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Fyggex VIP Insiders Interview Series 30: Gary Nuttall, Blockchain & Defi Thought Leader

We sat down with Gary Nuttall, seasoned Blockchain and decentralized finance (Defi) thought leader, who also happens to be Ambassador for University of Nicosia blockchain programme. He has been around to create understanding for emerging technologies, from AI to cryptocurrencies and Non-Fungible Tokens (NFTs). Let’s dive into it, enjoy the interview!

Fyggex: To start with, who is Gary Nuttall and what do you do? 

Gary Nuttall:  I have been involved in many of these technologies and because of this, I am able to get rid of the ‘hype’ and the ‘mess’. I provide education, I do speaking/ consulting and advisory services. At Distlytics, we take these technologies through a distillation process which brings them out in a clearer form for the end user. At the moment, several of our clients are related to either cryptocurrency, blockchain or NFTs. There’s a couple of really interesting NFT projects that are beginning to boil quite interestingly at the moment.

 

Fyggex: How did you get into the blockchain industry?

Gary Nuttall: My background spans across various industries including: retail, pharmaceuticals, commodity trading and insurance. The thing that carries me across all those industries is my interest in data analytics and process engineering.  

When I heard about blockchain in 2014, I started going to events to understand more about it. 

Most of the time I didn’t really understand what they were talking about as it seemed complicated. I then realised that at least 50% of the time people were talking about it either too technically or they just repeated what they had read from some book and in reality they didn’t understand it themselves. This got me more interested in the subject and I decided to start learning about it. 

In 2016, my company that I was working for at the time went through a major restructure, which meant that my department disappeared. That was a great opportunity for me to actually step into an independent consultant role. At the beginning with my background being data and analytics and a distributed ledger being related to blockchain, I thought, well, distributed ledger analytics, Dislytics, that’s where the name of my company actually came from.

A question I would ask prospective clients was, ‘how are you going to do analytics on the blockchain?’ To which I would get a response ‘What is a blockchain?’ I realised I was ahead of my time and this is when I decided to focus on teaching/educating people. I then went from purely educating and masterclasses, to travelling around the world to speak on the topic. I discovered that a lot of people are talking about ‘how blockchain can be used’ and I in contrast tend to speak about ‘how it is being used’. 

For example, in the insurance industry, where I’m quite heavily involved in at times, there are a lot of live projects already where you don’t even realise the blockchain’s being used. 

That’s kind of my background and brings us up to today. 

 

Fyggex: What would you say has been most difficult with your blockchain journey? 

Gary Nuttall: Persuading people that technology doesn’t matter. What they need to know are the benefits and the opportunities. Blockchain is ultimately a software protocol. For instance if I went into a meeting with a group of people and asked, ‘do you use TCP/IP?’, most people in the room won’t be familiar with what that is. But if I say, ‘does your organisation use the internet?’, they understand the question. As for HTTP, they’ve got an idea that it is something to do with the worldwide web but it is actually the protocol behind the web. 

So if you think of blockchain as a protocol, you quickly realise that it is boring, no one needs to know about it, but it is game changing. The biggest challenge I’ve had in blockchain so far is with non-technical people wanting to understand the technical details behind Blockchain, because it shouldn’t matter to them.  What they need to know is what are the benefits, what the opportunity is. Not exactly what lies under the hood, how the ones and zeros with the code move. 


Fyggex: Do you see European Union or European Commission helping the industry?

Gary Nuttall: They’ve kicked off the European Observatory and they’ve got the European blockchain projects going on, so they are quite advanced in supporting the initiative. I believe they are trying to create a European blockchain, where the various organisations and countries can plug into. 

This in part goes against the principles of blockchain. Originally when blockchain came out, it was meant to be distributed- which is what the European observatory is. On the other hand, it was also meant to be decentralised, whereas here the EU is controlling it. They’re doing some good exploration, and that should definitely help to accelerate things. 


Fyggex: Ok, EU helps,  how about what do you see as the biggest threat to blockchain? 

Gary Nuttall: I think the biggest threat is that there are marketeers that are promoting it to have capabilities beyond what it currently has. 

The analysis firm Gartner says that every new technology goes through a hype cycle. It starts with the initial innovation trigger, then what they call ‘peak of inflated expectations’- which is where everyone’s talking about it, everyone’s spending money, everyone’s getting excited by it. And then, you get the dawn of reality or what they call the trough of disillusionment. This is where people realise it actually doesn’t work anywhere as well as it should. 

What I’m seeing is a lot of firms are doing experiments, trying things out. Blockchain is being driven by technologists who are usually young, fresh from university and have no long-term experience. They will be making the same mistakes that other technologists made 20 years ago, but they don’t learn from them. For some reason important aspects like testing, change control and version management, they seem to think doesn’t apply to them or the work they’re doing. People don’t realise that a lot of technology is still young and immature. At the moment, blockchain isn’t mature enough to be commercial at scale yet. But it is getting there.


Fyggex: Based on your experience, which countries have the best Blockchain regulation? 

Gary Nuttall: I don’t think there is any country that has purely blockchain regulations and I monitor regulations quite closely. Blockchain is a technology and countries tend to regulate the use of the technology rather than the technology itself. 

The UK Financial Conduct Authority (FCA) regulates things like crypto assets. They don’t regulate the blockchain that sits underneath the crypto assets. The UK has a sandbox program where they get companies to come join into the protected environment effectively to push the boundaries of regulation.  About half of the companies have been either crypto or blockchain related or using a distributed ledger. They have done six of these programs so far.

Regarding other crypto industry locations, Malta has introduced the Virtual Finance Act (VFA) that is actually very crypto friendly. Similarly Gibraltar is very friendly. Some of the smaller islands like British Virgin islands, Jersey and Guernsey are quite friendly. In mainland Europe, Germany’s finance regulator BaFin has produced guidance on crypto and Switzerland has FINRA which has set out clear definitions and guidance on crypto assets including crypto tokens and cryptocurrencies. 

In contrast to the USA, they’ve got a major problem with regulating cryptocurrencies. USA has about 13 federal regulators who claim provenance over cryptocurrencies. In addition to the SEC you also have every state with their own regulations. 50 States with regulators makes it very complicated to operate cryptocurrency in the USA.

 

Fyggex: What do you see is lacking in the blockchain industry?

Gary Nuttall: Adoption, I think, is the fundamental thing. I think technologies do take a while to mature and to get adopted, but we are yet to see significant numbers of large scale projects. 

There are few exceptions, TradeLens, for example, which is the trade finance project, supported by IBM, Maersk shipping and a number of other shipping port operators. It has over 200 participants in it now, where they are using that to track containers. InsureWave is another project working with providing insurance on ships. 

Other successful ones are mainly around cryptocurrencies. There’s less on the actual blockchain adopted for scale. Walmart has something going on, but even with them the project is specifically around green groceries, such as salads. They’ve not deployed it to their entire supply chain yet. It will take a few more years. 


Fyggex:  How do you see the future of blockchain? What kind of development can we expect in the coming years? 

Gary Nuttall: Whilst blockchain is at the “Peak of inflated expectations”. I’m seeing cycles of it within blockchain as well. Originally we had cryptocurrencies with massive hype and then all died off for a while. That’s generally speculation and price driven development. We had the initial coin offering (ICO) phase in 2017 & 2018, where blockchains were being used for fundraising for projects, and that exploded for a while then it collapsed. 

Now we’ve got the whole decentralized finance (Defi) piece where again, things like, flash loans and yield farming are exploding right now, and that’s all going to go wrong at some points and then they will rebuild again. 

The current hype at the moment is around Non-Fungible Tokens (NFTs), which again is completely crazy. The great thing about NFTs is that they’re actually not only the first good implementation on using a blockchain as a ledger of trust, but also the way of introducing things like royalties and licensing. We are seeing that with digital arts at the moment. 


Fyggex: Can you open up this little bit more, how could NFTs go mainstream? 

Gary Nuttall: The mini waves we have witnessed in this explosion is in NFTs being used for digital arts. The next one will be in music, and we’re already beginning to see bands and DJs putting their music into an NFT form. (Editor note such as Aphex Twin, Linkin park, Busta Rhymes, Grimes)  

With NFTs we are  seeing collectibles growing massively with sports clubs, such as the USA’s NBA Hot shots. I’m involved in a fascinating project around that kind of space, which actually links images, AI and blockchain together. You’ve got lots of technology buzzwords in there but what it’ll deliver is something quite fantastic that I’ll be able to share in a few months. 

The next thing I think is going to be a growth in NFTs being used for purposes other than the digital arts and music. Things like, intellectual property, licensing, digital rights  management and certificates of authenticity. I think these are all areas where we are going to see massive growth very soon. 


Fyggex: Some of the developers say that they want NFT to be for the people. Do you think it will stay that way? Or will it be like Bitcoin level priced cryptocurrency in which only the big companies and rich people are able to invest into it? 

Gary Nuttall: It will always be for the people until companies realize they can make money out of it. That is sadly the commercial reality. Making money is a major driver. Anything that is highly profitable is always going to attract commercial organizations in some way. 

That’s not necessarily a bad thing because along with it comes maturity, regulation and jurisdiction control. NFT markets are completely unregulated. There’s no rules around there. 

Some of the things that it is being used for are however regulated. If you want to use an NFT for real estate, it is actually quite regulated in some places. People don’t realize that if you want to use an NFT to act as a digital share, then there’s plenty of finance regulation around share ownership. 

This is what I was saying before on the blockchain side, you’ve got a lot of technology, people who are young and out of university, you don’t have any prior experience who don’t realize that what they are doing, may actually be covered by regulation already.
And they think this is just coding. As if it would be something different. 

For many NFTs, things like copyright law already exist. Digital rights management already exists. Rules relating to payments already exist. NFTs will have to evolve to actually support existing rules.


Fyggex: Since NFTs represent new technology, do you see risk with scams?

Gary Nuttall: The biggest problem is not really scams. The biggest problem is that most people who are buying NFTs don’t actually understand what they’re buying and if they did, they probably wouldn’t buy them.

If you actually decompose what an NFT is and what you need to have access to, you effectively need a crypto wallet that you’ve got the keys for. You need a platform for it to operate on. You need a small contract running on a blockchain to actually be executing and monitoring ownership. You need the tokens to be distributed in a particular way on the blockchain, and then you have the underlying assets so that the digital image on a file store, such as IPFS. 

Now, I listed out several different components. If you lose access to any one of those, you’ve lost the NFT in effect. Having a token that says you’ve got ownership of something that is at the end of a file string, but that server’s gone offline or it’s become unavailable, means you now have nothing. 

Risk is less so with scams. It is more about the technology being misused that is a major problem right now. Lot of people are buying an NFT and they think it gives them actual digital assets. It doesn’t, it just gives them a certificate to say that they own the digital asset. 

The ultimate “scam” in NFT is that most people don’t actually understand what they are buying. I’m working on a project at the moment that is looking at deploying NFTs so that you really do have absolute ownership. Think of it as the NFT as an encrypted file that only you can access or you grant access to. Whereas at the moment many NFTs are just a pointer to a JPEG. 

I think generally that there are scams in this space as well.  That is simply because people,  who do not understand the technology, see prices going up. They’re trying to get into it due to fear of missing out (FOMO) phenomena and scammers are happy to exploit that worry. 


Fyggex: Do you think celebrities could take over the NFT market selling collectibles to fans who will buy almost anything?

Gary Nuttall: They already do. That is why people pay so much for football shirts which have been signed by their favorite football player. Similarly they will buy an album that’s been signed by their favorite band. I don’t think it’s going to change. 

NFTs are a new platform for celebrities to use. Not only football teams and band management, but also commercial NFTs. What I mean is real estate, property ownership, share ownership, as the market for actually digitizing existing financial services is exponentially larger than the fund marketplace. 

We’re all aware of how much people pay for NBA cards and how much people pay for football tickets. But if you think of the finance industry as a whole; pensions, hedge funds and insurances. That industry is a hundred times larger. That is where the real big difference will happen with NFTs. 


Fyggex: You don’t think that celebrities would spoil the NFT market?

Gary Nuttall: No. Quite the opposite. It is always good to get celebrity endorsements on things because it increases visibility. The classic example is Elon Musk. Whenever Elon Musk tweets anything, it has an impact. He made a Twitter tweet about DOGEcoin and those DOGE coin prices skyrocketed.  He has also tweeted about bitcoin mining and that led to the price falling.  

So there’s a risk of celebrities adversely affecting the market BUT it helps with building visibility as the mainstream press love to report such things. If celebrities come out openly endorsing things, whether it’s cryptocurrency or NFTs, it simply builds their awareness and it makes those more normal. More people would actually know about NFTs, seeing about it in the press, news about $69 million artwork and so on. The kids will accept it just as it is. 

And to put it into context. There’s no fundamental purpose or uniqueness in DOGEcoin, but the market capitalization value of DOGEcoin is larger than Colgate Palmolive or National Australia bank. The market cap of DOGE coin right now is I think it’s approaching double Barclays bank. Barclay’s multinational bank operates around the world and this Meme joke crypto token, which has no purpose at all, has got a valuation bigger than a major bank.  

 

Fyggex: Do you see any future for NFTs as investments? 

Gary Nuttall:  Don’t take this as financial advice but there are  two areas for NFT investments. The first is to invest in the platforms that actually support the NFTs and that’s the work I am involved in with two organizations at the moment. One is applying innovative  cryptography to secure a more robust environment, the other is building an amazing platform to transform images and create amazing NFTs. 

Another is providing that environment for people to enable buying and selling all sorts of digital assets in a secure way. Not just digital art. I think that’s a major investment opportunity to consider.

In terms of the NFTs themselves,  if someone is buying a particular Pokemon card, because they think there’s going to be value in selling it in a few years time, they can do it. That’s the same thinking as with cryptocurrencies in general. LiteCoin, Monero, Ripple or Bitcoin.

People think that in the future, it will be worth more. They may be right, or they may be wrong. The future, it’s only going to go one of three ways, it’s only going up, down or sideways.


Fyggex: If someone wants to create their own NFT, what would you advise?

Gary Nuttall: If you want to create your own NFT, take a look at the sites that allow you to do it for free and try it out. Major marketplaces such as OpenSea or Rarible will allow you to create an NFT fairly easily and actually walk you through the process. You can try out in a test mode initially.  Test before you do it properly, because it could get quite expensive. The problem is that if you actually properly create an NFT on Ethereum blockchain, it will cost, at the moment, probably $200 in gas fees to mint it.

 

Fyggex: Despite those NFT costs, what do you see as the next big thing? 

Gary Nuttall: One major area within it will bring together and transform imagery, AI, and NFTs. NFTs are going to be used as our certificates of ownership of digital assets and physical assets. I’m working on a project at the moment, which is to use NFTs, for a certificate of ownership of physical fine arts. I see actual pieces of artwork, which will have an NFT with them to confirm the owner. 

We’re going to see a growth in NFTs around other digital assets. Things like, digital identity cards, ownership of books or documents. There will be a transition over to NFTs being used as proof of ownership on physical items.

It’s going to merge digital and physical, which we’ve not quite got yet. The problem is that people have tried to do that with blockchain already and failed. Louis Vuitton has done exactly this by putting a blockchain link in to prove origination of their handbags. It ‘s always possible that you could take the tag out of that handbag and put it in a different handbag. Some of the stuff I’m working on is actually working the other way around. World is going to eventually see a transition from digital assets to physical assets instead.

 

Fyggex: What would you recommend for people who want to learn more about NFTs?

Gary Nuttall: Go and watch my five minute Youtube NFT explainer video. It explains it all very simply. If you want to know the technical stuff, then go and Google things like ERC- 721, which is the explanation of a smart contract standard. You can go and see how they actually work in Ethereum. The Ethereum foundation has the technical specification, the small contract, that you need to use to create a token. 

Visit the NFT marketplaces websites, such as OpenSea and Rarible. Read what they write. 

Look at YouTube videos about NFTs, what they are, how to actually create them and how to buy and sell them as well. 


Thank you for the interview Gary, we will be following your endeavor’s with great interest!