The landscape for blockchain technology has been undergoing immense changes across Asia. With corporates, SMEs, investors, and developers seeking new use cases for blockchain, many are arguing that detailed understanding of blockchain is lacking and are calling for more researchers and educators to help drive the industry forward.

Asia Blockchain Review recently spoke to Daniel Liebau, Founder of Singapore-based Lightbulb Capital. The firm was founded in 2014 in Hong Kong to help realize the potential of innovation and novel technologies. The company is now a corporate finance boutique with a focus on FinTech and blockchain. Liebau talked about the importance of blockchain research, the blockchain landscape in Asia, challenges for mass adoption of blockchain, and how decentralized finance (DeFi) is set to transform existing financial markets.

Asia Blockchain Review:  “Lightbulb Capital” is quite a unique name. Can you tell us about your inspiration to start the company and the work that you do?

Daniel Liebau: No one has ever asked me this. But yes, there is a story to it. When I was about to start the company back in 2014, I wanted to call it something like ‘Innovatio’ or ‘Finnovatio’, but then I spoke with an expert who understands marketing and branding. 

She said, “That’s not a name. You need to be more creative, especially for a business focused on innovation. You have to be able to proudly present your business card to, say, the President of the United States,” which at the time was President Obama. 

So I went back to the drawing board. Lightbulbs represent novel ideas (think Thomas Edison), so if we wanted to do something novel in finance, Lightbulb Capital sounded like a good option. To this day, I have proudly represented our small brand that now has a bit of a name – at least across the Asia FinTech and blockchain worlds. So right now, we work with startups and blockchain projects on the corporate finance / advisory side and do consulting and education work with large corporates and universities. All revolves around innovation in finance, and therefore, blockchain features prominently in a lot of what we do.

ABR: You started the firm in Hong Kong, but soon after, also opened an office in Singapore. Can you share with us the reason this move?

DL: We had a superb opportunity to serve a significant, government-related, entity in Singapore, and they preferred for our invoice to come from a Singapore entity. As a small firm, that was a unique opportunity. If all it took was to open an entity in Singapore to get this critical client, I thought I should do it. And as much as I like Hong Kong, I do believe that the ecosystem here in Singapore is much more vibrant. China, of course, is at a different level when it comes to technology innovation, but as a hotbed for FinTech, Singapore has established itself in a lovely spot. 

But that doesn’t mean we don’t serve HK-based clients. Currently, I split my time between Singapore, Hong Kong, and Shanghai. 

ABR: If we were to ask you about how you’d see the future of blockchain in finance, what would you say?

DL: A lot. I want to use this opportunity to highlight three key areas that will have a significant impact on finance.

1. When digital rights (including securities) can be issued on blockchain and governments accept them as the source of truth for asset ownership, financial markets will fundamentally change. This is no small task. Liechtenstein has made a move in the right direction, where the record on the blockchain takes precedence over other records using a container model (more information can be found here).
2. When cryptocurrencies finally have utility and their volatility decreases, staking economics will make sense. I can imagine how there will be a whole new market based upon staking. That is exciting, but requires a bit of rethinking. Like so many other things in the blockchain world, we cannot use our old thinking and expect to understand the new environment. Therefore, I genuinely appreciate all researchers dedicating considerable time to investigate and document novel phenomena.
3. Financial inclusion will reach a new level. For the longest time, I have been very interested in business model innovation based on blockchain. Business model innovation is different from the hunt for productivity gains. Financial inclusion will allow us to concentrate on customers we do not have today. So it is not about improving the existing user experience anymore. I want to be more involved in this space for sure.

ABR: Meanwhile, in the blockchain space, many have claimed that education is still lacking in this industry. As an educator and a review editor for academic journal Frontiers Financial Blockchain, what specifically in the blockchain industry do you think should be taught?

DL: There are, by now, a considerable amount of entry-level courses in blockchain programming, and that is great. Not everyone needs to be able to write code (even though if you have the opportunity to learn it, that would undoubtedly be a good thing to do). 

Equally important: Giving people from different backgrounds, the chance to understand the core principles and history of DLT. Focus on how this technology will affect their work. I cannot say too much, but I am trying to fix this through several avenues, and you will hear more about it in 2020. In finance, a special focus has to be how to risk manage blockchain-related projects and transactions. We have already created a course to address this demand.

ABR: What do you believe is the next step on the “road to maturity” for the blockchain ecosystem?

DL: We need to be inclusive and work with governments, legislators, and regulators to find ways to use blockchain and other scalable technologies fairly and positively. I got involved in the 2tokens project for this very reason. Together with Alex Bausch and the team, I want to contribute to the conversation on how to execute a compliant token offering. By doing this, the Netherlands will remain a hotbed of financial markets innovation. Through the course of the project, we will gain many insights that can then serve as guiding principles to make token financing more acceptable and mainstream. 

ABR: What do you think is the key issue that holds back traditional financial services firms from interacting with digital assets?

DL: Regulatory ambiguity is, for sure, a challenge. But also culture and lack of understanding of novel technologies. Together with a few others, we have therefore started the “BEST” or “Blockchain Enterprises & Scalable Technologies” Association. 

The objective of the BEST Association is to drive forward the conversation with regulators, researchers, educators, SMEs, large corporates, and everyone else keen to join. Now is the time to focus on implementation. The last 3-4 years were very focused on thinking big and experimenting and conceptualizing. I am afraid that if no project goes beyond some incestuous partnership for trading or speculating in digital assets, the ecosystem will suffer. That’s the main reason why the Association exists. More information can be found here.

ABR: Decentralized Finance or DeFi is gaining a lot of traction in the industry right now. Do you think that DeFi will transform the existing financial sphere?

DL: I like new things in finance. I like the concept of a distributed ledger, ideally a public one. So I also really like the idea of building financial services in a decentralized fashion. 

As usual, the devil is in the details. At the moment, we do not know how to price a cryptocurrency asset. This makes it hard to determine what an appropriate interest rate for a crypto-collateralized loan would have to be. Also, the volatility of the assets makes it almost impossible to get this right, at the moment. But I think it is excellent that experiments happen. This is another reason why I hope that the many contributions around blockchain research by researchers around the world will help us to get our heads around these crucial issues.

ABR: We see more actual use cases of blockchain, but the industry is still struggling with mass adoption. In your opinion, what are the critical challenges for this industry?

DL: In my humble opinion, the key to success is to understand a particular industry well if you want to transform it. I do not believe that you can enter an industry and succeed without subject matter expertise. No doubt, more creativity, perhaps someone will experience from a different sector, can augment a team, but serious knowledge is essential. 

I tried to build a shoe business once. I wanted to sell my favourite shoes from Austria in Asia. After establishing contact with the family-owned company, everyone was quite keen to get started. Then, I spoke to a senior luxury retail professional, and she asked me all these questions: How big is your store? How much of it is storage? All I could think was, these are excellent questions, but I never thought of them. When I spelt out the name of the shoe company, she said straight away, “Forget it, no one in Asia can pronounce that.” Now I think about how naïve I was to believe this could ever succeed. Yet many people in blockchain are confident that they have some exceptions in their pocket. I wonder why?

A second reason for the lack of adoption is the horrible user experience. Unless the user experience of interacting with the decentralized world is easy enough for my 72-year-old mum to interact with it confidently, the UX is not good enough. So I hope that projects and startups give this matter enough attention. Custodians like Onchain Custody in Singapore or HEX Trust in Hong Kong play a key role. Digital-ready financial services firms like Sygnum, that have just obtained a CMS license for Asset Management from MAS in Singapore, also will drive this forward.

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