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Adam Ettinger on Bitcoin, Blockchain and ICOs
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Adam Ettinger Interview Transcript


 

Adam Chapnick:

Hey, everybody. It's Adam Chapnick here at Block-Con in Santa Monica 2017. I'm here with Adam Ettinger from Sheppard Mullin, a partner there, and we're going to talk a little bit about Blockchain and Bitcoin. So, how's it going?

Adam Ettinger:

Fantastic. Thanks for having me.

Adam Chapnick:

Yeah, it's great to have you. You're from BigTime firm and people think about ICO's and Bitcoin and all this cryptocurrency stuff as kind of fringed. How did you guys get involved? How did it come to be that Sheppard Mullin is in this space?

Adam Ettinger:

Well I think, If you're a lawyer that deals with technology companies, you want to follow the technology.

Adam Chapnick:

Right.

Adam Ettinger:

At least for myself, I certainly want the most interesting technology and I want to follow the technology that smartest people seem to be following. In 2012 some of my smartest clients that I'd ever had while I was actually practicing in Silicon Valley. Seemed to just be gravitated towards Bitcoin and Blockchain technology. I followed that, and I'm happy I did. It's been definitely the edge of innovation, and a whole bunch of very challenging legal questions. And that's how we end up.

Adam Chapnick:

I love it. Were you one of the first guys at the firm to sniff it out?

Adam Ettinger:

Yes.

Adam Chapnick:

Oh, good for you.

Adam Ettinger:

I think that's fair to say. There weren't many lawyers, period, in 2012. I got pulled in to do a semiconductor development agreement, because people were creating mining equipment for Bitcoin. And it rolled into other technologies and other aspects of the ecosystem.

Adam Chapnick:

Amazing. So, which elements of the ecosystem do you guys see ... are you involved in all of them as far as the Blockchain as an underlined technology or Bitcoin as a currency or as a commodity. Do you get involved all around or-

Adam Ettinger:

I think that's right and not just on the company's side. Whether the company is in payments, companies in mining equipment, companies are in token technologies and now of course it's all over the map. But then there's the other side of it. It's representing the investors who are investing in it.

Adam Chapnick:

Oh, interesting.

Adam Ettinger:

And forming the funds that will then invest.

Adam Chapnick:

Up at the VC level? Those-

Adam Ettinger:

Yes.

Adam Chapnick:

How about that.

Adam Ettinger:

[crosstalk 00:02:06] funds VC level. You name it.

Adam Chapnick:

Got it. So, what do you think is the most interesting part of this? Is it the underlying technology? Or is the investment opportunity in one of the currencies or where do you see it?

Adam Ettinger:

Sure. I, on a personal level, I think that the most interesting part of it is the possibility of what the technology enables. I know we've seen ... I remember one of the most amazing times, was I saw a Ukrainian protestor in early 2014 holding up a sign, and it was with her Bitcoin address. And suddenly people that wanted to sponsor her could send it from anywhere in the country.

Adam Chapnick:

Wow.

Adam Ettinger:

Instantaneously. And she didn't know who they were and they didn't know who she was. Before too long she had $15,000 worth of donations-

Adam Chapnick:

Amazing.

Adam Ettinger:

For a cause. You know, that fact that it could go from a white paper to a technology that enables something like that, that quickly. I'm always amazed at how it plays out. I'd love to say I can predict it, but I don't. Like a lot of technology, it's hard to know where it goes and what gets accomplished first.

Adam Chapnick:

Yeah.

Adam Ettinger:

It looks like supply chain, and supply chain management is going to get impacted very, very swiftly. I don't know that we saw that coming in 2012 or 2013.

Adam Chapnick:

Right. What about things like smart contracts and what not. Does that affect the legal industry?

Adam Ettinger:

It's going to challenge the legal industry.

Adam Chapnick:

Yeah. How so?

Adam Ettinger:

Well, for one thing, more and more people are going to want to code their contracts that they would normally have commercially. So that they can be executed, the performance can be executed by a distributed pantheon of servers around the world rather than necessarily the persons who are reading the contract. That means that we need to work with coders about the semantics as well as sharing understanding about the [inaudible 00:03:54] that we're trying to automate. A lot of contract law. We have a lot of the smart contracts and we saw this with Dow is a question about, "Well, how much is the contract supposed to tell us, and what happens when something happens that we didn't anticipate? Like a hack that takes 15 million dollars worth of [inaudible 00:04:17]." So it's dealing with those kind of questions.

Adam Chapnick:

Yeah, fascinating. So, it impacts so many different parts of the ecosystem. What about ICO's in particular? What are you seeing with that and is that something in terms of the regulation that is going to be dampened or do you think it's going to be helped?

Adam Ettinger:

So, I think ICO's have been absolutely fascinating. You can say a lot of things about the ecosystem. Whether it's a bubble and so on and so forth. The first thing everybody gets is that it's fascinating. Linux is this operating system that now we see everywhere. We see it in servers. It's in your DVR at home recording movies. Well, that's an open source project that only got funded if you worked for a company and they let you kind of work on it. [inaudible 00:05:02] That's really where it came from. Then we had Etherium which is an open sourced project a lot like Linux in that way, but they figured out a model for being able to take in money in order for them to help build a platform. And that's something that if you're trying to bring together an ecosystem around a new open source platform and compensate people for participating and for helping build it. There wasn't really a vehicle until this. So, that part of it is absolutely fascinating.

Adam Chapnick:

It is.

Adam Ettinger:

Unfortunately, it reads on every single ... I think the only regulatory body of that doesn't have much to say about it right now is the FAA. I'm waiting.

Adam Chapnick:

Just wait. That's right.

Adam Ettinger:

Because otherwise you're talking about federal level of federal securities, state securities, money service business law under [inaudible 00:05:58] state, money transmitter law. Commodities trading and of course consumer protection and contract law. All of these things are ... currently we have a lot of [inaudible 00:06:10]. We notice that they've somehow implicated or they seem to be implicated, and we're doing the best we can to try to navigate that. We do need clear regulations. That doesn't necessarily happen just because cases get litigated or regulators make announcements. Sometimes [crosstalk 00:06:31].

What we're hoping for is a Renaissance, in a way, of what we saw during the break out of the commercial Internet. Where some laws were re-casted or re-tailored specifically because they realized that ... The example I like to give was eBay. When eBay started there was a lot of fraud when it came to selling things online between people who didn't know each other. And it almost looked like regulators should step in, because there was a lot of it, and how do you protect people? And how do you enforce that protection? But because eBay was able within the regulatory framework to build up an eco system. It came up with it's own solutions, and for any regulator to try to actually mimic that or try to somehow do it through regulatory action would have been very, very challenging if not impossible. So, we need to have a healthy respect for regulations and why they're there. And also, hopefully, as much as we can, help the regulations and statutes and international cooperation go in a direction that facilitates the innovation without killing all possibility.

Adam Chapnick:

Amazing. Yeah, it is a tricky one. Every time the regulators get involved it's like whack a mole. So they figure out one thing and another thing pops up it feels like. The last question I think, is with so many of these crypto currencies popping up, what do you see happening into ... what is it 1,800 ... I actually don't even know the number. It's thousands [crosstalk 00:08:02]

Is that meaningful? Is that something people should keep an eye on or what is the significance of having-

Adam Ettinger:

Like whether or not the number is just on it's own, too big of a number?

Adam Chapnick:

Yeah.

Adam Ettinger:

I don't think I'm qualified to say. It doesn't really worry me. The numbers don't worry me as much as what's behind the numbers. All the companies will perform or they try to perform. I think when we ... and I know your background is in [inaudible 00:08:25] which I admire so much. I really do, and I'm glad to see so much innovation.

Adam Chapnick:

Yeah. It's exciting-

Adam Ettinger:

But we want kick starting campaigns and we get that they're all not going to be successful. We get that that dance troop isn't necessarily going to get to go around the world, and they might fall apart. Or maybe that new suitcase will never get made. There's something about cheerleading the entrepreneur and a population really getting behind entrepreneurship and innovation that's excited and ripe. In a way that playing the lottery isn't.

Adam Chapnick:

Right.

Adam Ettinger:

And I guess what I'm hoping is that the companies behind those numbers are dedicated enough to even when they fail and people lose ... the tokens aren't going to be worth as much as they'd hope to. That we are still enthusiastic about what this whole new approach can provide [inaudible 00:09:23].

Adam Chapnick:

Well, thanks so much for joining us today. It's been great talking to you. Hope we get a chance to talk to you again in the future.

Adam Ettinger:

Absolutely.

Adam Chapnick:

Thanks, Adam.

Adam Ettinger:

Thank you.

Adam Chapnick:

Alright.