Moritz Strube interviews Dominik Schiener.
Dominik Schiener is co-founder of IOTA, a Berlin startup, which has developed a blockchain-like solution for the M2M payment for services with Micropayments in the Internet of Things. In the interview, the 21-year-old, who has earned his money with the computer for 7 years, tells about his previous activities, his current startup and his plans.
Can you tell us something about your background? What have you done so far?
Originally, I come from a small village in South Tyrol with 800 inhabitants. I was very interested in computers and the Internet very early on and I also occupied myself with business. At 14, I began to “hack” computer games and sold these modifications and achieved a fairly adequate income for my age and effort. With the money I then tried to build an advertising platform.At the beginning of 2012, at the age of 16, I learned more about Bitcoin through a friend and finally focused on it at full time – next to the school course.
Dominik Schiener (Source: Dominik Schiener)
Through the advertising platform, I had a partnership with Amazon Web Services (AWS), which gave me $ 15,000 in credits. This money on AWS I then used to run GPU Mining, which was quite profitable and enabled me to start my first startup in Zug in Switzerland. With additional capital from investors, I wanted to build up one of the first “Fiat Exchanges”, ie an online exchange for the exchange of euros and dollars in cryptic currency. However, when this company failed in Switzerland in the “Crypto Valley”, I initially switched to “research” (eg Identity , voting , new governance models , DCO’s on the blockchain) and CargoChain (trade finance on the blockchain) But then ultimately full-time with IOTA .
You’re early, both in terms of time as well as your age in the subject Bitcoin and Blockchain. What fascinates you about the subject?
I have always been fascinated by new technologies and curious to try something new. With Bitcoin it was a mix of fascination, entrepreneurial interest, but also real personal benefits.
Because at that time – I think I was 15 or 16 – I received regular money and my web developers had to pay, I saw the real limitations of paypal and wire transfers. Apart from the fact that I was still too young to open my personal Paypal account, it was obvious to me that Paypal & Co. often hinder innovation and young entrepreneurs.
With Bitcoin and Altcoins I was able for the first time to easily pay people from all over the world. This concept of “leaveless innovation” ultimately convinced me of blockchain and decentralized technologies, especially because precisely this concept of innovation without barriers had made my entrepreneurial career possible.
You founded your first company in Switzerland, your next one in London. Why?
In mid-2013, I wanted to develop a Fiat trading platform because I saw the potential and thought it would be a good start. But I realized very early on that it is difficult to solve problems. By 2015 “blockchain” was still not an issue with the banks, which meant that it was almost impossible to open a bank account for a “bitcoin company”. In addition, the legal and regulatory issues had not yet been answered, which further increased the uncertainty and difficulty. Is what I do illegal? I do not know …
Because I knew Charles Hoskinson (ex-Ethereum) and Johann Gevers (Monetas), I was convinced by the two of them to come to Switzerland to join the “Crypto Valley”. At that time Charles Hoskinson was still the CEO of Ethereum, Vitalik was CTO – long story. That is why I decided in early 2014 for Switzerland, registered the company and rented an apartment in Zug to join the Crypto Valley as one of the first companies. Subsequently, I am regularly suspended between Switzerland and South Tyrol. Because of my parents I unfortunately had to finish my degree – another long story.
Although I had hoped to solve the legal, regulatory and banking problems in Switzerland, the initiative ultimately failed. On the one hand, we were not able to build the “Self Regulating Organization” in Switzerland, and on the other hand the costs in Switzerland were simply too high for me – compared to Ethereum I had no $ 17 million;)
The company in the UK I had then registered to work with a bank from Liechtenstein. At first, I even flew to the Isle of Man to meet with some banks there. The government spoke at that time of a “bitcoin license” for companies, but the banks were not really convinced. Through an acquaintance I was then able to open a bank account in Liechtenstein.
In the end it was “too little, too late”. Through the Bitcoin and Altcoin crash I had lost a lot of my money. To be honest, I had no desire to continue a Fiat Exchange.
You won several competitions. Do you tell us more about this?
At the beginning of 2016 I won the biggest blockchain-hackathon in the world. The Hackathon was organized by Deloitte and Wanxiang and had a total of $ 100k. Wanxiang has flown me at the time and paid for the accommodation and everything, my partner for the Hackathon I then found through Reddit – the power of the Internet.
What I then actually developed was ” CargoChain “, an Ethereum-based trade finance platform to automate “Bill of Lading” and “Letter of Credit”. In a further development I then added RFID for automated container management at the ports.
With a similar concept, I became second at the GTEC (German Tech Entrepreneurship Center) Blockchain Contest in Berlin and I won the Technology Challenge at the Emirates National Bank of Dubai (ENBD) in London.
Although the concept of CargoChain was very good, I realized that as a startup in Trade Finance Space, it is difficult to achieve anything. All the VCs that contacted me, I finally rejected, because it did not make sense for me to carry the project commercially. However, I am still very interested in implementing this “chain of custody” in the supply chain through IoT and Distributed Ledgers. With IOTA, we are already working on a proof of concept.
Why did you go to Berlin? Did Berlin meet your expectations?
The mountains in South Tyrol were too boring for me;) Fun aside, it is pointless to start a blockchain company in South Tyrol. Berlin, especially because of the whole ecosystem which is here, simply offers much more possibilities to increase your chances of success as startup. I am always here all day in front of the computer, but for meetings with companies, Berlin is fantastic, especially because many innovation labs are here.
After more than 8 months I still have not seen the Brandenburg Gate or anything else but the Alexanderplatz, but I find Berlin really great. Especially because I do not need to travel 4 hours by bus to the airport 🙂
You have co-founded IOTA. What makes IOTA, who are the founders and what does IOTA achieve?
IOTA comes from a hardware startup, which focuses on a new microprocessor for IoT. Because all the founders of IOTA (David Sønstebø, Sergey Ivancheglo, Sergei Popov and I) have been in blockchain space since 2010 – 2012, the real limitations of blockchain technology became clear at an early stage. To enable real machine-to-machine payments, we have developed a new architecture, which is no longer based on a blockchain, but on a DAG (Directed Acyclic Graph) .
The IOTA-Tangle (source: IOTA)
By this invention – the Tangle – IOTA solves the problems that conventional blockchains have, and thereby makes it possible to implement new use cases. IOTA is the first public “blockchain” which is scalable, has no transaction fees, is protected from quantum computers (we do not use elliptic curve cryptography), and also allows offline transactions (partitioning). This makes IOTA perfectly suited to enable micropayments for millions of devices in asynchronous IoT networks. In addition, IOTA can also encrypt data encrypted or secure and we are in the process of developing further modules.
Our vision of IOTA is to build up a real “machine economy”, in which machines buy and sell data, resources and services. Specifically Computation, Storage, Bandwidth and Power will be available on-demand. This means that you have to pay per resource unit, even the smallest amounts with micro-payments .
What are the challenges for the payment of M2M services? How does IOTA address these challenges?
The biggest challenge is to enable interoperability so that there are no “clusters” and can actually pay for all machines. For this reason, we have not patented the Tangle, but developed everything as open source software. We are in the process of registering the IOTA Foundation here in Germany, which, like the Linux Foundation, will look after the further development of the protocol and its standardization together with industry stakeholders.
Another challenge, of course, is how to join the transaction network. To do this, you first have to purchase IOTA tokens. This means that you have to find an efficient way to convert traditional currencies such as euros, dollars, etc. into tokens. This constant exchange is, of course, very important for on- and off-boarding, since you do not want to keep your customers and machines constantly exposed to the volatility of the market. To enable this, we have already developed several concrete concepts. My experience with Fiat-Exchanges, of course, helps to develop something like that.
Why a new currency? Can not pay with Bitcoin or Ether? Will Lightning or Raiden not provide the necessary transaction speed?
Short version: ” I’m looking forward to paying $ 20 to $ 200 payment channel for my $ 4 coffee. “.
Long version: On-Chain Off-chain scaling is, of course, a very controversial issue. In IoT and in a real machine economy, the machines must be able to buy or sell even the smallest units of a resource. When you use a network with transaction costs, you have a real problem to determine the price of the resources. If you do not know beforehand how much you ultimately get after deduction of the transaction costs, you can not determine whether the business is worthwhile at all.
Payment Channels increase the complexity of the development of IoT applications due to routing or transaction costs. In addition, payment channels have not yet been given – there are still many problems to solve, especially when routing.
M2M payment with IOTA example, presented at the Mobile World Congress (Source: IOTA)
What potential users have you spoken to so far? How was the response? Especially for industrial customers active in IoT?
Although IOTA is also very suitable for Remittances and Web-Payments, we are currently focusing mainly on IoT and Industry 4.0 companies. Here we have several partnerships, eg with Innogy and Ubuntu ( first and second blog post).With Ubuntu, we were also together at the Mobile World Congress. We still have several projects with companies, which we will publish in the coming weeks.
In general, the response is very good, especially because many companies have already developed prototypes with Ethereum or Bitcoin and had to realize that Blockchain still has many problems. We are actually very pragmatic and “hypen” not – which can sometimes have disadvantages. Our goal, however, is to realize the first real production-ready applications.
What do you advise German start-ups and companies that plan the development of blockchain applications?
You should not follow the hype and develop a complete understanding of the technology, the business and the problems. Although many blockchain applications make sense at first sight, reality often looks different. In many cases attempts are being made to solve problems which are not real problems in business and society.
In the case of blockchain applications, it is about saving costs, creating new sales flows or creating transparency.Many companies place “blockchain” at the core of their business model and hope that this will bring customers. Until now, there is still no company or startup in my opinion (happy to be proven wrong) that successfully sells its block-based product as SaaS (software-as-a-service) or license-based. The only ones who are making money at the moment are the consultants. Therefore, one must understand the market and the problems to develop a product for which people will pay money. Integrating blockchain is not enough.
What are you planning next?
My main focus is IOTA and the IOTA Foundation. Building an entire ecosystem is no small matter. Our planned projects and partnerships with companies, start-ups and universities are geared to establishing exactly such an ecosystem.
In addition to IOTA, we also have several DLT projects (Distributed Ledger Technology), which are sponsored and developed by the IOTA Foundation. To this end, we will publish more information in the coming months.
Is there anything else you want to tell the readers?
In this blockchain space, no one knows what they really do. Although there are always announcements of new consortia, partnerships and investments from large companies, this does not mean that real problems are solved. At the moment, it is still too early to say which projects will be successful and which will not. Every project – be it Bitcoin, Ethereum or IOTA – is still in the stage of the Proof of Concept. Often, the core developers do not understand themselves, what is the real benefit of their blockchain, see Bitcoin, 21 Inc, etc.
My general tip is: the problems and the technology must be fully understood before making any final decisions. You have to be open, try new things and experiment with different solutions. On the one hand, in order to gain experience, and on the other hand to have comparisons on the basis of which the decisions can be made.