Digital Wealth News is pleased to bring you our “Fintech Luminaries” series – featuring thought leaders within the blockchain and digital currency space. For the next feature in this series, we’d like you to meet John Wagster of Frost Brown Todd LLC, full-service law firm providing services to some of America’s top corporations and emerging companies with more than 500 attorneys in 12 markets across eight states.
NAME: John S. Wagster
TITLE: Member
COMPANY: Frost Brown Todd LLC
WEB ADDRESS: https://www.frostbrowntodd.com/
How did you personally become involved in blockchain?
I first heard of the technology shortly after Bitcoin was created, but I didn’t appreciate its immense potential until 2013-14 when I began to research it in earnest. I am old enough to have witnessed firsthand the creation and exponential growth of the internet and cloud computing. When it became apparent that blockchain technology has the same potential to revolutionize business, I was determined not to miss out on the next big thing.
What does your firm do/offer within the blockchain sector?
Frost Brown Todd assists blockchain centric enterprises and blockchain solution providers across all business verticals, including health care, FinTech, marketing, data mining, and of course, the creation and maintenance of cryptocurrencies. Our team has assisted with scores of initial coin offerings (ICOs) and security token offerings (STOs), and we have helped create and continue to represent cryptocurrency denominated hedge funds and distributed application providers. We were one of the first large law firms to accept cryptocurrency as payment for our services, and we have even developed (currently in beta) a blockchain-based software escrow agreement to explore internal uses of the technology within our firm.
What is your role within your firm and what do you do there on any given day?
As co-chair of our firm’s blockchain and cryptocurrency team, I oversee all aspects of each blockchain engagement. On any given day that might mean interacting with individual clients, working with other FBT attorneys in our team-based problem-solving format, giving speeches and lectures around the country on blockchain topics, or if I’m lucky, brainstorming on the legal implications of the disintermediation the technology might catalyze. I also spend a fair amount of time developing new business and evangelizing blockchain’s potential across my firm and to my other technology clients.
What area/s of blockchain do you believe will grow the most in the coming five years?
That’s a tough question. If by growth you mean early adoption, I believe there are some excellent opportunities in the logistics and payment industries that have few barriers to entry. If by growth you mean true disruption to existing business, I believe health care and insurance will experience radical change over time, but both of those industries have entrenched interests that will be slower to convert to a new paradigm. Nevertheless, we will see an exponential growth of blockchain research and development in those industries in the next five years even if the results are not apparent until later. Finally, barring governmental intervention, I anticipate a radical growth in decentralized finance, particularly in the areas of international remittances, crypto lending and the creation of blockchain-based exchanges. Just this week, Coinbase announced it will introduce a cryptocurrency-backed Visa card that can be used for everyday purchases and ATMs. I expect to see more such use cases in the near future.
What do you believe the next major innovation in financial technology will be and why?
The next major innovation in FinTech is already here: the development of blockchain-based exchanges for the trading of securities and other financial instruments. Nasdaq and other exchanges are already using decentralized exchanges overseas, and it’s only a matter of time before the US regulatory agencies allow such exchanges in the states. The exchanges will succeed because they allow traders to interact directly with the exchange instead of through a compensated middle man. The advantage is less cost and greater efficiency; the disadvantage is the increased risk for individuals who want to trade freely but don’t understand the market as well as they think they do.
What are the biggest problems facing the blockchain industry in the future?
Two of the greatest challenges are: 1) living up to the hype of such huge potential, and 2) striking a balance between the promise of the new technology and the havoc caused by massive disintermediation. After 3-5 years of hyperbolic discussion of all the advantages of the technology, there are still relatively few active blockchain applications. At some point, people may get frustrated by the slow progress and move on. In the areas where the technology has a real opportunity to make a difference, such as in the health care and insurance sectors, many billions of dollars have been spent on the current infrastructure. The companies that built and own that infrastructure are going to fight like hell to keep it, even if blockchain technology has the potential to provide a more efficient, less expensive way to do business.
What has been the biggest success in your firm to date?
While we have helped many clients build new and promising enterprises, our greatest success might be helping our legal system adapt to a technology that did not exist when most of the laws and regulations governing it were passed. The quintessential test for determining whether a new cryptographic token is a security is derived from a legal case that was decided 85 years ago. The laws governing the flow of money between individuals and companies and countries and financial institutions were crafted when there was no alternative to currencies backed by a central governmental authority. Now that blockchain technology is offering new opportunities, our legal system, from the modification of laws and regulations to the simple execution of contracts, needs to catch up. It is tremendously rewarding to play a small role in that process.
What has been the biggest failure in your firm and how did you adapt?
My biggest personal failure was not seriously investing in bitcoin and ether early on even though I appreciated the potential they had to become mainstream stores of value! Our firm’s biggest challenge has been to help our partners and clients realize the opportunity offered by blockchain technology without getting bogged down in how the technology works. Millions of people trust email every day with their most important secrets without understanding how internet protocols send, route and receive their messages, but many have a difficult time embracing blockchain technology because they don’t understand how it works. We will know blockchain technology and decentralized applications have truly been accepted when we can talk about the functionality of blockchain-based applications without talking about the technology itself. We talk about software as a service (SaaS) applications all the time without dwelling on the fact that they are made possible because of the internet. One day we will discuss distributed applications without mentioning that they are powered by a blockchain.
What blockchain leader do you admire the most and why?
One of the leaders I admire most is Brenden Eich, the creator of the Brave internet browser and the related Basic Attention Token (BAT). Not coincidentally, Brenden also created the javascript programming language and founded the Mozilla Foundation. I put him at the top of the list because he has remained at the forefront of technological development for decades, and because the BAT token, which allows users of internet browsers to be compensated for browsing instead of giving away their browsing history for free, was one of the first and remains one of the few cryptocurrencies with an intrinsic value beyond novelty.
How do you feel consumers (or if more relevant for your firm – businesses) are adapting to the facet of blockchain that your company operates within?
Now that the ICO craze has subsided, we are starting to see which cryptocurrency projects have valuable, lasting ideas. Since we represent clients across the entire spectrum of blockchain use cases, we have a front row seat to the greatest entrepreneurial experimentation since the dot com era, and it’s fascinating (and educational) to watch companies, even those who may have failed in their initial mission, to reconstitute themselves in an effort to become part of a lasting blockchain infrastructure. I could give many examples of such adaptation, but the one keeping us busy right now is the development of asset-backed tokens (aka security tokens) that have the potential to revolutionize the way ownership rights and property rights are traded and recorded.
If you were to personally invest in just one blockchain firm (other than yours), which would it be and why?
I personally invest in a number of digital tokens, but the ones I believe in most deeply are Etherium (ETH) and the Basic Attention Token (BAT). I like etherium because it was the first major token with an economic value beyond just offering a way to transfer value. ETH created a blockchain infrastructure that improved on bitcoin’s by being faster and more easily adaptable for use by others. I like the BAT token because it turned the modern day browsing dilemma on its head. Facebook and Google allow you to use their products for free to get access to your personal data; the BAT allows you to use its product for free and pays you for your personal data. Which one makes the most sense to you?
John Wagster specializes in blockchain-based ventures and is the co-chair of Frost Brown Todd’s blockchain and digital currency practice group. John has served as inside and outside counsel to ecommerce and technology start-ups and mid-size companies, particularly those with an interest in the global marketplace.
