3rd July 2019, London – Kharkiv – Mumbai
Today we are publishing an interesting interview call we’ve had with Pavel Kravchenko, CEO at TokenD and Distributed Labs. Dappros team conducts a series of interviews, product comparisons and analytical pieces. An important aspect to our research and publications on this topic is that we are pursuing practical and no-nonsense approach, basically trying to dig deeper into products, solutions and approaches, asking questions that interest software developers and businesses who are looking to apply blockchain, distributed ledger technology and decentralized finance in their work. As we are working on numerous blockchain-powered or blockchain aware software projects and we run our own blockchain-as-a-service infrastructure, we’re always eager to learn the nitty gritty helping us make right choices on which product to use or integrate with in each particular use case. Without further ado please find below the video recording (including the screenshare) and the text transcript of the interview. We thank Pavel for his time and invite you to stay tuned for further unique interviews and pieces from the creators of most prominent blockchain, DLT and DeFi technologies.
Taras Filatov: Okay. We can start. Pavel has joined actually, so I guess we could start. So, Pavel is founder and CEO of TokenD, which is a security token and asset tokenization platform. And he can obviously do a quick introduction. I think Pavel has like half an hour. So, we’ll do as a quick Q&A call. Pavel, you know myself, I’m joining from UK and Nikhil is joining from our team in India, in Mumbai also brings in some questions from our tech team and basically the main purpose of this call is to ask some questions so we understand TokenD better. We’ll also share, we’ll publish this online so maybe other developers, system integrators understand your platform better. We are recording this and will share the video and text transcript with you afterwards so you can have a chance to review it before it’s published. Other than that, we can go ahead with questions and answers, but if you want to say something as a quick intro or if I name the platform incorrectly, please go ahead.
Pavel Kravchenko: Okay. No, you named it correctly. So, a short intro from my side, I am a cryptographer, I have a PhD degree in this field. I used to work as a developer C++, Objective C, Java, in 2014 I went to Silicon Valley and joined the Stellar team. I worked there for a few months and I have worked in Singapore also on crypto project in the same year in 2014 together with my partners, I’ve built Distributed Lab, now we are a product company. So, we’ve been working on FinTech projects for four and a half years. And after a while we have formed vision for a product. Basically, it’s like WordPress for tokenization and we started to sell only product and then we formed a network of partners who can do customization of this. So, our core mission is to build financial internet. So, we envision this as a situation when all accounting systems use uniform protocols to communicate with each other and was like, wallets and the work will be much simpler than it’s now. So that’s what we try to do. And for that we have to come up with open source standards for protocols for accounting system in general, it’s not just in blockchain, it’s all about the decentralization. It’s about how do accounting systems talk to each other. So, we already published our draft of standards. The TokenD product is like a reference implementation of the standards and it allows to launch an accounting system that uses these principles much faster.
Taras Filatov: Okay, fantastic. Thanks. Thanks very much for the intro. That’s great. So I think you mentioned 2014 or 2015. Is it where the services business has started or when did you do start the product development?
Pavel Kravchenko: We, well, we started the company from 2014 and the vision for product was formed in 2015 and then we started to assemble some modules, so the first version of the product which appeared in 2016 and the second version in 2017, now we’ve released the public version of the product.
Taras Filatov: And I know you are shipping very actively so; you are now releasing some things. I saw your updates on the website and on GitHub. So where would you say the product is currently? So, because you’ve had different versions before but now it’s more open or ready for developers, right?
Pavel Kravchenko: Yeah, so now the core is still not open source for variety of reasons but all the front-end and SDK, mobile apps are all open source but eventually everything will be open source, so we will follow Hyperledger approach.
Nikhil Bankar: And how big is your team is and where are you guys located?
Pavel Kravchenko: We are located in Ukraine, in Kharkiv. The team is approximately 40 people.
Nikhil Bankar: Okay.
Pavel Kravchenko: So, they are mostly developers, and then we have a research team as well that does research of all the modern protocols and techniques. We’ve been very active in the educational space. So, we conducted 14 courses and then in universities have free courses, then we do an online course. It’s only in Russian though and it’s available on YouTube. And then we made a book and this book is available on Amazon and the second volume is coming. And every day we are working on research according to our priorities.
Taras Filatov: Mhmm, and can you share.. obviously you don’t have to answer, if you cannot but, it would be useful, to understand. So, anybody who uses your platform, are you guys like, well off commercially, are you self-funded? Are you profitable? Are you going to stay in the market for many years to come? So, it’s reliable kind of to use your platform and how are you doing generally as a company?
Pavel Kravchenko: So we started this as consultancy and R&D company and our most of our profit was from the development services. Then we built the first product that’s commercially like in positives, cash positive. It’s a Bitcoin Wallet with a built-in exchange where we connect via API. And in 2017 when we launched our second version of TokenD, our business model was selling the license, a perpetual license for the software plus doing customizations of it.
So, our average price was $100,000 per license, at that time we provided the code base with it. And this year, like end of last year / this year, we have two models. One of them is a monthly license. So where the customer will pay 1,000 euro per month or a full lifetime license, 50,000 euro one payment. So, this is our business model. So, we don’t do customizations on top. That’s like our partners are doing customization. They are better than us in this, we believe.
So for now, last year we’ve received investment from Israeli multi-billionaire, so he’s backing us and we’ll have another round this year. So, currently we have revenues but we’re using investment money to grow.
So regarding the stability, we use the code base of Stellar for the transactional data structure and consensus. Then we have all layer which was optimized for our cases plus modules. Our code base is in escrow. So, if something happens to us the code base is available. And as I said in eventually, we will be open source, we believe that’s the only path that can be possible. So our goal, and again, we are open sourcing all our architectural decisions and protocols. I can show it while screen sharing as well. So, like every design decision will be documented..
Taras Filatov: Yes, please feel free to screen share.
Pavel Kravchenko: Yeah, give me one second then.
Taras Filatov: So basically, you’re saying that it’s not a SaaS or cloud model, you’re offering your code to be deployed by developers or businesses, in their data center, in their own cloud, so it doesn’t depend on you, right?
Pavel Kravchenko: Yeah, yeah. We don’t interfere with the solution that we deployed for customer and actually deployment scripts are also available.
Taras Filatov: You mentioned that the core is still, it’s not open source, so would it.., would it be called.., would it be something working from your central server or the core is given as a binary to the developers?
Pavel Kravchenko: It’s like a library so it works on the server of a client.
Taras Filatov: Okay.
Pavel Kravchenko: Do you see my screen?
Taras Filatov: Yeah. All right.
Nikhil Bankar: Yeah, we can.
Pavel Kravchenko: So, this is for example, like a draft of the standard of payment system integrations. So, every crypto, like, it’s kind of blockchain based system, has to be integrated with external payment methods, whether it’s crypto payments or cryptocurrencies or fiat. So, here we describe like how do we handle this task, it’s not always trivial thing and developers try to reinvent the wheel all the time. So, we kind of standardized our approach to this. So, how do we do with deposits, withdrawals, two-factor, how admins should confirm or reject this, like operations and so on. So, this is what, how we described. So, all these documentation is on TokenD website. Plus like this for example, this document doesn’t really mention TokenD, it’s just like a generic thing except the logo on there, on the right upper side. But this is like architectural decisions. So, if you are like, house architects, it’s how do you put doors and windows and in other every single bits, properly.
Nikhil Bankar: Okay, well. Do you have any documentation that where a developer would start?
Pavel Kravchenko: Yes, indeed. So, let me show. So, sure. So, you see the reference documentation for TokenD now. We have a release every two weeks. So, we have release notes so here would describe like architecture, describe how do you.., environment you need, key concepts, et cetera. And then, for example, if you go to release notes, so for example, we had a feature, bug fixes, new requests and so on.
Taras Filatov: So, can you show you there was this part with pricing, was it your current pricing likes thousand euros or something per month. Per admin. Alright. Yup.
Pavel Kravchenko: We have a free developer edition as well.
Taras Filatov: Okay. So, the pricing, you have the free option and then for business administrators. So, what does it mean the ‘business administrator’?
Pavel Kravchenko: It’s like an admin of the system. So, customer needs to.., like you have person that manages KYC; that would be one admin, separate person manages limits another admin and so on.
Taras Filatov: So basically, depending on the size of the business, right?
Pavel Kravchenko: Yeah. Yeah. So, every middle size business needs like up to 20 administrators.
Taras Filatov: What would it be the limit for the free version? So, where would the, I don’t know, ‘choke points’ be?
Pavel Kravchenko: Free version lets you do whatever you want for a month, then you can re-install the system; basically drop the database and start from clean. So for demo purposes it is perfectly fine but for production obviously it’s not, but for partners we can provide the license to show a demo to customers so you don’t need to re-install anything.
Taras Filatov: Okay. Understood.
Pavel Kravchenko: So the price is pretty competitive. So 1,000 euros per month is less than, you know, a DevOps that will support the system and we provide some kind of support by email and we have a support desk where we answer questions and report bug fixes that constantly works. And then as you saw, we have like this bug fixes and improvements published in release notes.
Taras Filatov: So, the process of getting your platform for someone to play with, would it be to download the repository or get it from GitHub or something and launch it on their server, right?
Pavel Kravchenko: Yup.
Taras Filatov: Okay. And the, so just to go ahead with the questions. I’m conscious we are limited with time. So, what would be the typical customers or verticals that would benefit most from using TokenD?
Pavel Kravchenko: So, it would be a company that does not just want to sell tokens, it’s kind of dumb thing, just to sell tokens. If the company that wants to build its own digital infrastructure. So, imagine if company is doing something in a warehouse management and they need to update their warehouse receipt system. So, instead of using paper or outdated databases, which is inconvenient to create secondary market, they can take TokenD, customize it and build their own digital solution with mobile wallets, with web, you know, panels with admins with flexible role management with KYC. So they just receive much more functionality out of the box. So, as I said in the beginning, it’s like a WordPress, but for tokenization. And tokenization, in this case it’s just digitization of certain assets. When ledgers became fully digital and all accounts are managed by cryptographic keys.
Taras Filatov: Okay.
Pavel Kravchenko: So, I will show one picture that would be helpful maybe to explain a little bit. Yeah, do you see my screen?
Taras Filatov: Yeah. And I saw you are a fan of Game of Thrones.
Pavel Kravchenko: (laughs) Yeah, I’m not, just the poster.
Taras Filatov: Haha so yeah, this is, okay..
Pavel Kravchenko: So, this is one pager describes which modules do we have and how do we provide it among certain use cases. So, our customers, somebody who wants to launch, it could be STO platform, launch a crowd funding platform, or a real estate tokenization or like intellectual property marketplace, et cetera. So, it has a ledger exchange, payment system, wallets, all kinds of management of identities and assets inside.
Taras Filatov: It’s a great analogy, WordPress for tokenization. At least we understand that because Nikhil and I had to deal with installing, setting up websites and web systems on WordPress. I’m not sure if the whole world understands it, but it’s a great analogy.
Pavel Kravchenko: Okay, I hope so.
Taras Filatov: Yes. Sorry, go ahead.
Pavel Kravchenko: One more thing. I will show you how we approach particular use cases. So, obviously for some people are quite hard to get the idea of a framework which can be used to build quite a lot of things. I would say that 50% of enterprise blockchain application would be applicable for TokenD but not the other half. But, anyway, there are many use cases. So, we create kind of solution briefs for many cases and sometimes we even create specific demos. So, this one is for a tokenization of real estate; it describes our vision of the architecture and the workflow and describes the user stories and roles and how we see the system should function. And we’ve built a particular demo, like a simple one for investment and bonds and revenue streams for loans so it can be launched as a PoC to test the idea in a particular market. So, then we have a codebase also available on GitHub; it’s like a plug in to TokenD so it turns TokenD into this real estate thing and all our partners can do the same. They can create these plugins. It takes like 40-80 hours of work to customize these front ends and just turn it into a particular thing.
Nikhik Bankar: Okay.
Pavel Kravchenko: So, we have distributed this publicly as well. I hope it simplified our job.
Nikhik Bankar: Yeah, and may I know how do you market your platform? So, are you targeting the global market or a set of specific people?
Pavel Kravchenko: Um, it’s a global market, so currently marketed through my connections, I have many, uh, plus we have partners who want to address particular niche. And obviously they want to earn money faster, which means they have to talk with the customer when they have something tangible already. So, if customer comes and the customer wants the real estate and the partner already knows that this solution exists in these functionalities are there and knows how it works, then it will be much easier to on-board this customer and to sell them development services and so on.
Nikhil Bankar: Okay, and according to you, which industry is moving faster towards the tokenization?
Pavel Kravchenko: it seems that real estate is, but I have many requests for fine art tokenization. Mmm.. I would say that stable coins are quite hot, but people don’t really understand what to do with them because it can’t possibly have all the stable coins, you know, and sometimes it’s not really convenient to use all of them. Um, but I would say the assets that are the most hard to work with; they will be tokenized first. So, the industries where paper based technologies is still there; so, there will be, you’ll will see unicorns that they’ll set trends in how assets should be managed.
So, as soon as somebody big will launch a tokenized real estate platform, someone reputable, then others will follow. Because, for example, for real estate, I’ve heard many companies launched the tokenization of some development projects, houses, but then they put some, you know, garbage on this platform, some house and/or office center that nobody needs, right, it’s in the middle of nowhere, there was no point to tokenize it.
So, you need to tokenize like a hot portfolio where secondary market will be really big, so that we should start from that. And for example, maybe you’ve heard the biggest developer in United Arab Emirates in Dubai, the Emaar wants to tokenize its portfolio, plus provide loyalty services based on blockchain. So, it’s coming. It might not be tomorrow but it’s definitely coming. So, we understand that our platform is kind of for the future a little bit. So, people are still like thinking about just selling tokens and that’s it. But it’s much more than that. It’s about digital transformation of all business processes where they all become transparent, they all become auditable, they become, they’re managed in a way that supports non-reputation and so on. So, cryptography will be used everywhere.
Taras Filatov: Sounds good and real estate is a huge topic obviously, grants for potentially another call because here we’re doing some projects in this space as well. And it also depends on local regulations, and you’re 100% right when it’s more difficult or challenging then it makes sense to use platforms and there is more business there. But uh, as, we’re running out of time, I just ask this one important question. So how, how do you handle the question obviously because you are based.., I think you are not Ethereum based, the platform of TokenD, so in which scenarios or use cases, we as developers, as integrators would be in better position to recommend your platform, in which cases it would work better to work with other platforms? So, for example, some customers might be happy with the private blockchain running on premises or in the data cloud and it might be even better for them, like banking, I don’t know, some asset tokenization between partners. They don’t, they never plan to go public. Some customers might be interested to list their, like you mentioned real estate, list their real estate tokens on the public exchanges in the Ethereum, right? So, in which case.., do you have any comments on this?
Pavel Kravchenko: I would say that.. my opinion, my personal opinion that traditional assets should not be sold to crypto investors because the crypto investor group is a very narrow and strange group of people. I would say that if somebody wants to get value from tokenization, they have to market it among their own existing customers. So, if a real estate investment trust has 10,000 customers, one day they can send an email that says, oh, now you can manage your portfolios online. Just download the app. You’re already a customer, login and password is the same or whatever and now you can manage your portfolio from mobile phone plus you can enjoy a secondary market and less / lower fees and that’s it. And they will start training so we just need to provide them with simple tools. And then, if it works, then the second real estate investment trust will do the same. And at some point, they will form a partnership and their users will be able to access opportunities for each other. And the second and market will become bigger and bigger and bigger. So, it’ll be like a consortium. So, I believe you don’t need to go to and sell to crypto investors that nobody knows who are they and they, they got used to completely different risk profiles. Real estate is not that, you know, not that good in this, it’s just completely different. So, assets that are tokenized should be first accessible by existing users. So, it’s like saying, oh, you’ve been using paper for years, now it’s fully digital, now here’s a mobile app. I don’t think we would even need to use the word “token” or “blockchain”.
Nikhil Bankar: Okay.
Pavel Kravchenko: It’s a technology underneath that provides you with transparency and trust in the digital world.
Nikhil Bankar: But is it possible to connect or sync TokenD with the public Ethereum, or would you say it’s not relevant to your typical use cases?
Pavel Kravchenko: Yeah, it is possible. So just, uh, we, when we’ve done this job a few times, so one example is Swarm which we’ve built a while ago, on one of the previous versions of TokenD, but again, yes. So, it can be done. In this case, the tokenized assets will be frozen in this private blockchain and issued in public blockchain and vice versa. But as I said, most of our customers that we envision, they would not need that. They will either have their own exchanges ecosystems or they will be connected to another regulated exchanges. Although I see that some crypto changes will become ‘normal’ exchanges then if they have enough traction among users.
Taras Filatov: Great, thanks very much, Pavel. Do you have any more time or shall we finalize now?
Pavel Kravchenko: Uhm.. honestly, I don’t.
Taras Filatov: Okay. Well then in that case, I think we should do another one or maybe we’ll send some follow-up questions, but it’s a great first call so we understand more about TokenD and we can share this with the others. Thank you very much for your time and yeah, good luck with building up the platform!
Pavel Kravchenko: Thank you.
Nikhil Bankar: Thank you
Pavel Kravchenko: Good day.