of information, to protect the private keys for wallets within their infrastructure
They are a B2B company. Their tech powers a lot of retail-facing solutions
They are not a custodian. They are the tech providers for enterprises to custody their own assets
Currently supports over 40 blockchains
Their Clients
50/50 ratio of crypto to non-crypto companies
Helping Web3 gaming studios and Web3 focused clients to deploy architecture
Talking to traditional institutions that are eager to come in
Different “Custodian” Terms
Qualified custodians: Counterparties that hold third party assets
Custodian: Those who hold the keys to the assets
On The Term “Wallet”
The term “Wallet” is one of the biggest misses that the space has when it comes to helping people understand the technology
Today, people think of MetaMask, a browser extension, as a wallet
The Ethereum Whitepaper defines user accounts as either:
Externally owned account (EOA) — the traditional wallet
Contract accounts — Smart contracts that execute x transaction depending on the assigned message
A private key is a long number that serves as the actual key to access the “safe deposit box”
A public key is a number outside the “safe deposit box” that tells people where you can send assets to
The combination of the private and public key makes up a wallet
MetaMask or Ledger are tools that allow you to manage those private keys
Wallet Identity And The Issue Of Privacy
Blockchain tech allows you to have as many wallets as you want to
His DeFi wallet has never been linked to his Sergio identity and his NFT personality
There’s no privacy in blockchain
Once a wallet’s identity is doxxed, you can see all the money that’s being moved around
Brands In Web3
A lot of them are entering the space
If they are not thinking about the lack of privacy, it will have repercussions down the road
Brands are still hesitant to fully come into the space
Abstracting Away Complexity As The Trend
Big winners will go to companies that provide easy on-ramp solutions
“I think it's a bit of a pipe dream, that it's going to be self-custodial.”
- Sergio Silva
Fireblocks will abstract the blockchain away, but provide users with choices
NFT Lending
His Experience With NFT Lending
Decided to try it out
Took a loan against one of his Punks and used the ETH as a hedge for spot
Marked his calendar wrongly and his loan got foreclosed
The platform sends email notifications but those emails jammed
“I cried out of frustration, much more than the monetary loss. Obviously, that sentimental value of losing my on-chain identity.” - Sergio Silva
Tweeted what had happened. It was owned by a DAO and the DAO sold it back to him
Use Case Of NFT Lending
For people to generate yield by lending their NFTs in an overcollateralized way
Global Payments
First time he used the blockchain was to buy crypto and send the money back to his mum and sister in Mexico
There’s lots of cartel activity there and banks are hesitant to let people withdraw a lot of cash
Having the ability to send transactions and manage your own assets is a huge thing in emerging countries
In Africa, the Tron blockchain is used for micropayments because they don’t trust the banks or might not be able to get a bank account
They just announced their payments engine at Money20/20 conference to enable crypto payments
Explaining Crypto To His Family
Opened an account with a local exchange for his sister before he left
In Mexico, there’s lots of different things that happen and people have to remain very flexible
Digital money was something that made their lives easier
His parents made a sacrifice to enroll him and his sister in a US school
After graduating, he and his sister saw the opportunity of paying it forward to them
They trusted in his judgment in crypto and joined him:
His mother got into Stepn
Cashed out a bunch of NFTs for his nieces
Mexican Vs American View Of Crypto
Mexican culture is more homogenous than the American culture
Mexicans are always worried about someone else trying to take advantage of them
Cultural background makes it hard to have the initial conversation about crypto as everything is in English
His family’s dollar savings are now in DAI
Banks do not want the populace to have dollar bank accounts because the government wants to regulate the currency and not let it get replaced by the dollar
When stablecoins take off in emerging markets, citizens are able to transact in dollar-based stablecoins and go around a lot of these capital controls
Greatest Use For Stablecoins In Emerging Markets
Remittances are a gigantic business in Latin America
Blockcahains minimizes the transaction costs for the average user
What Excites Him
Within the next 6 months: Happy to see a lot of educational initiatives in the space. Excited to contribute to some of them
Over the next 5-10 years:
Making businesses more efficient through the use of blockchain
Increasing the surface area (interact more with your customers, connect better with them, etc.)
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