Paper money will not work on Mars : Zee Zheng SpaceChain CEO (All Interviews)

Succeeding in the fusion of blockchain and space, Zee Zheng believes that these technologies will enable a new era of seamless global collaboration. Having launched 3 blockchain-enabled satellite payloads into orbit within SpaceChain’s first year of operation, Zee has been recognized as a pioneer in this industry and has been sought as a speaker at events like Space Tech Summit, SpaceTide and Space Forum.

Zee Zheng (SpaceChain CEO)

Interview Date : 23th March 2020

Zee Zheng SpaceChain CEO (All Interviews)

The beginning of Crypto in Space Evolution

I have always been fascinated by blockchain technology. I have been in the bitcoin and Ethereum communities when it was introduced. I was especially involved with Ethereum because I was interested in smart contract implementations on blockchain. In the beginning, I started to look into the blockchain monetary system and its functions to gain knowledge about its payment system and began making smart contract transactions. I decided to venture into blockchain technologies one day. I then met with my mentor, Tim Draper, who is one of the world’s biggest investors in crypto and bitcoin. I started talking about all the ideas with Mr. Draper, leading to the initiation of SpaceChain.

Zee Zheng

The final kick-off was when I met with my co-founder CTO Jeff Garzik. He was one of the first bitcoin developers, and a key contributor to the bitcoin community. I saw that there were many blockchain and bitcoin decentralized applications already available, but I was puzzled as all the decentralized applications were set up in centralized infrastructures. It’s very interesting to think about that, because you cannot build a decentralized amazon if you get paid by a centralized institution. Jeff and I discussed these kinds of ideas, and we figured that space-based infrastructure would be potentially the best solution. Two years on and SpaceChain already has three launches.

Working in space is not a piece of pie

Working in space and with satellites is always a challenge, and that is the exciting part. The biggest challenge for us is the integration of space and blockchain as the pace of progress of both industries is different. In the blockchain and crypto sphere, there are so many new things happening every week. When we started two and a half years ago, there were many updates daily. Now, governments and big companies are getting involved and it is making the crypto industry more legitimate. However, the space industry has existed in the last 80 to 100 years, and many of such companies are still very traditional. There are space companies that have existed for 30 or 50 years, and newer ones have been around for 10 years which is considered very young. Changes and regulations also take place at a slower pace. 

We have to plan a year or two ahead and make predictions on the industry developments within a year. This depends on what the customers’ needs and wants are in that year. As such, one of the major reasons why we focus on security is because we know that it will always be needed. It is part of our strategy and it is challenging because we have to navigate between blockchain communities and space ventures. Many space professionals whom we have talked to are very traditional, and they do not know much about the crypto sphere at all – and all they hear about is about getting hacked and the volatility. We constantly have to educate and explain to them that we are trying to address these challenges and improve the two industries by tapping on the strengths of each industry.

Space is neutral and coverage is greater than land-based infrastructure

The original idea behind SpaceChain was that we wanted to build a decentralized infrastructure, and if we would have gone for traditional land-based infrastructure, we would need to have that infrastructure available globally. From the perspective of connectivity, satellite infrastructure makes greater sense because we can cover wider areas. It is very difficult to set up blockchain infrastructure locally. Moreover, the nature of blockchain is global accessibility, and if we begin to establish connectivity from above land, the coverage is much greater.

Another big difference is that space is more neutral. SpaceChain is a single company, but we have launched in various countries like China and USA, and potentially with partners in other countries in the future. As such, our infrastructure becomes multi-jurisdictional and will be more resistant to potential local risks that can be minimized to keep our infrastructure up and running.

Paper money will not work on mars

In the next century, we could move to Mars and colonize it, and I wonder what form of currency we would be using. Mars is an entirely new entity, and separate from the world economy, so world currencies like the Japanese Yen or the US dollar will simply not cut it. I think bitcoin or a virtual equivalent will be an attractive option as the currency of choice for such hypotheticals. Carrying paper money on Mars would be questionable, while bitcoin will fare much better as the currency of the future.

We are definitely the leading company for space and blockchain integration. We have done three launches, and that is 3 launches ahead of everyone else. SpaceChain was awarded funding from the European Space Agency (ESA) and we have worked with established companies like the International Space Station (ISS) and NanoRacks. SpaceChain is leading this integration and we want to get as many people on board as possible, to let everyone know that space is a fantastic option. When we first started, it was just us, but many companies soon realize the potential of the industry through education and promotions. The vision for SpaceChain is to build a massive constellation of satellite nodes. If more space companies realize the potential of blockchain integration, we can achieve our goal of creating a global decentralized satellite network. We offer open source space technology, and we are happy to share our knowledge and expertise.

Multi-signature security

The most important feature that we have added is the multi-signature. Instead of one key, we are using multiple keys to enhance security. In December 2019, we carried out a launch on a SpaceX rocket to send our blockchain hardware wallet technology (our version of a bitcoin wallet) which was later installed in the International Space Station (ISS) which demonstrates how users can perform space-based multi-signature transactions, increasing the security of the operation.

As to how it works – if two parties decide to create a transaction, they have to send a request and have our satellite payload provide a digital authentication to validate the transaction. For example, if we were to get hacked, the hacker would have to go through our SpaceChain system. As opposed to land-based internet, we use satellite communication which is a completely different method. The reason for this is because hacks are usually carried out directly on servers, with around 99% of hacks carried out through land-based internet. Thus, we are using an alternative way of communication to prevent hacking.

Another interesting fact is that we are making the transactions happen slower. For example, we can set up the transaction times such that unless our payload does not pass a certain point on the Earth’s surface three times (which is going to take a couple of hours) the transaction will not be approved. This is really bad news if you are a hacker, because when you are hacking a system, you would want the transaction to take place as soon as possible, and not face hours of delay.  If many hacking attempts are successful because transactions are executed very fast, forcing a delay of a few hours can make sure that these attempts are stopped and funds kept safe. We are seeing a lot of interest in such a product.

Changing the communication method of data transmission like making calls through a satellite phone rather than a mobile phone

Changing the communication method of data transmission is another advantage of our system. We do not change the nature of blockchain, but we improve the method that data is transferred. We want to be supportive of the scalability trend that Ethereum and other coin companies are investing in. However, we will not intervene in what they do. From our end, we are essentially changing the method of communication, similar to choosing to call someone through a satellite phone instead of a regular land-based phone, the content of communication does not change, but the functions that we are using to communicate will change. That change basically reduces the risk of us being hacked. At the same time, we are changing the infrastructure and the concept of transaction that we are using. Instead of receiving the approval signature right away, we have what we call “approval orbits”. Unless the payload orbits around the earth for a selected number of times, the transactions will not be approved. Also, we don’t want to build our own blockchain because there are already so many wonderful blockchain projects with so much innovation. What we want to do as a space and blockchain integrator, is to improve the system.

We do not build our own blockchain

We do not build our own blockchain, but we integrate with blockchains. We have already integrated with Ethereum and bitcoin and partnered with Qtum, and we continuously integrate their system updates as well.

Global decentralized satellite network

One of the biggest risks with smart contracts is that it is overestimated especially with the roles that smart contracts play in businesses. In the early years, everybody was excited and wanted to automate everything with smart contracts. However, many applications are very data heavy and they require more complicated infrastructure. If you put all your data in a smart contract, it may turn out to be a bigger risk than a problem solver. At SpaceChain, by using smart contracts as a link for collaboration between space companies and satellites, it will create a trustless network between the parties, and this level of collaboration is what geographically distributed businesses are seeking.

In conventional contracts, many conversations and meetings are necessary to build trust and establish business collaboration. We believe that with smart contracts in blockchain, data sharing agreements can be established more easily. I believe that smart contracts will be the future for business agreements.

Our ultimate goal is to build a global decentralized satellite network that can support not only blockchain, but many other industries as well. One of the biggest challenges that we see in the space industry is that many companies are competing with one another to make proposals for their own constellations. What happened with one of the biggest investment firms earlier this year was that their biggest projects were about to run out of cash. This happens very often in the space industry as many companies are competing with each other. Our proposal is that instead of each company having their own project, we can work together to build a constellation to serve the community.

A big reason why businesses do not take this approach is due to trust issues. Space is complicated, and there is a lot of confidential information, so we want SpaceChain to become a trust system between parties and between different satellites. Thus, it can be shared and businesses can trust one another, and most importantly, trust the system.

More countries are looking to manage crypto as a legal asset

Personally, I don’t see a reason as to why some countries are resistant to crypto. I understand that some traditional and centralized banks are resistant to crypto in order to retain control. At the same time however, it is almost impossible to stop this phenomenon. In the long term, both the crypto community and the centralized banks may eventually integrate. I personally think that crypto will not completely replace centralized banks. In terms of customer service or people-centric interfaces, we always need personal touch, which is what traditional banks offer. At the same time having this crypto system being accessible as a legal asset for people who want to use it is extremely important. We have seen countries like Germany legitimizing crypto as an asset and India lifting the crypto ban. With all those movements we can see that organizations are trying to find balance with crypto assets. I think that is the general direction that the world is heading.

Crypto is not only about asset prices going up and down

Volatility is something that crypto needs. Crypto as an asset, it’s about price discovery and liquidity – these are some of the most important features of crypto. If you have a proper price discovery system, you have to allow it to go down by 50% just as you should allow it to have an increase in 50%. On the contrary, in the stock market they have circuit breakers and government interventions, so you really don’t know the real value of an asset and, it is difficult to understand what the market is really like. The central government can take measures to stabilize the market. For example, in some countries, you can only buy and cannot sell at times. This is really interesting because you should be able to mend and have the right to control your assets.

Where volatility is concerned, people have gotten used to random and fast price rate changes that can happen within a couple of hours, a couple of days or 30 business days. Volatility is something that we have acknowledged in both the stock market and crypto and leads to real market discovery. The price of a crypto asset is really about that current situation and the freedom to control assets. Growing the community and educating people about what is going on with crypto, as well as the potential that bitcoin holds, is very important.

There is no generation gap but a knowledge gap

There are a lot of financial professionals in Singapore who are well-versed with investments, so bitcoin has been heavily studied in the last 3 years or so. Singaporean young professionals are aware of what bitcoin is. However, many of them express that they like the technology but not crypto or bitcoin transactions itself. I don’t see that there is a generation gap, but more of dividing thoughts where some may say that blockchain makes sense but bitcoin doesn’t, and others who say both make sense and are very enthusiastic about it. It is more about the knowledge gap. Even if one knows enough, they may not buy bitcoin. Here at SpaceChain, we want to connect the network and the people in the crypto and space community. We are providing a cybersecurity solution for bitcoin, and any other blockchains and digital assets for the future. We are trying to connect all these elements and make people feel safe, prevent disruptions and protect users from hackers. It is safe, it makes sense and it is the next generation of financial infrastructure that already has become a big community that will continue to grow to be much bigger.

KYC processes around the world and risks to crypto exchanges

The crypto exchanges we have collaborated with in Singapore use standard systems for KYC confirmations. One advantage of operating in Singapore is that we are in an English-speaking country, so businesses processes are convenient and can be easily understood. I noticed when the exchanges reach out to other countries, it is quite hard to identify what information is required for legitimizing an ID and what is not. As such, conducting registration for some customers can be quite difficult. Let’s say that a certain exchange covers 80 countries, but there is one country that they are not completely sure about its business and KYC process, they would rather not get involved. It will be risky if they do – as a hostile threat might take out the entire crypto exchange system.

Coronavirus and crypto both need proper measures

If businesses want resiliency and to mitigate risks of blockchain networks from shutting down, verification of the nodes in the infrastructures become very important. For example, the coronavirus situation could lead to high risks if we don’t take proper measures. Therefore, having all kinds of backup for assets is essential. In any situation, having a copy of assets in space will be incredibly important especially in times with unforeseen circumstances.
As a node infrastructure, we want people to have access to their assets. One of the potential angles that we are pursuing is for developing countries like Africa where local currencies are breaking down as their economies go through unimaginable inflation rates. Sometimes they use US dollars, and other times they use fiat currencies. Despite this, we hear that they use bitcoin often as it is universal and accessible. As such, we want our space infrastructure to be accessible to such nations as well.

People need to rethink the definition of money

Due to the Covid-19 pandemic, there was a liquidity crisis at one point where people were selling their assets aggressively, causing the market crash. Also, due to many exchanges promoting new things in the market, crypto was overleveraged. In the long term, people will come to understand the market. If you look at the US stock market and bitcoin markets, crypto is not performing badly as compared to centralized governments that are injecting billions of cash into the economy. People have realized that with limited supply of assets, bitcoin is going to be highly important. While all the centralized banks are injecting money into the system, the fiat currencies you are holding will eventually become less and less valuable. In terms of monetary policy wise, it is the best time for bitcoin ever, the greatest invention through bitcoin is not just the technology, but also the awareness of the monetary policy that people need to think more about. It makes one wonder about how the modern economy and modern banks work and don’t work. I think right now it is the most exciting time for bitcoin as people look for what is real.

Interviewer , Editor : Lina Kamada



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