Tai Zen: We also have a special guest with us right now too. We also have the Crypto Edutainment channel with us.
Let’s go ahead and get started. What’s up, guys. This is Tai Zen. Today I have LeonFu.com with me.
Leon Fu: Hello. It’s a video on this Labor Day. Why are we working this weekend?
Tai Zen: This is fun. This is going to the moon. Are you in North Austin right now?
Leon Fu: Still in North Austin.
Tai Zen: I’m broadcasting from North Dallas right now.
Many of you know that when we first started this channel back in 2013, we talked about a lot of different ICO.
In this year, we’ve been really busy trading and taking profits, so we don’t have that a lot of time to talk about a lot of new ICO is that’s coming out.
However, there are so many of it recently. We get flooded with like over a dozen ICO every day contacting us to talk about them.
It takes a lot of effort for us to talk about an ICO now because it’s so difficult to tell which ones are bullshit and which ones are not bullshit.
Leon Fu: There’s simply too many of them, right.
Tai Zen: We put a FAQ on our channel Cryptocurrency.market so that if somebody is serious, they’ll go there and look at the FAQ number three and looked at our ICO guidelines.
If they respond to it in that manner, we’ll consider looking at it. If not, we just don’t even bother with it because it just lets us know that they’re not that serious.
Today, we’re talking about a new project called Rivetz. Before we talk about it, we got to go through all the disclaimers and disclosures.
It’s always safe to assume that either I, Leon, both of us or someone on our team are investing in the ICO that we discussed.
We are not going to waste time talking about a cryptocurrency without doing all the research.
Just be aware of that so that you guys don’t say we are talking about this because they paid us to talk about it. That’s not true.
We are in a good position to where we are financially independent, so we don’t need somebody else’s money in order to live or pay bills and stuff. Therefore, it gives us the ability to talk and be neutral about the projects that we talk about.
For example, we were offered everything by Dash community to come out to London to the Dash conference.
We chose not to accept Dash offer because we wanted to be able to interview them and say whatever we want without being censored by them or something like that.
All right. Let’s talk about how we found out about Rivetz because this was an interesting project.
Let me just talk about a few things that got our attention about this project before we dig into it.
First of all, most of the ICOs nowadays don’t have any work in software. It’s just so hard to talk about a project raising hundred million USD, which have nothing but a piece of paper that has a wishlist on there.
It’s been really difficult for me and Leon to talk about an ICO that has credibility or validity.
The reason we introduced this one is when Leon usually goes to the Bitcoin meetups in Austin, where he meets David Johnson, the chairman of Factom, then finds out about Rivetz from him.
We found out that they’d been working on software since 2014. The founder of Rivetz is Stephen Sprouse. He used to be the CEO of a publicly-traded company in America that was listed on the Nasdaq exchange.
That lets us know that this guy is going to understand securities laws and how the laws work in America. The fact that he’s running a public company for over a decade lets us know that he has an idea of how to do business in America.
Besides, the fact that a project has working software gets our attention really quickly. Now, we don’t have to figure out whether they are actually going to build the software with the money that they took from the investors because this Rivetz already has it.
Is there anything else you want to answer about how we’ve found out about Rivetz?
Leon Fu: David Johnson’s specialty is these kinds of base layer Particl type projects. Factom is one of these kinds of projects.
He was also involved in Mastercoin now known as Omni. Even though they rebranded themselves, they held an ICO back in 2012.
Many people were not happy with that, which is why counterparty exists today. That counterparty is basically a fork off of Mastercoin at the time.
Instead of doing the ICO, they simply burnt the Bitcoins. To this day, you can see how many bitcoins were burned to issue Mastercoints. Right.
That was something Johnson was also involved in. He continues to see Rivetz fits in that same category.
Leon Fu: This is going to be in the infrastructure type play. I would consider it the same as any kind of project where you build other things on top of it.
There’s not really a product on its own, but it’s one of the infrastructures that other things are built on top of it.
I would even call Ethereum as one of them because other projects are then built on top of it. It’s a critical piece IPFS.
In this blockchain space and this whole decentralized movement, a lot of the infrastructure has not been built out yet or it’s not built out to the state where it needs to be. That’s why many of these projects are going to focus on, which is also the opportunity that we have as investors to invest in these infrastructure plays.
I’m good friends with David Johnson. Factom’s headquarter is here in Austin. I go to the meetup and hang out with them on a regular basis. Since he’s very focused into these kinds of projects, that’s how we found out about it.
Tai Zen: Let’s talk about what it is trying to solve.
According to Andreas Antonopoulos, the top of Bitcoin evangelist out there, he says that there are 3 ways that you can authenticate a human being.
The first way is by what you know, such as a password in your head. The second way is by who you are such as the fingerprints or your retina scan. The third way is by what you have.
Which one of those is Rivetz? Or it is the combination of those?
Leon Fu: Today, most security and authentication is based on what you know like your mother’s maiden name, your phone number, password, and username.
That causes a lot of problems because you have to keep those things secret. If somebody else finds out about that, there’s really nothing to prevent someone else from knowing the same thing.
If they know that information above and type that in your computer, it will work because as far as the machine’s concerned, if you know all those things, it is you.
One of the other ways you can validate is what you have like a Trezor or a Ledger. Those have moved security to something that you have. It’s a special device and it’s like a physical thing that you have.
2-factor authentication is often trying to combine these 2. For example, you have to know a username and password. Then, you have to have a phone that you’ve typed in some random 6 or 4 digit number that keeps changing every 30 seconds.
For example, Google authenticator is still something that you own because what it’s actually having is random seed and in every 30 seconds, you will get a different random number.
However, if the hacker somehow figures out what the seed is, it’s not, it’s still not really something that you have. That’s the problem you have with that.
Let’s go over something that people have seen as a Yubikey, which uses encryption to sign a message that authenticates that you actually have that device. It’s a little USB stick that you plug into your computer. The problem that’s another device you have to carry.
Rivetz is trying to move authentication and security from something that you know to something that you have.
Tai Zen: They’re targeting the cell phones because that’s something that almost everybody has.
Leon Fu: When somebody authenticates something, you know that authentication must have come from that cell phone or that computer. It could not have come from any other computer.
It’s trying to move the authentication off from something like username and password that can get hacked.
It is trying to move that onto the hardware itself because phones newer than 3 or 4 years old have this thing called a trusted execution environment, where there is a place on the phone that is controlled by the hardware that’s outside of the control of the operating system of the phone.
Tai Zen: Can you clarify the term ‘trusted execution environment’? Is it a computer chip? Is it a piece of plastic?
Leon Fu: Yeah, it’s a piece of a specially designed chip that is can execute instructions independently of the operating system.
Basically, it can keep secrets in terms of data that even the operating system doesn’t know about.
You can put things like your fingerprint, credit card numbers or your passwords inside this chip and the operating system of the phone can’t even get to that data.
Tai Zen: Who put that chip in there?
Leon Fu: It’s part of the chipset of the cell phone today.
What Rivetz is trying to do is similar to what Steven was trying to do in his previous company, where Wave Systems were trying to sell the chips.
All latest cell phones, whether they’re IOS or Android, have this chip inside. They all have this trusted execution environment.
What it’s being used for today is to store data such as your fingerprint. It’s also being used for Apple Pay or Android Pay. Now, you can even use your credit card and buy stuff with your phone. That is also a kind of data it stores.
The operating system will have access to everything on the phone except for this trusted execution environment.
Tai Zen: Basically, this trusted execution environment inside your phone, laptop or your computer is designed to store sensitive information
Leon Fu: Most to secure information.
Even if you hacked Android, you still couldn’t get to this because it’s physical hardware that even the operating system can’t get to it.
Tai Zen: So who can access that trusted execution environment?
Leon Fu: Okay. This is something Johnson said. In order to access that, you have to get permission from the hardware manufacturer themselves.
Tai Zen: Basically, in your discussion last time with David Johnson, he said that Stephen Sprouse, the founder of Rivetz, has gotten permission from Intel to be able to access that trusted execution environment.
That also means he had to go through a lengthy security process or certification process to be able to have security clearance to access that part.
Leon Fu: Even Apple does this for apps. Apple has complete control over its App store. Assuming you didn’t jailbreak your phone, nothing on your phone is allowed to run unless apple gave it permission to run.
When you download an app from the App Store, it can’t run unless Apple gave it permission, in which they’re creating a signature by signing off on it with their private keys.
The operating system is built so that it won’t run anything unless it sees a signature from Apple. This is the same thing. This is a trusted execution environment won’t run unless Intel signs off on it. That’s why it’s trusted.
Tai Zen: What the audience needs to understand is random software just can’t access this trusted execution environment unless they’ve been approved by the chip manufacturer or the hardware.
Now that we understand this trusted execution environment is in our phones and computers, how does that relate to cryptocurrencies and Bitcoin? What problem is Rivetz trying to solve?
Leon Fu: Let’s use a credit card as an example. I use Apple Pay all the time because you can pay with your phone.
They want to make sure that when you use your credit card to pay with Apple Pay, it only comes from your phone.
If you want to use this credit card, it must have come from this phone and nobody can take a different phone and pay with your credit card.
How does this relate to us? For the first time, in cryptocurrencies, we are constantly having to worry about hackers.
Stephen and David are saying that instead of having security in the network, we’re moving security from something you know to something that you have.
For example, if you have the private key to a coin, you can take that person’s coin. Therefore, what we want to do is move something some secrets such as a private key, passwords, your credit cards into a protected area that’s actually hardware protected.
It’s protected on a hardware level so that only that particular device can actually sign off on a transaction.
In this way, even if a hacker did hack into your computer, the computer itself wouldn’t have access to those secrets.
Tai Zen: According to your understanding of what David Johnson and Stephen Sprouse said, if I store the private key of my coin on my phone and a hacker can hack into it, they can transfer the cryptocurrencies out of my phone.
If we use that trusted execution environment Rivetz proposes to do, the hacker has to have my physical phone in their hand in order to hack.
Leon Fu: Yeah. You can put all kinds of conditions like it has to be from that phone and that phone has to be within your house. For example, if that phone leaves your house in Dallas, you can’t send the coins. They’re creating a platform where you can put conditions on the hardware.
They’re trying to move the security from the software because most people are not technical enough to secure data, especially data to the Internet. However, people are generally very good at securing physical things
In the case of exchanges, it’s even impossible to physically protect data. That’s why all of these exchanges keep getting hacked.
Tai Zen: That means if the exchanges use Rivetz to secure their customers and clients private keys, it would make it extremely difficult for hackers to hack into the exchange accounts.
The reason is the hackers would have to have access to exchange’s computers, plus they’re just entering their exchange and hack it from overseas.
Leon Fu: Yeah. Most of the hacks we see today are through the Internet.
Tai Zen: After we explain to the audience how we learned about Rivetz, what it does and how secure is your private keys by using hardware instead of software, how do we need to look at it from an investors perspective?
Leon Fu: We just did a boot camp in LA and we spent like the third or half of the time talking about security. That was one of the major things. Now, Rivetz is trying to simplify that.
Rivetz is trying to make it so that instead of having everybody remember their username and password or protect the private keys with something they know, they can actually move security to the device level rather than having security on the network.
You’re trying to authenticate by asking different kinds of questions, which is very hard for a human being to remember, especially over the years. However, it’s easier for us as humans to secure physical things. That’s something that’s possible.
It will make money because if it becomes wise widely adopted, assets like coins and exchanges can have more security, which makes the asset more valuable.
Obviously, if any project gets widely adopted because it offers some value, which, in this case, is a better security solution than we have today, that will be extremely valuable.
If it becomes the standard practice of how you secure your coins by using software built on the Rivetz, that platform will become extremely valuable.
That’s the opportunity that we have here, which is to see if we can actually have a standardized way to secure sensitive data.
Tai Zen: They’re currently running their ICO now. I think that it’s supposed to end in a week on September 10th or something like that.
Do you want to go over their valuation?
Leon Fu: Let’s go through the valuation. I’m looking at there Rivetz website right now.
Tai Zen: If you’re watching this video, you can go to rivetzintl.com and follow along with this video. I’ll put a link in the description.
Leon Fu: Let’s go through what the valuation is on an ICO. This is how I actually analyze ICO.
We see there are 200,000,000 Rivetz tokens that will be fixed. They’re going to sell 70,000,000. They’re going to reserve 60,000,000 for marketing and incentives, for the community, among which 30,000,000 will be available now and 30,000,000 in the future.
Among the other 70,000,000, 10,000,000 is available now. They have a smart contract that will release 20,000,000 in 1 year, 2 years and 3 years.
The first thing we have to know when we calculate a valuation is what is the supply of the coins.
It’s 200,000,000, but only 110,000,000 is available now. The other 90,000,000 is going to be released over an in the future, right.
Let’s just talk about the valuation in the first year because 110,000,000 is going to be the float for the first year. Each Rivetz is going to be sold for 0.003 Ethers.
Of course, there are going to be bonuses depending on when you invest. Many of these ICO are using a discount rate. For example, if you invest earlier, you get a bonus or you get a discount that you don’t have if you invest later.
They’re going to sell 70,000,000 at a fixed price of 0.003. If it does not sell out, the rest of the balance will go back to the company.
I don’t know if the unsold Rivetz will be locked up or available immediately. I’m just going to assume that they’re going to sell out because most of the ICO we’ve looked at have sold out within minutes.
I do the math by multiplying the number of available tokens, the price of Rivetz in Ethers and the price of Ethers in USD, the valuation in the first year is $110,000,000.
I think there’s like a 20% discount and then going down to a 10% discount. You can find that information here, then you just discount that back to the price you paid.
I’m assuming $1 per Ether if you paid $332 for Ether, which is right now I’m looking at CoinMarketCap.
Obviously, if you paid less or more for those Ethers, you’re going to pay more or less for the Rivetz because it’s being priced in Ethers.
I guess what our audience wants to know is whether it is a good price for this project.
My personal opinion is it’s a little bit rich, to be honest. If you got a discount, it’s a little bit better. It’s a lot higher than what we pay for Particl. On the other hand, the entire market has been higher since the beginning of the year.
If Rivetz went to an ICO last year, I don’t think they would’ve gotten $110,000,000. They probably would have been getting somewhere between $5,000,000 and 15,000,000.
Now, they’re asking for 110,000,000 and it seems like they’re getting it. They’ve raised over 50,000 Ethers at the time right now as I’m looking at this.
That’s my opinion. It’s a lot, but it’s not out of line with the rest of the market. That is just what the market is going for right now.
It’s a good project. I like it. If you get a 10% or 20% discount at the ICO, it’s around where it should be compared to the rest of the market.
I don’t think it’s out of line, but I also don’t think it’s a great deal either as far as investing.
Tai Zen: One thing I want to add to this is most of the cryptocurrencies coming out right now is just a piece of white paper.
Even if they come out a little bit higher than what we had last year ICO, I would say we also have to account for the fact that they already have working software.
I’m looking at coin market cap right now. Stratis is at $6.29. Factom is $26.47
If these other infrastructure projects have gotten this far, how do you look at it as in the same bucket?
Leon Fu: That’s why I say I think it’s priced fairly. I didn’t say it’s overpriced, especially if we get the discount, the valuation becomes reasonable.
I think it’s actually priced better than Particle was at the time of that ICO
It’s about fair market value. I think it is what they’re asking for.
Tai Zen: All right. I want to give the audience a chance here to join us live. If you have any questions regarding Rivetz, we’ll answer it the best we can.
I don’t see any questions coming in. I know you had a run, so we’ll wrap this up.
If you liked this video, give us a thumbs up. If you don’t like this video, give us a thumbs down, so we know not to waste time making it.
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If you are interested in learning how we invest in cryptocurrencies and the process that we use, we will have a cryptocurrency investing boot camp coming up on November 9th, 10th around that time.
Just go to cryptocurrency.market/boot camp and get more information. If there are any questions, leave them in the comments below and we’ll look forward to seeing you in a future video.