How TruckCoinSwap Hopes to Ensure that the Backbone of America Keeps on Truckin'

Audio-Only Podcast

Editor's note: Find the Blockchain Journal Podcast wherever you listen - Subscribe to our content on Apple Podcasts, Google Podcasts, Spotify, SoundCloud, and Pandora.                                  

              

Full text transcript of David Berlind's Interview with TruckCoinSwap CEO and co-founder Todd Ziegler and advisor to the company, Gabriella Kusz

David Berlind: Today is December 19th, 2023. This is the Blockchain Journal podcast. I'm your host, David Berlind. And today we have two guests with us. One of them is the CEO and co-founder of a company called TruckCoinSwap. That's Todd Ziegler. And also an advisor to the company is with us as well, Gabriella Kusz. Todd, thanks very much for joining us today.

Todd Ziegler: Thanks for having us, David. We appreciate the invite.

Berlind: Yeah, it's great to have you and Gabby, great to have you here as well.

Gabriella Kusz: Thank you. Always a pleasure to see you again.

Berlind: I can call you Gabby, right?

Kusz: Yes, of course.

Berlind: Yeah, I just saw you at the Boston Institutional Digital Assets Forum here in Boston. So it was great to see you in person, but now I think you're in Chicago, if I'm not mistaken, where you're all bundled up to stay warm.

Kusz: Yeah, it's kind of chilly today.

Berlind: Yeah. And where are you coming to us from, Todd?

Ziegler: Yeah, so TCS is a Wyoming company, but I'm based just north of Cincinnati in southwest Ohio.

Berlind: Okay, great. Well, again, it's great to have you guys and I wanna talk to you about TruckCoinSwap because in the run-up to this, we were doing a little bit of back and forth on email and I was like, wow, okay, this is kind of a really cool example of how blockchain as a technology can reinvent an entire industry, particularly how finances are done between providers and the consumers of those providers services. And in particular, we're talking about truckers and how they move goods across the United States and maybe in other parts of the world. So maybe we'll first start off there. Todd, what is TruckCoinSwap? Can you describe it to us?

Ziegler: Yeah, at its core, TruckCoinSwap is a fintech and a blockchain-as-a-service company that through blockchain and Web3 technology is able to provide freight invoice settlement to the transportation industry that's 70% faster and 50 to 90% cheaper than the incumbent options.

Berlind: Let's talk about what the incumbent options are. What's wrong with them? Why don't you go through and describe to us a typical workflow maybe, and what's wrong with that workflow, and then we'll talk about how it is you used blockchain to improve on the problematic parts of that workflow.

Ziegler: Yeah, absolutely. So the core problem that TCS solves is shipper pay terms in the United States and Canada are egregious. There are 30 to 180 days. Just a little bit by way of my background so people know. I'm an attorney by education. I spent the last 10 years working in the transportation industry.

And I think that's important. I had a colleague of mine introduce me at an event in Chicago about a week ago as "somebody who's not a crypto bro" And I think there's some value in that right this is a problem that came from the two trillion dollar US transportation industry and interestingly, it's a problem that blockchain has solved. I think most people would probably intimate or concede that blockchain is not a solution to every problem. It's not a solution to most problems, but in this case, it happens to be a solution to the single largest problem in the North American supply chain, and that is the cost and time associated with trade finance.

You asked about the current options in the market. So when the transportation industry, specifically the trucking sector, decentralized during the Carter administration, back in the 80s, it became very fragmented. And we had all of these small businesses basically get created. We have a million small businesses just in the United States that are managing 90% of the full truckload spot freight. Another way to say that is if these companies disappeared tomorrow, we'd be rationing products in every grocery store and retail location in about a week. That's how indispensable these small businesses are not just to the supply chain, but to the entire US economy.

And a lot of us kind of got a really good experiment in that during COVID, walking into grocery stores, not being able to find toilet paper and essential goods. So these are small businesses. They're not at scale. They don't have a settlement department. They can't wait 30 to 180 days to get paid, right? It costs $1,400 to fill up a truck with diesel. You know, you're typically paying a driver, you're paying, you know, very lofty insurance premiums.

You've got all of these operational costs associated with running a trucking company or a logistics brokerage or a 3PL or a 4PL. You can't wait 30 to 180 days to get paid directly by your shipper if it's Walmart or Target or whoever the ultimate shipper is. When I first kind of made my way into the blockchain industry, a lot of people kind of didn't believe me that a lot of shipper pay terms were net 180. Literally, you deliver a load of widgets to somebody and they don't have to pay you for six months.

Berlind: That's crazy.

Ziegler: But that is industry standard and it's actually more common with the larger companies, the Fortune 50, Fortune 100 companies, because they have economies of scale. So their position is, we have the freight, we'll contract with you to move it, but if you need to get paid in 10 days or less, you need to go sign a contract with a bank or a factor income.

Berlind: So let me just stop you there.

Ziegler: Sure.

Berlind: Why are the terms 30 to 100 so exorbitantly bad? Like 180 days, as you point out, that's six months. So why are they 30? Where does that come? It must come from some old legacy setup that just continues until this day as we see in a lot of industries. What is it about 30 to 180 days that makes that the traditional approach?

Ziegler: Yeah, I think the legacy framework is certainly part of the problem, right? It's actually shocking when I talk to people in tech, like more than 90% of freight transactions in the United States and Canada are still being managed in PDF documents via email. Okay, this is $900 billion a year in transactional activity that's still predominantly denominated in paper, right? PDF documents via email. So that's part of the problem.

The other part of the problem is these, like I said... a lot of these fortune shippers that are moving a lot of the freight, they're publicly traded companies, they're at scale, they don't need to change anything, right? And really, they don't need to change anything because in their minds, the problem is resolved by these third-party banks and factoring companies that provide freight invoice factoring services to these companies. The real problem is though when we get into the math because...

Berlind: What's a... let me pause you there for one second.

Ziegler: Sure, sure.

Berlind: What is a... because some of our audience is not gonna be familiar with all of this terminology.

Ziegler: Sure.

Berlind: What is a factoring service? What does that mean?

Ziegler: Right, it's basically a bank or a third-party intermediary. And if you're, let's say, David, you're an owner-operator, you're a one-truck operation, right? And I'm running Acme factoring companies. So you and I would sign a contract and that contract would basically say that I can get you paid in 10 days, every time you send me an account receivable or a freight invoice from one of your shippers.

Maybe you're running loads for a big grocery retailer, right? Anytime that you want to get paid in 10 days, you can basically send me that account receivable. I'm gonna pay you in 10 days. I'm gonna directly deposit or ACH cash into your business checking account, but I'm gonna charge you 3 to 6 percent. And that's the real problem because 3 to 6% of gross doesn't sound that bad to a lot of small businesses, especially in a high-interest rate environment. But when you look at 3% to 6% annualized on these freight transactions, often times these are 20% to 30% annualized interest rates. So another way of saying that is we're charging the equivalent of hard money loans or payday loan rates to the most essential small businesses in our economy.

And there is no alternative for them because again, the only alternative is to wait to get paid directly. And that's going to take 30 to 180 days. So they are forced into these factoring agreements because there was no alternative until TCS came around.

Berlind: Now what about the larger trucking companies? I assume that their finances are in a better position to tolerate a longer period of time, and therefore in some ways, they're putting a lot of pressure on the smaller mom-and-pop truckers because they can't hack that kind of 30 to 180-day float or whatever you want to call it. And so it just makes the bigger companies strong, gives them a stronger hand in the trucker trucking industry to service all of these shippers. Right. So I'm just trying to understand the, you know, the, the total complexity here that we're dealing with in this industry, because it's a foreign industry to me.

Ziegler: No, and it's a great question. So our core user demographic in the transportation industry is those 1 million smaller companies, right? It's the one to six truck operators. It's the smaller brokerages, 3PLs and 4PLs, because they don't have a collections department. They're not at scale. They're not equipped to be able to manage the AR and AP issues of a larger company.

Now, it's interesting that you bring up the companies that are at scale, the larger trucking companies, because when TCS started, we weren't in this high-interest rate environment that we're in now. And this is a really important point. So let's now say, David, that you own 100 trucks, right? You're a fairly large carrier, you're at scale, you have your own W-2 collections department, so you don't have to factor your invoices with a bank or a factoring company. But let's think about what that actually costs you.

So let's say your largest shippers are on net 90 terms, and annualized inflation is somewhere in the ballpark of 6%. Even though you're at scale, even though you have a collections department, if you're waiting 90 days to get paid, you're still losing about one and a half percent in inflation costs. And then on top of that, you are payrolling this W-2 collections team. And that has a cost associated with it, right?

So the chances are you're probably still paying in this high inflationary environment, somewhere between 2% to 3% of gross to get your invoice settled. And if that's the case, you can also work with TCS because we're able to provide that same efficiency that's 70% faster and 50% to 90% cheaper than that 3% to 6% rate that somebody would be either paying to a factoring company or absorbing in terms of costs and OpEx (operating expense), right?

Berlind: Sure. Sure, so -

Ziegler: So it's not just a solution for the small businesses, but it kind of depends on the relationships between the carriers at scale and their shippers and what those pay terms are.

Berlind: Right, anywhere between 2 and 6%, I mean that's big money.

Ziegler: It is. Yes.

Berlind: I mean at the end of the day, that can be a lot of big money. And you mentioned two other terms that I'm not familiar with, 3PL and 4PL, so just for our audience, what do those things mean?

Ziegler: Yeah, that's shorthand for third-party and fourth-party logistics companies.

Berlind: Okay.

Ziegler: Those are companies that typically are involved in some kind of brokerage. So they're helping to match shippers and carriers in some capacity. And a lot of 3PLs and 4PLs also have capital equipment or some type of asset. So maybe they own some trucks or they own distribution centers or some type of asset within the transportation infrastructure and industry.

Berlind: So that's the equivalent of, you sort of, when you say 3PL and 4PL, you're talking about the "number of hands on the pie," so to say, because the more people, the more parties that are involved, at the end of the day, the less money the actual trucker's gonna make, I think.

Ziegler: Yeah, and that's true. They're typically, with respect to brokerage, they're sometimes adding another layer of being an intermediary, right? But 3PLs and 4PLs are critical to our supply chain as well, because lots of times they're the glue that's connecting these smaller carriers and shippers to make sure that these goods get to market on time, especially when you're talking about like food and CPG [consumer packaged goods] freight that has like a shelf life.

Berlind: Yeah, in tech I think about how cloud changed things, right? And one of the things that [the] cloud did was it changed the amount of capacity, compute capacity you had to keep in your data center just ready for whatever that big surge is. And I can imagine the trucking industry, nobody wants to keep the capacity around, like 500 trucks when you only need that one time a year or something like that.

Ziegler: Right.

Berlind: So we're talking... when you talk about these middlemen, you're talking, and the brokerages, you're talking about things that helped optimize the matching for demand for freight with the supply for all of the different things that are needed, drivers, trucks, etc. to actually move that freight around.

Ziegler: Yeah, I like to use the example of Walmart too. So Walmart actually, last I checked, they have the largest trucking fleet in the world, right? They own more trucks than any other company. However, their trucks can't come anywhere close to managing their entire routing guide and providing all the capacity that they need, right? So they still have to go to outside carriers.

Or let's say they have a truck that's ready to move a load of strawberries from Arizona to New York, but the truck breaks down and they needed to move, right? So even the largest trucking company in the world still needs help from these small businesses to source outside capacity to kind of fill those gaps in the routing guide throughout the year.

Berlind: Right, well anybody who's seen a Chevy van pull up and deliver something from Amazon, an unmarked car, you kind of have an idea.

Ziegler: Yeah.

Berlind: It's the same basic structure, right?

Ziegler: Yes, yes.

Berlind: Okay, so I get the problem. We have a lot of people who are waiting a long time to get paid and there's a cost associated with that. How does blockchain solve that problem?

Ziegler: That's a great question. And basically what we've created is a blockchain-as-a-service platform. And our tech stack is pretty robust. It includes a proprietary mobile app where we're able to communicate directly with our transportation users and accept all of their accounts receivable and the ancillary documents that they send to us that kind of constitute that account receivable or freight invoice after they've delivered a load.

But the crux of our tech stack is an ERC-20 Polygon token. And that token is listed on Uniswap. We've got some big centralized exchange announcements, listing announcements for Q1 next year. But basically that ERC20 token is what facilitates that settlement that's 70% faster and 50 to 90% cheaper. And I'm sure we'll probably go into that in a little more depth here.

Berlind: Right, well, in general, blockchain is a means of circumventing traditional financial rails where the settlement times are longer, we know that.

Ziegler: Right.

Berlind: And so this just, you know, by sheer brute force addresses that particular problem, but also depending which chain you're on, you also have a greatly reduced cost of transacting compared to something like ACH that you mentioned earlier, SWIFT, whatever it may be.

Ziegler: Yep.

Berlind: So you just start to kind of strip out the inefficiencies, which is great. I can imagine though that there are some people who are making money on that 30 to 180-day float and they would not be too happy to see an innovation like this coming along.

Ziegler: Probably not, but if you look at the history of Western civilization, good tech always wins, better tech always wins, and simply this is a faster and cheaper mouse trap.

Berlind: Sure.

Ziegler: And you made the point, there's a lot of inefficiencies in TradFi, there's a lot of inefficiencies on conventional banking rails. And the way, I like to think of it, again... you know, I started by saying I'm not a crypto bro. I was late to Bitcoin. I mean, I didn't buy Bitcoin until 2017. And then it took me a couple of years kind of marinating on the Satoshi white paper, right.

But when I got back to it around the time that, you know, TCS was started. I went back and reread the Bitcoin white paper and I was like, this is exactly what the Satoshi thesis is talking about. This is exactly what blockchain tech is supposed to be all about. Eliminating inefficiencies, disintermediating third parties, reducing time, reducing costs. This is the single largest problem in a $2 trillion industry. And I was like, I wonder if blockchain can solve it. So I wrote a pretty short white paper. Took it out to the University of Wyoming advanced blockchain lab and kind of the rest was history. Within eight months We had you know settled the world's first freight transaction on the blockchain utilizing the TCS ERC-20 token.

Berlind: You mentioned Uniswap and essentially the decentralized finance exchanges that are out there. Is that where other buyers can come in and essentially buy up invoices? Is that where that activity is taking place? Or has that part of the workflow just been eliminated all together?

Ziegler: That's a good question. They're not buying invoices, but what they're helping to do is they're helping to create this use case, right? This critically important use case in the blockchain Web3 industry. So the way the TCS token – and I realize we're going to kind of move into tokenomics and taxonomy a little bit here to make sure that everybody comprehensively understands how this works.

So, instead of like, typically, if you know, you were a bank or a factoring company, David, somebody would deliver a load of widgets, they would send the freight invoice to you through the app, that would initiate the settlement process. In about 10 days, they'd get an ACH cash payment into their business checking account, less three to 6%. That's how the sausage is made now. That's how the majority of all these freight invoices are settled.

So we created the exact same model with our own proprietary mobile app and web app, right, where those documents can flow to us through the app. But instead of sending an ACH cash payment to a business checking account, TCS will directly deposit the current USD value of that invoice in TCS tokens directly into a business wallet for the transportation user on an exchange.

Now, the first question we get then is, well, wait a minute. You know, these trucking companies are not, they're not, you know, traders. They're not investing in crypto. They're not trying to arbitrage markets. And that's true. Their need typically is to get to cash as quickly as possible and as cheaply as possible, right? Because again, it's $1,400 to fill up a truck with diesel. So what we have done is we've created an ecosystem that says, "When trucking companies or transportation users or brokerages, when they sell those TCS tokens to the secondary market," just like you would sell Bitcoin or Ethereum or anything else, "if the secondary market does not buy those tokens, TCS acts as the buyer of last resort." We swoop in, we buy 100% of whatever the outstanding balances that the transportation user just sold. We ensure that they can get to liquidity, they can get to cash.

They're on to their next load, they're paid. And now like a bank or a factoring company, TCS will collect on the invoice from whoever the shipper is. Again, Target, a grocery retailer, whatever. We will wait the 30, 60, 90 to 180 days to collect that cash directly. So again, for the user, we've created a faster and cheaper platform with a better user experience. And then, the secondary market, anybody that's interested in participating and buying TCS token, basically is helping and advocating for this use case in blockchain Web3.

Berlind: Right, they're essentially providing liquidity as well to the underlying system.

Ziegler: Exactly.

Berlind: Right.

Ziegler: The liquidity that they provide is liquidity that TCS does not have to provide directly. That's correct.

Berlind: And so how does the onboarding work? I mean, how do you get out to the truck[ers]? There's... the benefits are obvious. If I'm a trucker, I'm gonna be like, wow, this is like, I can gain somewhere between 3 and 6% maybe on my gross, that's not insignificant. Give it to me.

So how do you get the word out to these truckers and these different companies that are providing all of this transportation commerce across the country? And how do you get the other members of the ecosystem on board as well? Because I can imagine a typical factoring company, as you've described, might view this as a threat and they might say, well, okay, maybe we have to evolve and join this.

Ziegler: Yeah, and that's one of my favorite questions because one of the most common questions that we get is, how do you get to the truckers? So we're in this interesting situation as a company that's getting ready to launch at scale next quarter, right? We've been building out this infrastructure and our strategic partnerships for the better part of 18 months, right? We have more demand right now than we can even meet.

We have over 350 users waitlisted with no formal marketing or advertising of any kind. And those users just by themselves represent about $100 million in annual volume that would be running through our token and running through the exchanges. One of the questions that we ask any transportation user that comes to our website that wants to learn more or they want to, you know, be on the waitlist to start settling their freight invoices with us. One of the questions that they have to answer is, do you have any experience with blockchain, wallets, digital assets, etc.? About 50% of them mark yes. So you compare that to the rest of the world where I think it's something like 2% to 3% of the world has done anything in digital assets. Here we have an industry that's already 50% exposed to the tech.

And it makes sense if you really think about it for at least three reasons. Number one, a lot of the operators and drivers in the space are foreigners, right? So they're intimately familiar with cross-border payments and the time and costs associated with that. So kind of when digital assets and blockchain came to the fore, you know, they got interested.

Number two, most truck drivers are in a cab for eight hours a day. I think they call it like "Ph.D. by podcast" or something like that. These are some of the smartest people I've ever sat down and talked to. I joke, TCS was one of the educational sponsors at the Mid-America Truck Show last March. We got invited to come back in 2024. And this is the largest truck show in the world. There's like 70,000 people that show up every year for this conference.

Berlind: Wow!

Ziegler: And I end up at dinner with a bunch of truck drivers talking about fractional reserve lending, right? And these guys, you know, during the last crypto bull market, they were in their cabs to hear the ads from Coinbase and Kraken and sadly FTX, right? But a lot of them dipped their toes. They bought a little bit of Bitcoin. They bought a little bit of Ethereum, but they've at least touched the industry, right? So they get it.

The other thing that's advantageous is most of these companies are, you know, a lot of the truck drivers or owner-operators, they're small business owners. They're driving around the business that generates by industry averages about $250,000 a year in gross revenue. So they have business acumen. They understand that 3 to 6% on every invoice is not only typically a 20-plus percent annualized interest rate, but oftentimes that, that factoring cost is costing them 30, 40, 50, 60% of their net revenue. Right? It is this massive expense that they have to endure. So it really is the perfect sector of the perfect industry for building out this type of blockchain solution.

Berlind: What's the international application of this? I'm assuming that since we have all of these legacy inefficiencies in the trucking market here in the US, that it must not be too different in other parts of the world.

Ziegler: And I'll kick that one to Gabby.

Berlind: Yeah.

Ziegler: She's our ambassador to the world here.

Berlind: Sure, Gabby, go ahead. I'm glad to finally get you into the interview process here.

Kusz: Yeah.

Berlind: What's going on internationally in this industry?

Kusz: Yeah, so you're very, very correct. This challenge really isn't unique to the United States. And this challenge is one that, yes, it affects trucking and supply chain logistics and management, but it also hits on some of the broader themes of both food security, [and] national security. And so these are global themes that are relevant both to the US and some of our domestic policy challenges, but also to other countries that are facing similar issues. Not to bring in some of the climate crisis issues, but as our infrastructure is currently under extreme pressure from [the] climate crisis and other issues, having resilient freight logistics and being able to ensure, especially with the world's transition to just-in-time logistics, that we have the ability to ensure that our freight and overland trucking systems both in the US and around the world, are strong, resilient, and able to meet the needs of the market today and into the future is critically important. And so, you know, countries that have large landmass that are looking to ensure that their people are fed, clothed, have the CPGs or consumer products and goods that, you know, Todd kind of mentioned, this is all part of that conversation. And so you're correct. It is an issue. And yes, we're focusing, I think, first here in North America, the US and Canada, but it is something that in the longer trajectory TCS and also just from a standpoint of freight factoring there's a global trajectory and application.

Berlind: It is interesting. When you talk about just-in-time, because across many different industries, there's been a move to just-in-time inventory. However, there hasn't been a corresponding move to just-in-time payment. And you know somebody's benefiting from that in some way. And at some point, as you pointed out earlier, if people aren't getting paid on time, it could lead to the collapse of a particular infrastructure. So it makes sense to make sure that your just-in-time delivery stuff is matched to your just-in-time infrastructure, or the financial infrastructure, I should say, where everybody's getting compensated.

Kusz: Yeah, and I think, you know, like Todd has mentioned some of the egregious levels, like, especially when we talk about how this chips into net revenue. I would actually go a step further and say that this is almost not just payday lending but predatory lending. So when we get to these levels where you are significantly harming small and medium businesses, individual entrepreneurs, and cutting into their ability to feed, clothe, care for their families, and be able to be contributing members of society, then I think it's important to start to look at what alternative solutions, including leveraging blockchain technology, can do in order to alleviate some of that pressure and ensure that they're able to both care for themselves socially and economically but then also contribute to the national fabric here in the US.

Ziegler: And if I can add to that, David, and put some real figures on this, we're in the worst recession in the transportation industry that we've seen since 2008. It might be the worst in recorded history. Just in 2023, so far this year, we've lost 35,000 trucking and logistics companies to bankruptcy and insolvency.

Now, a lot of this is the result of kind of the boom-bust cycle associated with COVID and the Fed printing money and the low-interest rate environment. So it's not exclusively the result of freight invoice factoring. But I like to say that we have this silent tax in our economy called inflation, which everybody really understands now,  right?

Not so much a couple [of] years ago, but we also have this secondary silent tax in the supply chain because anytime you've got banks and third-party intermediaries carving that huge piece of finance out of the supply chain, right? Not only are these small businesses enduring those costs, but what are they going to do naturally if they're losing 30 to 50% of their net revenue or more?

They're gonna artificially increase their transportation rates wherever and whenever they can. Well, what does that mean? That means you and Gabby and I are also paying the price, because any time transportation companies raise their rates, everything that we buy at the grocery store and at retail locations increases in price. And in the United States and Canada, 72% of all goods are on a truck at some point from, you know... 

Berlind: Wow.

Ziegler: from you know, farm to table. I mean those are just the facts. So we are seeing... yeah, go ahead.

Berlind: Some of that malaise that's affecting the trucking industry, how much of that comes from just the restructuring of other industries? I think about the impact that Amazon has had.

You know at the beginning there were lots of trucks on the roads probably carrying the stuff that Amazon was selling and those trucks did not belong to Amazon and then over time as Amazon wiped out retailers They also acquired their own logistics system – you know – their own trucks and stuff. So how much of that – you know – disruption to the trucking industry also comes as a result of just the restructuring of other industries?

Ziegler: Yeah, it's certainly part and parcel, right? But Amazon is kind of like Walmart too, right? Like you'll see a lot of Amazon trailers on the highway, but when you look at the power unit, when you look at the truck that's pulling the trailer, right? It's not an Amazon power unit. Oftentimes it's a small business, right?

Berlind: Right.

Ziegler: It's a carrier, it's one of their power units that's pulling that trailer. So Amazon kind of like Walmart, do they have a lot of assets? Yes, they do. But they also need a lot of outside capacity. And there's always gonna be disruption. It's a $2 trillion industry, but the population is increasing as well. So even though we've got people kind of... we've always got this fight between boom and bust cycles. People are always pulling market share from each other, but this current economic environment has created so much financial hardship specifically for the small trucking and logistics companies. And it's also hit the big guys. You might've read about the recent bankruptcy of Yellow, YRC. They were one of the largest trucking companies on the planet. I mean, they go back a hundred years and they couldn't hold it together during this down cycle. And again, you know, I'm not trying to blame all of the problems on this secondary tax, this, you know, freight finance tax that's a result of the factoring problem.

But anytime you've got companies that are taking, you know, 30 plus percent hits on their net revenue, when we get into these down environments and the cost of capital go up, it becomes almost impossible for them to find oxygen. And that's exactly what we're seeing.

Berlind: When I think about the other applications of blockchain, to financial, typically financial flows like this – financial assets if you will, because in some ways an invoice is an asset, right?

Ziegler: Oh yeah, commercial paper asset, absolutely.

Berlind: It's a promise, yeah. So one of the big advantages of blockchain and the idea of tokens is when you tokenize an invoice of that sort is the fractionalization. I heard you mention fractionalization earlier, but I wasn't sure if you were implying that, you know, when you think about these factoring companies, that there might be an opportunity to fractionalize some of the larger invoices or pool invoices and then fractionalize that. Is that an element of this at all?

Ziegler: So I have to answer, first of all, thank you for asking that question. I have to answer it very precisely though. So on the one hand, we've got the TCS ERC-20 token, right? Which we're using for settlement for transportation companies. And then if you're a secondary buyer on an exchange, like Coinbase or Kraken or Netcoins, right? You can buy the token. One of the things that we're also working on with some of our strategic partners is this idea and if you think about a restaurant, you've got like the front of the house and the back of the house. So our ERC-20 token is on the front of the house. On the back of the house with some of our partnerships, we're also working towards the creation of a security token that would actually bundle these commercial paper assets, right? It might be a bundle of Fortune 1000, Net 90 paper, right? That might be one bundle.

But the thing about security tokens, and there's a lot of rave in the industry right now about security tokens, and I think that they're great. A lot of these use cases are fantastic. But security tokens, typically, in like 99% of situations that I'm aware of are only available to accredited investors, right? Because they are securities, you do have to do KYC AML. There is some underlying asset typically, or a promise or consideration of some sort.

So that takes 99% of the population out of the game. If you're an accredited investor and you can buy a security token and a Fortune 1000 paper that pays a yield, that's great for you. But how does everybody else participate in the use case? How does everybody else participate in the ecosystem? So that's one really cool thing about TCS as well, is we've got a front-of-the-house application and a back-of-the-house application.

Berlind: So I'm gonna switch over to Gabby because we're crossing over into two things that I think are really important.

First, giving your experience, rubbing shoulders with a lot of the regulators and lawmakers in Washington, D.C. And I'm familiar with your history of doing that. I've seen you down there at the DC Blockchain Summit doing your thing. How does the current regulatory environment in the US affect [the] adoption of a solution like this? Because we've seen [the] adoption of blockchain overall being somewhat slowed by the fact that we have some gridlock in DC over how to regulate cryptocurrency, which in turn affects blockchain as a whole.

Kusz: Yeah, I think it's a good question. So I'll talk specifically to TCS, which is a non-security utility token. So Todd kind of went into the way that, similar to Bitcoin and Bitcoin mining, an action, a function actually triggers the use of the TCS token, as opposed to just going out and buying a token. And so that is really to help settle invoices on the blockchain. So I think in the first instance, I always like to define TCS as outside of what we consider today to be the legal and regulatory strike zone. And so since it is very clearly a utility function that supports actual use cases that enhance the livelihood of people all across the country and not necessarily, you know, again, we play these games internally within the US, East Coast to Leeds, Main Street versus Wall Street. This is very seriously a Main Street use case. And so I think when we talk about, you know, the, and Todd and I kind of joke about it, the killer app or the killer blockchain use case that, you know, helps to drive mainstreaming and helps to provide insight to policymakers, this is definitely that use case. It solves what today in the US is a very serious challenge and problem. It supports and enhances the livelihood of people who every day use this money to support their families, their small businesses, and ultimately contribute to making our country stronger.

So, I think if I look at the legal and regulatory environment for TCS, that I think aligns perfectly given the fact that we have specifically designed this to be outside of and categorized as a utility token. That's that piece.

I think broadly speaking, if I'm looking at a macro level, what we're seeing because of the lack of legal and regulatory clarity is that the industry as a whole has taken a hit. You know, we've... at TCS, Todd, his co-founders, and others have worked to ensure that the design development has been very cognizant and intentional based on some of the legal and regulatory ambiguity and the fact that this would stay outside of that fray. However, I think broadly speaking the industry as a whole has taken hits based on the fact that there hasn't been – as we've seen in Europe or in Singapore or Japan – moves to really try to clarify to update the legal and regulatory framework given the fact that this is not just another new and emerging technology, but really at its core, transformational. And if that's true, then you need a number of different facets of change in order to ensure that you have what we would consider to be an enabling environment that allows for that technology to take off, to transform, and for benefits to accrue, not only to – because that's what's happening today, you're going to see potentially, again, knock on wood, the release of an ETF, you're going to see the security token component of the blockchain and digital asset space take off.

Who does that benefit? Is it the everyday person or is it again, a drive to the top, the 1% who can benefit from this? And I think that perhaps somewhat unintentionally those have been the consequences of not having legal and regulatory clarity, which is that again, a few small firms that focus on, and I say small not in size, but in number, firms that have cornered a certain component of that market that focus very strictly on capital markets application, they will benefit. And who is it that gets left out of that? I think that you're talking about an expansiveness and an enlarging of not just the digital divide, but I think generational wealth creation, an opportunity to really participate more fully in the digital future.

Berlind: When you're sitting face to face with regulators and lawmakers in Washington, D.C., which I assume you still do, can you bring up TCS as a use case and say, "Hey, look, here's a really great example of where it's all about the utility. It's not about securities or anything like that. Take a look at this and think about how important it is to accelerate your process to get that regulatory clarity in place so that it's not holding back an application like this or other utility applications."

It seems like you just have to get some really good bread-and-butter examples in front of the regulators and lawmakers in Washington, DC to kind of get them off their asses. I'm just gonna say that point blank because it just, I know to the American public, it looks that way. It looks like it's gridlock. I know the lawmakers and regulators think they're doing something, they're active, they're trying to get things done, but to the outside world, just looks like there's been no movement. And as long as we have no movement at all, it's just gonna hold back some of these utility applications because everybody's all concerned about the crypto stuff and what happened with FTX and so on.

Ziegler: Can I take a first stab at that, Gabby?

Kusz: Yeah, go for it.

Ziegler: So without naming names, I can share with you, David, that I have spoken to the staffs at the House of Representatives Committee on Finance and the House Agricultural Committee. And when I've been on the Hill rubbing elbows with congressional staff and some folks on the regulatory side of things, we typically get a, "Thank you." Thank you for providing a use case that we can actually talk to our colleagues about.

Because the number one refrain, the number one objection that, and I'm sure Gabby hears it too when she's on the Hill, the number one objection I always hear is like, "Where's the beef?" Like, where is the real-world use case that benefits consumers and households, and small businesses? Because frankly, you know, accredited investors and high net worth folks and traders and hedge funds are not the constituents of members of Congress, right? They're accredited. Nobody really cares about the risks that they take, right? They, you know, the whole point of being accredited is that you can properly assume the risk of whatever thing, you know, whatever part of finance you're engaging, right? So I think that... I kind of, you know, when I look at the Satoshi thesis, I see so many different use cases like TCS because the factoring problem, the trade finance problem is not unique to the transportation industry. It's not unique to the United States. This is a problem all over the world, right?

Berlind: Sure.

Ziegler: There are so many use cases there. And the more we can kind of build out use cases that solve these fundamental trade finance problems, I think the better narrative we can create for members of Congress, for regulators, for their staffs, because we've gotten so far away from what... you know, the blockchain tech was supposed to be about, what Satoshi was talking about 15 years ago. And I mean, most people who are honest will fully admit that 98% of the tokens that are out there don't have any underlying utility or don't have any underlying asset, right? Basically, it's a speculative digital asset that people are betting on and ideally you've got a chair when the music stops, right?

So we need to focus on these real-world use cases because that's what I believe is going to educate the folks on the Hill and help us change this larger narrative for the industry.

Berlind: Gabby, Todd just mentioned these real-world use cases. Where else besides the trucking industry do we see this problem with net 30 to net 180 where this model that Todd is applying to the trucking industry absolutely applies to some other industry and can help move the needle in Washington, D.C. and show these real-world use cases where the small businesses, the people who make up the backbone of the United States can finally convince lawmakers to get moving? What are the other industries where this works?

Kusz: Yeah, so I think in any of the industries where you're looking at invoice factoring and trying to reduce the timeline between an accounts receivable and settlement.

So realistically, TCS, I think, has an amazing model that is highly applicable to freight. But if you could have a crystal ball to see where this could potentially go in terms of opportunity, growth, [and] next steps, you're looking at really helping to facilitate settlements in a more timely manner for a number of different industries. I'm not going to go into specifics on it, but I'll say that this is something that has been reflected upon from a strategic mindset, but I think that also just from a policy perspective, this is something that challenges people, even we've mentioned actual payday lending.

So these are all components that I think when tied together and you start to look at what are the real world use cases.

You know, you had also kind of like hinted at some of like my previous life in doing a lot of like lobbying and government affairs. I'll be very clear with you, part of the reason that I stepped on as an advisor to TCS is because of the use case.

Berlind: Right

Kusz: The use case, the maturity of leadership, the governance, the fact that it is solid in terms of being able to action.

You know, when I was the CEO of the Global DCA, I would normally, both with our firms, but then also candidate firms, be looking at interviewing or speaking to roughly 200 firms a year. So I had my pick when it came to, like, how I wanted to spend my time, what firms that I thought actually had legs, and those that could actually execute.

There was a great meme that was going around LinkedIn by Barack Obama, former President Obama, just about how "Be a person who can get things done." And I feel like I used to think that was something like myself, like and Todd, everybody had these skills. And then it was like, "Oh, God, no one knows how to get things done!"

And it's like, you have and I'll be very honest with you. And I get irritated by, you know, some of like the VC, like scattershot money all over. They invested in great ideas but they never actually profiled those people to say, "are these actually people who, if I give them money, can actually do the thing that they purport and the idea or vision that they have?" And I don't like wasting my time, and I don't really feel like, you know, supporting just a great thinker or an ideation process. I'd really like to be with a group that can actually put pedal to metal and get things done, and not to use just like trucking analogies, but that's why I'm spending my time and supporting TruckCoinSwap.

Berlind: Well, I'll replace your phraseology. A lot of people say, "Get shit done" and I can completely appreciate the idea of getting shit done.

Hey, Todd and Gabby, thank you very much for joining me today.

Ziegler: Thanks again for the time, David. Appreciate it.

Berlind: We've been speaking with Todd Ziegler. He is the CEO and co-founder of TruckCoinSwap and also Gabriella Kusz. She's an advisor to TruckcoinSwap, also known as TCS.

You've been listening to the Blockchain Journal podcast. I'm your host, David Berlind. For more videos like this one, or if you just want to get the audio, we're on a whole bunch of podcasting infrastructures like Spotify and Apple Podcast. You can just go out there and find us. We're easy to find.

We have a YouTube channel. You can go to BlochainJournal.com [to] find the video of this and also the full text transcript if you need any of that. And all I can say is thank you very much for joining us and we'll see you on the next podcast.