Global Fintech Interview with Douglas Horn, Chief Architect of the Telos Blockchain

In 2025, fintech will see the move to general acceptance blockchain technology fully underway and over half of individual investors will have some portion of their funds allocated to crypto investments predicts Douglas Horn, Chief Architect of the Telos Blockchain in this interview. Catch the complete QnA. 

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We’d love to hear a little about your journey Douglas…and the story behind Telos blockchain

I’ve been in the blockchain industry for several years and launched my company, GoodBlock in 2015. Prior to that I was working as a creative in the film and television, and game development industries and often worked for local Seattle companies including Microsoft and Amazon in creative capacities. GoodBlock was one of the companies working on the EOS Mainnet Launch Group for several months up to the launch, but I had growing concerns about the tokenomics, incentive alignments and missing governance features that had been promised along with a few other EOS shortcomings, so I documented those and shared them with like-minded folks in the early EOS community and out of that emerged the Telos blockchain. The GoodBlock team built numerous features that went into Telos such as the governance system. We are also preparing to release our decentralized cloud storage offering, dStor which will be another foundational technology of the decentralized internet.

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What are some of the recent / upcoming innovations planned for Telos public blockchain?

Telos recently completed a number of major technological innovations including the Telos Decide governance engine, Sentiment Tokens for decentralized ratings and reputation, Telos Amend, a voting-based document amendment system, and emulators for the Ethereum and Steem/Hive blockchains, NFT technologies, and DeFi tools like no-counterparty token swaps, staking pools and multi-DEX common liquidity pools through Evolution DEX. While these are technically complete, the interfaces have a way to go before they are where we think mass audiences will respond to them. So the next several months ahead for the Telos Core Developers will revolve around improving the user experience for these tools and making them easier and more attractive to engage with. Already we are moving towards what I think of as the Dapp 2.0 structure where users have no need to think about using a blockchain. We are moving past the old wallet paradigm to where signing into a service is not appreciably different than logging in with Google or Facebook. In fact, we have a Login with Telos service that will allow authorization of other apps like this to create really convenient single sign-ons across the internet.

Of course, DeFi and NFTs are extremely hot right now and we are bringing out a number of offerings in conjunction with various developers. So I think you’ll see the whole suite of DeFi tools from various providers soon along with a variety of stablecoins in various world currencies and synthetics. Many of our DeFi tools closely approximate those that are popping on Ethereum now, but we also have some unique innovations that we expect will be copied elsewhere. NFT marketplaces will be popping up soon. The Telos EVM (Ethereum Virtual Machine) is the first implementation of this emulator that lets any Ethereum Solidity smart contract run on Telos as-is without gas fees and at many times the present Ethereum speed and capacity. Telos EVM will be an option on Metamask soon and it will no doubt become a shard on Ethereum 2.0 whenever that is up and running. Similarly, we built our own set of smart contracts that can emulate the Steem or Hive blockchains and allow apps to migrate from those to Telos and allow them to fine-tune numerous parameters that they previously inherited from Steem architecture without the ability to modify. The APPICS social media app is the first to use this technology in their recently announced migration to Telos, but more are coming.

But our biggest and most distinguishing feature right now is governance through Telos Decide. While Telos has been a leader in the self-governance of the chain since launch, we recently made all of these voting, committee management and related dGov features extendable to any dapp or DAO on the Telos blockchain to use almost effortlessly. Governance of companies, governments and groups at all levels has been woefully needing a disruption that really never came over the past 150 years–honestly, we’re all still just passing around pieces of paper with a checkbox marked as if the computer, web and mobile revolutions never happened. COVID-19 only exacerbates this need as people cannot meet in large groups anymore. Telos Decide is the blockchain killer app that no one has recognized yet, but will once we make it just a little easier and more attractive to use.

How according to you will blockchain play a defining role in the future of fintech?

Simply, fintech is immensely competitive and entirely measured by increase in account value. This makes it subject to move rapidly to any innovation that can derive a better return. Blockchain-based fintech provides increases in speed, transparency and accessibility to trades. It disintermediates fintech, meaning fewer people looking for a piece of an investor’s returns. Even if we ignore the exotic and probably risky DeFi products people are going crazy over at the moment, just the reduction of execution costs on traditional financial instruments is going to increase investor returns in a way that traditional fintech won’t be able to keep pace with. Even small improvements in returns will drive every financial institution to keep up or lose all their customers because money has no loyalties.

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Given the ongoing pandemic; how have you seen changes in business needs and consumer behavior impact the need for new fintech innovations (what kind) – what are your thoughts on how this pandemic will impact fintech in the near future?

Most of the systemic changes I see are going to happen fast, but not immediately. Over the next nine months, what the COVID pandemic and resulting economic collapse is going to bring is largely going to be highly speculative. There will be a confluence of loose stimulus money looking for a home and concern about the level of money printing and sovereign debt, all while a lot of people face economic desperation from home with too much time on their hands and willing to make longshot bets on unvetted DeFi offerings. But these aren’t the big DeFi advances that I mean when I say that DeFi and fintech will sweep into the mainstream. My timeframe for that is over the next two to four years. It sounds like a long time in crypto timeframes but to the stolid financial sector, it’s a blink of an eye. Some financial innovators like Fidelity will open up trading by next spring and by the end of 2021 competitors will start to notice and release their own offerings. Like all of these advances, it’ll seem odd until it’s suddenly on everyone’s lips.

Fintech has evolved at a rapid pace over the last decade, there’ve been significant evolution and growth in digital assets, cryptocurrencies. What are some of your predictions for crypto in fintech and how will global markets keep the pace with the growing interest in crypto vis a vis their regulations…?

Tokenized assets and real estate will become the first really big markets going mainstream in part because economic problems and societal shifts are going to weigh heavily in that sector almost immediately. Think about New York City property–in a year it will have gone from the most rock-solid land anyone could own to a place where it no longer makes any sense for businesses to operate in. This has already started. On a different scale, look at all the malls and office space whose tenants are already three to six months in arrears on their rent–how are those commercial real estate companies going to stay afloat? Many won’t. A lot of property is going to change hands in a period when no traditional banks are making business loans anymore. So anyone without deep pockets is going to have to get creative about how to finance these firesale properties. Tokenized real estate is an obvious answer.

Highly speculative DeFi products will continue for some period of time as FOMO feeding frenzies. There’s two likely paths for these: In time most will wash out but a few stalwarts will emerge and become a basis of the high-velocity DeFi movement. Alternatively, there may be a massive collapse of these due to the high risk of financial contagion throughout the systems. A lot of crypto folks have used the fractional reserve system as the symbol of traditional banking’s ills, and yet they plow money into complex knots of DeFi offerings where staking, lending and speculating keep twisting back on each other while unaudited code presents unknown risks for anonymous system manipulation.

While the flashy DeFi products will get the spotlight, many blockchain businesses will be quietly moving forward with real deployments of real business solutions that will lift the prestige of serious blockchain efforts because businesses will finally have some actual wins to point to. This is likely to lift the utility tokens for some time because these assets stop looking like totally speculative tokens and look more like shares in cutting edge tech companies. A big difference between now and 2017 is that now there are a handful of blockchains like Telos that can handle the complexity of transactions at sub-second times and with nearly unlimited capacity and no gas fees. Fintech and other tools on these platforms will be able to match the demands that real solutions place on them in a way that nothing in 2017 could hope to.

What are some of the near-futures innovations you foresee transforming how digital asset management platforms will be planned and built over the next few years?

The biggest innovations near-term are likely to be in improving the UX to make these accessible to a broad base of users who have stayed away from blockchain and crypto so far out of the complexity and fear of losing, and even using, cryptographic keys. That is going to get a lot simpler as Dapp 2.0-type applications take the main stage.

I am hopeful to see many new cryptocurrency futures and options that are settled in the currency rather than in USD–a practice that’s basically a bucket market that can manipulate and be manipulated by real crypto markets.

DEXs that use common liquidity pools are going to be a big step because they make much larger pools that are therefore more efficient, harder to manipulate and have no need for separate arbitrage. EvolutionDEX on Telos and EOS is an example I’m excited about.

Wrapped tokens are going to be huge because they are both a DeFi product and a second layer for slower but higher value coins like Bitcoin and Ethereum. These are already available on high capacity chains like Telos meaning that not only can wrapped BTC be used for DeFi purposes, but by the many dapps on these platforms as well.

There will be ample oracles running on dedicated chains like Chainlink, but also as services on almost every high performance chain. Decentralization of oracles is probably going to continue to be a problem for each individual system but the high number of available oracles will make it possible to achieve acceptable decentralization by accessing several different oracle offerings and rejecting anomalous data and averaging the rest.

Together, these three advances–common liquidity pools across multiple DEXs, wrapped tokens moved to faster chains, and a wide range of price oracles–are going to create highly efficient decentralized swap exchanges with or without counterparties that operate across many blockchain platforms. Maybe few of the pieces alone will be as secure and trustworthy as one would hope but together they can create acceptable levels of risk.

Given the overview of what fintech looks like today in 2020 and this evolving space: how would you describe this market in the next five years, fintech 2025?

Professional investors will have taken advantage of the DeFi tools of the day to maximize returns and hedge other investments. The first big-exchange corporations will be shifting from stocks to tokens. For new businesses, the shift will already have happened where the thought of launching an expensive and inefficient old-school IPO will seem laughable. Today’s currency and commodity markets will have blockchain-based counterparts that will be steadily gaining market share due to lower costs and greater variety of products available for programmatic trading. Every major currency will have a central bank digital currency in circulation and the US Dollar will have lost its hegemony as a global settlement currency. You will see large transactions settle in Renminbi, Bitcoin, Euro, Yen and synthetic stablecoins derived from baskets of these currencies in the way that Libra had hoped to.

Consumer and business banks will be struggling to hold on to their last customers because most of them will have fled to self-managed cryptocurrency offerings. The speed of the transition will have taken almost every one of them by complete surprise and their stock prices will collapse. The variety of blockchain-based personal finance and payment offerings will be broad and smart aggregators will have combined them into interfaces that are easier for users to deal with than online banking is today. The only reason people have bank accounts today is that there’s no alternative. There is absolutely no customer loyalty in that business and there will be even less if the banks follow the same playbook they did in 2008 of taking bailout money and withholding it from businesses in need. In five years when there are new options, banks will be going down the tube or else actively reinventing themselves. A small number of banks may actually be those that have pioneered those aggregated service interfaces. Most will be scrambling though.

Before we wrap up, would you like to share a few last minute business tips?

Selling and marketing in the time of COVID-19 is going to be tricky for those who try to stay with their pre-pandemic business plans. There is a massive shift going on and I would suggest that every business around be prepared to pivot to the new normal however they can. Whole new niches will open up and be quite profitable, but they will go to the early birds who adjust their old reality to this new one. Whatever happens with COVID-19, I think the world and US economies have already passed tipping points that are going to make the V-shaped rebounds look more like an L.

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