Justin, a physicist and seasoned executive from the loyalty industry (where he built a billion dollar unicorn), has developed a novel cryptographic game and foundational primitive for Web 3 using ‘stateful NFTs’, with some of the world’s leading game theorists, that removes the need for arbitration in the fulfilment of digital to physical redemption.
We discuss NFTs as loyalty mechanisms, and how an emergent dCommerce Stack could one day unbundle Amazon.
Jamie Burke 0:13
You’re an early stage web three founder apply to our award winning accelerator programme base camp at Outlier ventures.io slash base camp, we write your first $50,000 check and give you access to 200 mentors, including many of the leading web three founders, and a network of 1000s of the world’s leading investors and exchanges. We’ve helped over 30 startups from 15 countries from all around the world, raise 100 and $30 million in growth funding. It can help you fast track product market fit and where relevant the launch of your token economy. Today, I’m really happy to welcome co founder of boson protocol, Justin Bannon. Welcome, Justin.
Justin Banon 0:52
Thanks, Jamie. And it’s a privilege to be here.
Jamie Burke 0:55
So you describe yourself as working on bridging the virtual to the physical world. In particular, for web three, boasts on protocol as a web three primitive, it solves the physical asset Oracle problem using stateful NF T is based on a dynamic game, which obviously is a mouthful, so we’re gonna unpack exactly what we mean by that a little bit later. A more simple way of describing it is you’re connecting smart contracts to real world commerce and its data. So I actually got to know you pretty well through base camp, the Outlier Ventures excelerator, you win the winter 2019 cohort. So there’s some reasons why I think it’s timely to get you on the show. So NF T’s are hot now non fungible tokens are hot. Now, as ro ham, the founder of dapper labs said, you know, you realise the full or true potential of NF T’s when you consider that almost everything in your life is non fungible, rather than fungible. So some of the few things that are fungible include, you know, currency, money and some commodities, but pretty much everything else is, is non fungible is not interchangeable, to kind of atomic level. So based on souls, the fundamental problem that I think everybody first asks when they begin to wrestle with the concept of NF T’s, in the context of digital to physical transactions. So just the other day, I was talking to a friend, and he was kind of getting his head around NF T’s in a purely digital sense. But in the minute that he kind of stumbled across this question of, well, how could I use an NF t to redeem a physical good or service, he just couldn’t buy that, how that could be solved. Now, at boasts on you, you’ve kind of solved that problem. And we’re going to get into this journey about how you’ve got there, at least you found a viable workaround. And I think it’s informative for people to understand why somebody like you and your co founder might be the people to kind of solve this. So you’re quite a unique beast in that you’re an ex physicist, you’re not a coder, but you’re hardcore math guy, quite academic, you’re used to solving complex theoretical problems. But unusually, you’ve also really earned your stripes in the business world previously blitzscaling, the priority pass group into a billion dollar per annum digital platform and transforming that industry, which was a loyalty points, business in a traditional sense. So to give some context to your background, so as I said, You’ve got a physics degree from pure college, actually two masters that you’ve managed to somehow do in your evenings, one from UCL in digital business and innovation, kind of really focusing on platform and network effects. And the other, which is an integral part of your kind of founder story with boasts on digital currency, master’s from the University of Nicosia. You’ve also founded a couple of startups in your early 20s, including a video production company but I guess most relevant to what we’re going to talk about today was when you joined priority pass group in 2006, as Operations Director, but quickly grew to become divisional MD for for that group. And you were there for over 12 years until relatively recently 2018. So for the listeners to understand priority pass was a company which enabled access to airport lounges via paper and plastic vouchers at the time when you joined. But as I said, you you blitzscale that from 50 million to a billion dollar company per annum in revenue, but also helped it undergo a digital transformation. So working with large brands and partners like master visa, Amex diners as well as 1400 banks and credit cards worldwide. And it was there that you, I guess, first began to explore how you could effectively digitise a process, as you describe it, find it a digitally native form factor for that industry, which of course, was digital and mobile vouchers. And that really not just transformed priority pass, but also the wider industry. Then in 2019, you co founded Osan. And I believe that the kind of the Genesis story of that is that you met Gregor barossa, your co founder, who was a lecturer, one of the lecturers at the Masters where you were doing the digital currency initiative. Can you tell us a little bit about that that meeting? And then you know, how that evolved into what goes on is today?
Justin Banon 5:59
Well, as you’ve highlighted, yeah, I’m not I’m not a coder, but I took a couple of technical modules a to give, you know, to kind of cover that area, but also to find a tech co founder for this for this idea that I had. And yeah, Gregor and I would stay on after class and just discuss Not just that, you know, that his lectures, but also, you know, what blockchain means, what it what it enables, and very quickly, we discussed my idea and, and, and just joined up together and been working on it ever since. Yeah.
Jamie Burke 6:34
So what was the what was? So what was the idea? What was the insight that led to boesen protocol,
Justin Banon 6:42
the insight was in the same way as when I was at priority pass, I recognise that, with the advent of mobile and digital people would still want to access the same products and services as they were accessing currently via like paper and plastic vouchers. But in a form factor that was native to this new kind of digital and mobile channel. And so with with crypto, you can see exactly the same sort of situation. As crypto emerges as this new form factor, then crypto businesses and their customers are going to want to access real world products and services, but do that in a crypto native way.
Jamie Burke 7:25
And so this is, this is what he described as solving the physical asset, Oracle problem.
Justin Banon 7:31
Yeah, the description of the problem as a physical asset, Oracle problem comes from a post from from Jimmy song where he highlights the problem, as an example of why you know, only Bitcoin is a kind of, you know, valid sort of cryptocurrency. But actually, the problem is, if I wanted to buy your car, Jamie, and you tokenize, that car, and you represented it as a token, and I went, and I brought that token from you, that’s great. But how can I guarantee or have any insurances that once I’m in possession of that, of that token that I will actually receive the car as well. And that is, you know, it’s that is the problem that we address and, you know, have have a solution, or at least a very effective workaround for.
Jamie Burke 8:21
So I believe, after you met Greg, or during the course, you actually went off and began doing some consulting both together and kind of alongside one another. And it was in these engagements where you really began to refine different approaches to how you might solve for this problem. Could you tell us a little bit more about
Justin Banon 8:44
Yeah, Gregor and I, we work for a company called X ray, which is a decentralised logistics platform. So we’re doing some really interesting things. So we were tokenizing freight invoices and using centrifuge tin leg, and then using those NF T’s then to be collateral within multi collateral die. We’re also working on early ocean protocol, data marketplaces integrations. But the the other project, which is most most relevant for bozen, is that we were looking to what techspray rewards its users. So if you think about truckers on the platform, they arrive on time they deliver to quality, etc. And it was looking to reward the users with tokens. Now, tokens don’t really mean a lot to trackers what they would like are kind of like real world things. And so we had an early version of bows on protocol, which enabled truck drivers to take the tokens that they obtained from dex freight and swap those tokens for duty. blockchain vouchers that could then be redeemed for real world products and services. Initially, we were using the Dharma protocol architecture, which involves some some trusted, trusted keepers or arbitrators, if you like, so that in the event of any disputes or reversals, you would have to revert to an arbitrator, which is a pretty set standard set up with, you know, protocols and projects such as open bazaar. But what we quickly realised is if you if you’re plugging in a decentralised network, into a protocol like Bose on that requires arbitration, well, the cost, the you know, and the friction of that really kind of breaks that process, you know, you just can’t afford to do it. So I kind of put my physics hat on and and said, Okay, well, can we eliminate arbitration? Is it kind of theoretically impossible? and to what degree, if we can’t eliminate it, to what degree could could could we minimise arbitration? That’s the problem that we really, we really started to look at. And by the time I got accepted to base camp, I had a very strong intuition that we had something quite significant in terms of being able to remove this cost and friction and have what we were kind of referring to as this decentralised autonomous commerce. And I mean, I think probably day one, Jamie mentioned that to you. And you immediately said, Well, that’s a very bold claim, we need to establish it. And so I was introduced to Dr. Zeynep guttridge, who is a researcher in behavioural economics and Game Theory at Imperial College. And I know you and as part of the outlier team as well. And Zeynep is, you know, very, very smart. And, you know, one of the best in the industry there. And her initial thoughts were, why don’t I don’t think that’s possible. So we sat down, and after about two hours, then it said, Well, I think you may have something but I’m going to need to work on it. And we worked on it over the coming weeks, and within a month or so Zeynep joined as an advisor, and, and has been working with us to develop that ever since. As soon as similar story with with with Trent makhana. He, I’ve been sort of acquainted with Trent previously, but at diffusion in 2019, in Berlin, we sat down and went through, I sort of took Trent through my deck and trendsetter, I don’t want to see the Marketing Show me the mechanism, typically trend and we went through, and he was on. Okay, so you’re not trying to tokenize the thing itself. It’s, you know, it’s a kind of a futures contract. And that’s exactly the approach that we’ve taken. You know, just to kind of complete that. Similarly, we presented a f London at earlier this year in February and zargon, who had worked on a couple of projects with kind of consulting, also said, Look, you know, I think you’ve got this issue this issue, He then joined as an advisor. And so now we’ve refined the protocol to where we feel it’s, it’s probably got to a point where you get diminishing returns, and there’s not that much incentive to evolve any further That said, it is an it is an evolving complex system. And, yeah, we were due to launch a prototype of that core mechanism within the next couple of weeks.
Jamie Burke 13:42
Yeah, so I mean, that’s an interesting journey, almost a year long period of r&d, to kind of maybe just add some colour to some of the people that you mentioned. So Trent McConaughey of ocean protocol, Michael’s our gamma block science, block sciences, a big crypto economics, design, consultancy. And you referenced diffusion diffusion is actually the kind of cop virtual conference was now virtual conference used to be a physical conference that we would do each year with the various portfolio. So it’s a great advert, I guess, to see how a lot of that stuff’s come together. Now, if we go into this, this physical asset problem, so as you said, Jimmy song, almost used it as a dismissive and it’s kind of dismissive towards things like NF T’s or just the idea of alternative cryptocurrencies. And this is a theme Actually, that’s come up again just in the last week, with people like Peter McCormack of what Bitcoin did next. I love PETA. I actually think he’s largely just being on brand by being dismissive of NF T’s than necessarily being totally convinced of it himself. But that said, It is used as a dismissive by Bitcoin maximalists towards NF T’s. And in the sense that they know, it’s a problem that is impossible to completely solve for. But I think what’s interesting here is that you believe there is a workaround to significantly reduce the requirement for arbitration. And effectively, that’s, that’s, I guess, where most on focuses, right? If you think about decentralised commerce, de commerce, in the context of e commerce, and how that then connects to the physical world, this is something that that fundamentally has to be solved for. And, you know, you want to be able to solve arbitration of disputes, but also reversals and reversals is another key part. It’s not just disputes, but it’s presumably the reversal of the transaction itself. Should it not be properly fulfilled? And so really, this is this is how do you fulfil What does fulfilment look like in the context of e commerce? So could you tell us a little bit about this work around I believe, you kind of describe it as a novel, a novel game? How does this solve solve the problem?
Justin Banon 16:27
So as I mentioned, yeah, it’s um, it’s a type of futures contract or a promise, if you like, where, essentially, the buyer and seller make deposits as commitments to proceed with an exchange transaction to an agreed upon quality. And in addition, the buyers payment amount is also locked up. So let’s, let’s deal with those two, two things separately. But I guess a good starting point would be this problem is partially solved, if you want, if you want to book an expensive restaurant, it’s normal to have to put a deposit on your credit card. And if you don’t turn up that you lose that it’s non refundable. So in a very, very kind of narrow way that is, is the type of concept upon which person builds except what the, we take these two sided deposits. And then those deposits are in a game, which is complex enough to handle the disputes and provide incentives for both parties to, you know, be incentivized to go through with a quality redemption. But on the other hand, it’s, it’s, it’s simple enough to be kind of operationalized. Now, it’s a it’s a complex system. And as ogham described it, it’s going to have boundaries where it’s going to bounce around with it within within a zone, and it might hit a boundary. And initially, we may have arbitration, and we will push it back into that zone. And we may add some algorithmic triage and extend the algorithm. And over time, then it evolves further, further and further now, this is what it’s done anyway, during our r&d process. So so that’s that’s the sort of the core the core algorithm. Then we have the the other one is the notion of sort of practical atomicity, which, you know, is one of these kind of fundamental arguments that you can’t have this hard link between the physical and digital how well that’s just, you know, that’s solved. Practically, if you go into Starbucks and you offer you ask for a coffee, you know, the barista could take your money and not give you a coffee. I mean, that’s, that’s entirely possible. And that, but you know, you accept that level of atomicity. And that’s that kind of cash level of practical atomicity is, again, the thresholds that we hold those onto. So
Jamie Burke 18:59
that’s the theory. Can you walk us through practically how that works?
Justin Banon 19:02
Sure. So bozen is itself is a modular component, but within bows on are a number of nested modular components if you like. So, firstly, we represent these promises as stateful and FTS. So, sure, you know, NFT non fungible token but with us, they’re stateful in that they move from state to state so that you have a state where they’re firstly they’re offered, then there is a commitment that is made, then they couldn’t be redeemed a complaint can be made a complaint can be admitted etc. So, these NF T’s, then, you know, flow around a dynamic game. And this dynamic game within bosons core exchange mechanism is a delicate balance with it being sufficiently complex to manage the exchange dispute mediations and reversals, but but simple enough to be good By again, we then have a token model which we we borrowed from ocean protocol for curated proofs market. And this this model, curates vouchers or inventory, which is that is, has high quality and quantity So, so vouchers which people use and a popular and which people like they’re at high quality are also curated using using that token model. But again, that’s modular we, we could and we constantly look and review that there could be a separate module there. And then in addition, we integrate with a web three data marketplace and our chosen provider course, which is ocean protocol. And I think we can come on to those two components of those on protocol in terms of coordinating transactions and commerce data.
Jamie Burke 20:59
Yeah. So you’ve used this term, D commerce decentralised commerce, and maybe before we go into it stack, because again, I’ve heard you talk about the e commerce stack. Why is de commerce important? Why is it important to have a distinction between commerce as it is today, and the commerce? And what is the role of both on protocol within it? You know, what’s its kind of mission?
Justin Banon 21:28
Okay. Sure. I mean, I’ll address that question. two levels, if you like, there’s a sort of operational level, which is free, low trust, low cost, low friction is different. We’ve seen that when you when you know, whether it’s email or when you implement a solution, that is that is free and low cost, it’s different. And so enabling commerce over the internet without intermediaries, but with this, minimised, arbitration, low cost and friction, it’s fundamentally different and is going to enable new use cases and a proliferation of commerce that has previously been been blocked, if you like by, by cost, trust and friction. So that that’s kind of the operational argument. And also, if you want to take on a beast like Amazon, which is super vertically integrated, a lot of people think, you know, look, it’s impossible for for a protocol to take on Amazon. I’m actually of the view which many share that by having a stack in a nice ecosystem of composable, specialist protocols, each of these optimising for efficiencies, and attacking different parts of the value chain, but in combination or aggregate, then these can be a real challenger first slowly but then all at once and I think they think for a large kind of whale if you like, like Amazon, it’s very difficult to compete against a sort of a swarm of specialist protocols, each attacking a point in your in your value chain, but also working together in a composable way.
Jamie Burke 23:13
So is this is this disruptive or transformative or, or something in the middle
Justin Banon 23:18
is super disruptive.
I previously I transformed priority past digitally, but the underlying business logic, the logic of centralised extraction, if you like, remains the same. Whereas decentralised protocols remove this logic of of extraction and and replace it with a more fair and equitable logic and a design to prevent capture by a centralised entity. So it would be very difficult to conceive of a centralised entity making that Moodle though I know people such as Trent has written on this. So So I would say it’s very disruptive. I mean, we do two things which ecommerce and Amazon does. So we’re similar in that way, but we do it in a decentralised way. So those two things are sure we execute real world commerce transactions. And we we receive secure web three customer data, which we monetize. But But again, we do this in a way that’s fair and equitable. It’s it’s a protocol that everyone can trust and anyone can use. And so this brings, you know, the potential to own two massive value pools. So as the global decentralised network for coordinating commerce, and then secondary as a planetary level web three data marketplace for commerce data, again, the difference being that, you know, bows on token coordinates the commercial exchange, and then captures and redistributes this value from the data monetization in a fair and equitable way.
Jamie Burke 25:00
Okay, so let’s unpack this D commerce stacks. I guess the the, the idea here is that with in the same way, we’ve seen this bottom up stack emerge in DeFi, it’s highly composable, you can move things in and out. in aggregate, it increasingly looks like a capital market will be at a very simplistic one. But the thesis is, over time, it will grow in complexity. And as you say, because each protocol is a specialist, primarily looking to optimise for efficiency, but and also to deliver yield to its end user. So I guess what you’re saying with the D commerce stack is there’s going to be an equivalent to the DeFi stack, maybe it’s also built on components of the DeFi stack. So could you talk us through the different layers of the e commerce stack, the things that will, will need to happen for e commerce at scale, and then maybe where Busan is placed within it?
Justin Banon 26:03
Sure. Um, so the way the way I view it is, if you take the current centralised commerce, you have multiple value types that all knit together in to provide differentiated and highly competitive competitive propositions. So if you if you if you take a sort of a premium credit card, for example, that that combines a method of payment, it combines credit, it often combines loyalty rewards, you can you know, you can buy products and services, and there’s a huge amount of data there. So your brands will build of a differentiating and value adding proposition from those components in order to be commoditized. And in order to compete on fees. And so with Bose on we tie together, we were designed to integrate whether it’s with a defy protocol that wants to reward their users with real world products and services. So wants to be able to kind of airdrop real world products and services, we would enable that. Whether it’s a, you know, a decentralised platform that wants to understand the preferences of its users, we can we can enable that. So what or whether it’s a crypto exchange that wants to in a crypto native way, instead of competing on fees, which is a race to the bottom, reward reward users or enable users to buy products and services direct from an exchange without ever touching fear. All of those are all of those elements. We are a building block where you can plug in each of those elements to create these kind of decentralised commerce applications.
Jamie Burke 27:57
So it sounds like you’re both lawns most valuable when used in a highly commoditized. industry. So as you said, it could be if we look at in the crypto world, it’s wallets exchanges, stuff like that. Is the go to market that you will be initially targeting these kind of crypto native businesses, or are you looking to kind of bring in your non web three classic, digital ecommerce web to businesses.
Justin Banon 28:30
So initially, we will be targeting these sort of high propensity crypto businesses where there’s a strong demand. So for example, crypto exchanges and crypto credit cards. But there’s, I mean, it’s no coincidence that rewarding and providing, you know, loyalty propositions on top of these products. It’s no coincidence that you know, so many of these products require loyalty and rewards, the reason being that they are otherwise commoditized. So we are we will be targeting crypto exchanges and crypto credit cards to offer a crypto native solution for differentiating those products in order that they don’t have to compete on fees and race to the bottom. We’ve also we’re also in conversation with a number of DeFi protocols, as well. Again, you know, a lot of the yield farming and what we’ve seen recently is a it’s a reward mechanic. However, it’s a short term reward mechanic where your distribution distributing your silverware. For a more sustainable reward reward mechanic, we can borrow from what’s been developed over the last 20 or 30 years and with with bows on protocol, enable that in a crypto native way. So that would be our initial launch market, which is which is crypto and the Then we would move to more mainstream across a raft of different industries from, from gaming to standard credit cards, and also just enabling marketplaces and and enabling as as a substrate for, for commerce itself in a quite a generic format. Yeah, I
Jamie Burke 30:23
mean, I think the idea of both NF T’s as useful to close the loyalty loop in the context of DeFi, as it stands this kind of highly promiscuous environment of yield hunting, and also NF T’s as far as a digital loyalty for existing e commerce and stuff like that. So I think it’s interesting to look at it from both angles. But if we zoom out, why is d commerce important? I mean, I hate Amazon, yet. I use it probably more than any other. Any other merchant supermarket website, you know, combined?
Justin Banon 31:06
Well, I, we don’t want to live in a world where commerce and data are captured and owned by monopolies. I mean, what, I’m exactly the same as you. Amazon is, you know, like a utility for me. But But what happens if Titans like Amazon continue to tighten their stranglehold on the supply chain and the market, they will end up controlling the market and supply chain and us and bosun is about laying down the infrastructure to enable a new type of economy. So to do enable applications to be built, where people are not separated from their data and the value that it creates. And so instead, you know, having having an economy where value is fairly distributed amongst stakeholders. And so that’s the infrastructure that we’re building with both on protocol.
Jamie Burke 32:03
Yes, I mean, I’m super excited about both sides. I’ve watched your development over the last 18 months or so. And, you know, I think the timing of this is very relevant now, if NF T’s are looking to kind of cross over, but also, as I said, to address some fundamental design problems that we see in DeFi today, so good luck with everything, Justin, it’s been great having you on, looking forward to seeing how you progress from here.
Justin Banon 32:35
Thanks, Jeremy. Thanks for having me on the show. And thanks for your continued support for Bose on and the whole industry.
Jamie Burke 32:43
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