Watch the full episode on Gamma Prime’s YouTube channel
Interview with Dave Hendricks, CEO & Founder of Vertalo
In this conversation from Gamma Prime at RWA Denver, Dave Hendricks of Vertalo dives into the challenges of wallets, tokenization, and ownership in a world straddling Web3 and TradFi. From creating keyless custodial wallets to explaining why today’s tokenized equity is still only a proxy, Hendricks outlines the path toward true on-chain ownership and the role distributed ledger technology will play in reshaping finance over the next three years.
Dave
And so what we did was we said, okay, we have to make this easy. But wait, there’s more easiness. We said, well, with wallets, okay, going back to the keys and private and all this stuff, we took a look and said, well, wallets are a real problem, keys are a real problem. We don’t want to have to deal with someone losing their keys and figuring all that out.
So we created keyless custodial wallets in our system, and that solved a couple of things. One, when we issue a tokenized asset, like a primitive, like equity or debt, we issue it to a keyless custodial wallet. Why? Well, one, we want to have that lot be easy for first in, first out, or last in, first out – whatever. Which lot do you sell? Hard to do those mixed lots, right?
But the other thing is every time we issue a tokenized instrument, it’s going into a new wallet. And guess who’s never seen that wallet?
Korath
The issuer?
Dave
No – the internet. The internet’s never seen this wallet before. TRM Labs, Chainalysis, anyone you’ve ever traded with – you’re not putting it in your MetaMask wallet that everyone’s always traded with. So anything we issue is private because your friends and the analysis crawlers have never seen this wallet before.
They also have never seen a smart contract before. So they don’t know what the smart contract is because we create that in our system. We then tokenize your fractional ownership. We then issue that into a wallet that’s never been seen.
Korath
So then what does that do for somebody?
Dave
That means that it hides their ownership. So if they trade, no one’s seeing the trading activity. They don’t see your positions.
Korath
And I guess that comes to one of the points with bridging the gap between the Web3 world and the TradFi world. Web3, permissionless, but also the…
Dave
It’s one foot in – we have three feet. One foot in legal reality, one foot in current reality, and the biggest foot in the future of this, which is very, very important.
And what we do as a digital transfer agent, digital asset manager, digital asset data management system, real world asset tokenization platform – we do all these things – is we take ownership and we encode it on chain.
But we have to mirror it to regular traditional databases for this TradFi thing. And the SEC has required that.
Korath
Right. And that seems doable.
Dave
Yeah. So this is a mix of on-chain and off-chain, but we future-proofed ourselves for when recording the ownership on-chain is the golden source.
Korath
Ah, okay.
Dave
That’s not permitted yet. You have no action relief. And the second one is so that token that was created and recorded is actually the legit share, not a proxy share. And today they’re all proxy shares. So all tokenized equity is proxy.
Korath
So my understanding with tokenization – I worked with a group, we grew to become the largest provider of special purpose vehicles in Canada. That was one of the things we did. And so we had a deal point and people would come to us to try to tokenize things because you take whatever it is, you put it in a vehicle. It doesn’t have to be an SUV, just any vehicle. And then you can sell units or partnership units equivalent to a token. Is that a proxy?
Dave
Yes. Everything is a proxy now because the thing is it always has to be recorded off-chain to that.
Korath
And it’s just like recorded – it’s just like your shares and you’ve just got a blockchain.
Dave
All shares are digital, dematerialized, and they’re actually held over at CDN. So even in your brokerage account, you don’t hold the shares. They’re held over here. And by the way, because they’re beneficial ownership rules, if those guys over there who are holding our shares go out of business, your shares are forfeited. We should continue this discussion if you’re interested in doing so.
Korath
I’d love to have a long conversation. And I’d like to fully interview you.
Dave
And so we can talk about what came before, what’s happening now, and what’s going to happen in the future. But I’ll tell you, this is going to be an interesting time.
Korath
Yeah. Interesting time coming up. What do you think? Next three years, up or down?
Dave
Oh, well, for what I do, which is infrastructure and actually upgrading the legacy financial system with a better record-keeping system and a better way to transform value to make it fractionalized and to make it transferable and tradable – nothing but straight up.
You know, I’m not like price – I can’t get obsessed with price. There are so many things to follow. Corrections all the time. It’s like people who are obsessed on that – it’s out of your control. It’s like you have to be in things you believe in for the long term. And like as someone who’s sold in and out and sold early, sold late, impossible to time. I’ve been at this for eight years. I’m not timing any market yet.
Korath
And nobody who says they can time a market is worthless.
Dave
I think that I can reliably predict that whatever we say now – that what’s going to happen in three years will be wrong. But I do believe one thing. I believe that distributed ledger technology will be recognized – my one prediction – by securities regulators and banks and those, especially in private, large financial institutions like asset managers, will be recognized as the de facto, de jure method for recording ownership of specifically private assets, but most assets. In private long before public because it’s not fast enough for public. That’s my prediction. And I’m working to make that true, but I’ve got to live in the world as it is now. I cannot…
Korath
And you never know what’s coming as far as like a lot of fairly positive things. It seems like they just showed up. SEC, new administration, all those things seem very positive.
Dave
And now the people who have been building stablecoins are big mad and big scared because the bills are possibly an extinction event for them. And I don’t hope for that for them. But you know, you got to watch out what you hope for. You can’t always get what you want.
I think we close it out on that. And let’s do another one. So if you’re still watching this, I’m Dave Hendricks at CKS on Twitter. And my company is Vertalo and I’m here at Gamma Primes. Amazing event at RWA Denver—what other people call ETH Denver. Thanks a lot.
Korath
Thanks for coming.
