Scott Melker:

What is up, everybody? I am here and you are here, it is 1:30 PM Eastern Daily Time here in sunny, Florida. Now, today I have the pleasure of learning more about how one company is making money for you instead of off of you. hi is a not-for-profit digital bank designed for everyone. I’m also excited to understand hi because it’s powered by blockchain, it is another great example of real-world utility of the technology that we of course all know and love.

Scott Melker:

To explain hi and take all your questions is Sean Rach, the co-founder of the company who has an impressive resume of his own. Sean has a passion for financial literacy, and has also helped millions of children around the world make sense of our complicated financial system. Sean Rach, like Bach, it’s a pleasure to have you on the live stream. And I can’t wait to talk about hi.

Sean Rach:

Yeah. Thank you. Thanks so much for having me, Scott.

Scott Melker:

Yeah. So obviously I’m sure everybody butchers your name.

Sean Rach:

As I said, I grew up in Texas and they called me Sean Rach, and I went for it so it’s okay. But yeah, Sean Rach, that’s cool.

Scott Melker:

I feel like Sean Rach is a pretty cool name. Maybe your rap name one day. So you’re the co-founder of hi, obviously. I just want to get the quick overview what you’re doing and why you’re doing it.

Sean Rach:

Yeah. I think you covered part of it right away. I think the idea, not-for-profit financial services may be a tongue twister, but the idea of what’s the next generation in digital banking? What can we do that addresses the real issues that we have? I don’t love my bank, I don’t think you love your bank, and banks really aren’t set up to serve, they’re set up to serve their shareholders. If you look at the last, what was it, the last quarter’s results, record quarterly profits, I didn’t see the change to my deposit rates, I think I’m still earning like 0.01% or something like that. So I think when you look at what companies offer to their customers, and in our case, we call them members, they got a long way to go, and it kind of got lost along the way.

Sean Rach:

So for us, first principles was really what can we do in that front? And we took the concept really from credit unions, the early days of insurance companies, they actually used to be called mutual aid societies that’s why you see mutual next to certain insurance companies, and the idea is that members came together to help each other. For those who grew up with Jimmy Stewart around Christmas time, that scene where he’s showing how banks work, that informed a lot of the things that I did with in financial literacy. And I just see this massive gap still, and so that opportunity to address it. And then why not put technology to use? Those of us who are in the crypto space, in the blockchain space, understand very clearly the opportunity and the capability that is there so why not bring that about?

Sean Rach:

And then if we look at everybody’s got a smartphone, and if this smartphone is in the hands of 3.8 billion people, what a better way to drive mass adoption. And so, our approach was to use chat messengers, every smartphone tends to have a chat messenger on it, so why not use those chat messengers as the first place to onboard people? And if we do that, you don’t have to download it, it’s already on your phone. If you go to hi.com/, okay, you could use my invite code, it’s invite only, but /Sean, you can then go into the site, you pick WhatsApp or Telegram, and you’re straight into it. Two seconds later, confirm a phone number, pick a nickname, and you’re a customer. And in our case, we call you a member. And from there, a member starts to be able to get a range of services.

Sean Rach:

And then maybe I just circle back and stop talking. But the brand, the brand hi, a great URL, but also a great sentiment in the idea of a universal greeting that everybody gets. Our website is in 16 languages or maybe 14 languages, part of our commitment to being global, but everybody understands hi. And I think for us, every time we start to get overly complicated and jargon filled, we put ourselves to that test, are we communicating simply? Can we help people move forward in this complicated world? And can we bring this technology to them one step at a time, one service at a time.

Scott Melker:

I dare not ask how difficult it was to get hi.com.

Sean Rach:

Yeah, there’s a bit of a backstory. One of our partners had it and had been using it for some other things. And when we started to talk about what we were doing, it was like, this is the right time to put this a URL to use. So with a history of crypto.com and now hi, hi.com, Yeah, I kind of like that. I’ll give you a funny story, if you’re cool with that.

Scott Melker:

Please.

Sean Rach:

Actually, if you type in easter.com, you’ll see another piece of my work. Easter.com redirects to hallmark.com, which is the first.com that I worked for. So way back when bought that and I checked it recently, I was like, “Wow, it still redirects. That’s pretty cool.”

Scott Melker:

That’s incredible. So listen, I want to make sure everybody knows. This is an AMA so please feel free to ask any questions that you have for Sean in the chat. I did not make that very clear at the beginning, but you can listen to us talk all day, but we want to make sure that you get all of your questions answered and get to learn everything-

Sean Rach:

Definitely.

Scott Melker:

… That you want to know. So, from my perspective, I’m wondering, what are the biggest problems? You address it slightly, but who is your target audience? What are the biggest problems that this solves for them? Is it un-banked and under-banked, is it people who are underwhelmed with the services that are provided? Is it everybody?

Sean Rach:

Yeah. Okay. I’ll try not to be too greedy, but yeah, everybody. No, I think you’re right, there are plenty of ways to address it. I think, first and foremost, and our initial idea was that of solving the pain points. Was zero interest rates and all the things that have led to Bitcoin and everything like that, there is a room for that. And you’ve talked about it on your show. I was watching you and Bobby Lee talk about it. You can safely, I’ll put it in quotes, safely, earn a return with a stable coin on a number of platforms using the blockchain. And I think that’s something that the vast majority of the people in the world don’t know about. And the vast majority of people actually don’t have access to it.

Sean Rach:

And so I think that’s the two parts that you outlined, which are exactly right. You’ve got the component of, “Hey, I don’t really need to go to a bank, I don’t need to see a bank teller, I don’t need to pay for the skyscraper that’s very nice to look at.” I think in today’s day and age, we’re fine to get rid of that. Even the work from home mindset just says, “Okay, what are the things that I actually need?” If I can have access to my assets, my funds, if I can easily send them, I think this is an area where the traditional banking system falls down, easily sending them.

Sean Rach:

I mean, I’ll be honest with you, this is why I did this project is that we said it should be as easy as sending a text. Somebody else said that about three years ago, but they never got around to doing it. And then we went through a quick mock-up of it and said, “It’s not that hard to build, why don’t we just build it?” And so we built it and then we said, “Well, let’s see if people like it.” And then we started to work through all of the components.

Sean Rach:

So ultimately, yes, you’re right, we are extremely ambitious in that our goal is not to get one million users. In fact, again, we don’t use the term users, members. We’re already at 1.23 million members, and our intention is not to get to 10 million. Our goal is not to get to 100 million. Yeah, we’re crazy, we want to do one billion plus. And the idea is if you’re able to make services that actually meet the needs, are easily available, I think you can see that makes a big difference in everyone’s life.

Scott Melker:

Yeah. I don’t think a billion’s unreasonable at all. I think it’s actually quite astounding that you’re at a million already. And talk about that growth, what time period that happened, and where that’s coming from.

Sean Rach:

Yeah. I think that was… when you press the I believe button, when you wonder, we think, we’re talking to each other, we’re thinking, “Yeah, we’ve got something, it’s interesting, the technology’s working. Hey, can we make this work?” And we put an incentive program in there, happy to talk about that from a marketing perspective-

Scott Melker:

Please.

Sean Rach:

… That it is invite only. And so the idea was, if we did that, and then we incentivized people to say hi every day, would that drive not only people to engage, but then also to invite their friends? And that’s exactly what happened. So the 1.2, three million comes from three people starting off. And we were basically said, “Okay, here we go. Let’s hit our groups.” And it was initially, even that, I didn’t hit everybody because I needed to hit… we started with Telegram so it was people who were broadly in the crypto space, and it was like, “Okay. Hey, take a look at this, tell me what you think.” And we were getting feedback.

Sean Rach:

And of course working in the space for long enough, the feedback is the key thing. People telling you, “Dude, this is wrong. Fix this. This doesn’t work.” Helped us very quickly. And so the growths that we’ve had has been explosive. Within 100 days we were able to get over a million people on board. We really do want to get more people in the west, we have a lot of people, let’s say, in Asia, across the Indian subcontinent that have already heard about it, but really getting to the west and making people aware of it because I think we’re onto something. And our intention was to see each step of the way, “Can we improve? What do we need to do?” And at this point, our service, one of the things that people will throw dice at us or throw their darts at us is, it’s pretty basic. Yeah, it is. The intention, and we put it in our white paper-

Scott Melker:

That’s good.

Sean Rach:

… On our website, we got a roadmap, we got a whole bunch of stuff coming down the pike, and we’re very, very excited about that.

Scott Melker:

I’m interested that that would be a criticism because I think that everyone can agree that banking is too complex. And there doesn’t really need to be anything complex about storing your money somewhere and being able to exchange value with other people, right? I mean, that seems like it should be a very basic skill.

Sean Rach:

You said it well, I think the only other thing I would say is that we were pretty crazy in that we developed a working product before we had a token. And some people, “What does that mean? We’d rather have a token for three years and then finally get around to it.” So they throw darts at somebody else, but I think for us, the idea was-

Sean Rach:

… Let’s get something up and get something that’s working that we bootstrapped, and then our idea of the token is the token is a membership token, it’s all utility. In fact, it’s all membership value. So instead of us being focused on, “Okay, how many fees can we raise?” Or, “Can we come up with a new spread that people won’t notice too much?” Why don’t we just make it clean and clear and focus everything on the token value and the membership value?

Scott Melker:

Sure. I was just looking for some of the questions over here. “Where’s hi available? Worldwide?”

Sean Rach:

Yeah. Initially we started off in a small subset, we pretty quickly took off the cover on that. Right now, there are obviously some markets which, the powers that be, restrict, the North Korea’s and Iran’s of the world. Are you okay?

Scott Melker:

Yeah.

Sean Rach:

But other than that, it’s pretty broadly available. I think we have members in about 160 countries, so that’s not 220, but it’s pretty close.

Scott Melker:

So I was pointing because I laughed because it’s always the United States when people talk about regulation. You talked about having, I guess, quite a few members in the east, is that just a function of where you started and that organic growth so if people were there and they’re talking to their friends and that’s where it’s growing? Or is that because there are any sort of issues with potential regulation in different countries?

Sean Rach:

Yeah. I think probably a little bit of both. Maybe I need to have a stronger influence in Europe and stuff like that. We were on Telegram, most of my friends in the US are on WhatsApp. So until we got WhatsApp available, then we could start to really push it out. I think to be clear, we have mentioned a token, we want to be very clear, we’re not available for token sales directly from us in the US so we’re very mindful. I think the compliance mindset is something that it’s non-negotiable. So from that perspective, we’ve been very careful, but the idea is, every place we can bring it, we will. And if there is something that we’re sitting on the fence, it’s not that we don’t want to, it is basically just managing all those sanctions and those types of things that you have to do with compliance.

Scott Melker:

And the next question is, “Is staking going to be available?”

Sean Rach:

Yeah, our approach to staking, in fact, we had called it a different term, but we’re just going to be calling it earnings. And the idea is, I think that’s a very, very, very important part of what people are learning about the utility of crypto in broad sense. So initially, again, everything will be one step at a time, and I hope everybody will understand why, but we will start with a product, and we’re just saying that it should be in September that we’ll be able to bring it out, which will offer staking in rewards of our token. And then we’ll begin to very quickly add other tokens to it, including Bitcoin and all the high liquidity tokens. And again, almost that same intention, any token that people want, we will try to bring it.

Scott Melker:

Perfect. Well, this is probably not directly about what you guys are doing, but it’s an interesting question. “What are your thoughts on the SEC possibly targeting stablecoins and KYC requirements?”

Sean Rach:

I hope that’s two questions. But the targeting stablecoins, how do I say this nicely, I hope not, but I think I can understand why they would want to make sure that someone that is claiming a reserve, that they have the reserve, some verification, I think we’re all keen on that, and I think we know which ones we’re talking about. But there are other ways that technology is being developed to offer stablecoins like dye and stuff like that, that are outside of a reserve capability. So I think making sure that, that is clear is very important, but the implications of stablecoins, especially in the Forex market, I think we haven’t even begun to see the impact. And so, I think making sure that that functions well for investors and for commerce is very important.

Sean Rach:

If KYC is a second question, I think I would just share with you the process that we’ve gone through. Though I had worked at Crypto.com for two and a half years, it was a great run, that was really the first generation of some of the KYC capabilities and the partners that were used at that point, I thought were pretty good, but it was pretty slow on the backend. And I think what we’ve seen now, we’re almost to the third generation and the capabilities to minimize the pain for the end user to complete the KYC I think is very important.

Sean Rach:

Now I would like us to all… it’d be great to go back in time and live in a world where we didn’t have all of that, but I think minimizing the pain just allows for maybe a bit of assurance on all sides. I think KYC, for us, is important for not only our platform, but our members. If you had people on board who were abusing the system and those type of things, obviously we have to deal with it. And one good way to screen it is somebody who’s already had some issues. So I think from that perspective, is it all right to call it a necessary evil? I think it is what it is. So can you make it as less evil as possible and as straightforward as possible?

Scott Melker:

Right. I mean, I think regulation is a necessary evil that’s coming, whether we liked it or not in general-

Sean Rach:

Yeah, exactly.

Scott Melker:

… And that probably plays into that. It’s funny regulation was always viewed through such a negative lens, I think in the early days, but now I don’t really get that many comments from people saying that it shouldn’t be regulated. I think now everybody just wants clarity. Clarity so that they can build because-

Sean Rach:

There you go.

Scott Melker:

As we even said, you have to basically guess what the regulation is going to be in every single jurisdiction in the world before you advance there. Correct?

Sean Rach:

Yes. And I think that becomes difficult for business. And I say that with a major understatement, you have to build your systems to be able to support turning on and turning off products and features for every single jurisdiction. And it’s not impossible, but it just makes the Rubik’s Cube, instead of three by three, it’s some kind of 12 by 12. So it’s possible, just it takes a bit more effort. But what you said, I couldn’t agree with you more, just clarity makes it so much easier. I think the challenge that any business faces is when the yard stick is going up and down, you’re like, “How do I deal with that?”

Scott Melker:

Yeah, it kind of made me laugh when Poloniex was recently… Paid a $10 million fine for activities in 2017 that violate new clarity that didn’t exist at the time when they… How can you retroactively punish someone because you were too slow to give them clarity on what they could do. And I think to see a lot of that in this space, and that has to be a challenge for you guys moving forward, but we have another great question.

Sean Rach:

Oh, sure.

Scott Melker:

“Question here, a very huge percentage of revenue in the US comes from the banks, 40%?” I cannot vet that number. “Any plan on how to tackle this potential resistance?”

Sean Rach:

Well, maybe I’ll give another… since we put our numbers and this one might blow your viewers minds. In 2018, I went looking, 2019 was a little bit difficult, 2020, kind of off the charts, but in 2018, do you know what the profits that the financial services sector made worldwide? And that would be banks, insurance, asset managers, all of that, roll it that together, want to take a guess?

Scott Melker:

I dare not ask how many trillions but a lot of them.

Sean Rach:

Well, it was actually a trillion. A trillion dollars in profit. I think that… I don’t know that we can even comprehend what that means. So I think what you’re seeing, maybe to reframe that a little bit is that, by all means financial services more broadly, the traditional services have seen it. Neobanks have come along, I think they’ve done a great job in putting the pressure to the incumbents or traditional banks. That has forced them, and actually, probably one of the very few upsides to this horrible pandemic has been the digitization and moving it forward.

Sean Rach:

I don’t know if you’re like me, but every time I hear digital transformation for a guy who was doing digital before it was called digital, I do kind of shutter a little bit because I’m like, “The digital transformation already happened and you’re going to have a workshop on it. Okay, cool.” So I think when you look at this, I would say just like many things that happen, innovation takes place, you have the early adopters, and then it begins to affect all parts of society. And in particular, let’s say this financial services sector.

Sean Rach:

So by all means, I think you’re going to see that, that is the mass adoption on the institutional side that we’re all been looking for. And obviously 2020 really kicked that off. So I think the potential resistance, I would frame it slightly differently and I would maybe look at it as they’re also smart, and they have smart people, and they’re going to use smart solutions. And what ends up happening is, if you’re using a digital ledger, which they do, but they hold on to money for three to five business days while they transfer it, and earn interest on it while they’re waiting to hand it back to you…

Scott Melker:

And charge you while they’re holding it.

Sean Rach:

Of course.

Scott Melker:

[crosstalk 00:21:59] transaction on both sides.

Sean Rach:

Yeah, with a nice spread on that FX, it’s really good. Hello. So yeah, I think that situation, I wouldn’t call it as much resistance as I would say that they will begin to adopt it as well. And I think that overall, that’s good, because again that drives a regulatory regime that’s clear, and then we’re able to push things forward. So I don’t see it as resistance, I do think that the innovator does have the opportunity. And if you look at whether it was computer technology, or the internet, or any of those things, there are opportunities. And being the first one doesn’t mean that you’re always going to be the best one, or that you’ll survive. I mean, how many e-commerce companies were there and Amazon, through excellent management, was able to figure out how to do it best. I think that’s the challenge for any business builder is how to do it best.

Scott Melker:

Sure the banks are not going to go quietly into the night-

Sean Rach:

No.

Scott Melker:

… And give up their share. And so I think it’s inevitable that they’ll just adopt the technology when they’re forced to do so. “Will hi create a Dapp or let other companies corporate with hi to create Dapp?”

Sean Rach:

Yeah. I think this is a very good one. Again, I think we would be very comfortable to be cautious. And what I mean by that is to say, our plans with regards to developing our own blockchain are for real. What we’re looking at though is almost like I just said about the KYC functions about first generation, second generation, maybe third generation. I think we’re seeing the same thing with blockchains. So clearly Bitcoin in its various forks have evolved in a certain way. Ethereum is addressing many of the concerns, question, complaints that have been there. And then we’ve seen now this next generation.

Sean Rach:

And for us, just as we looked at our business with regards to how do we focus on onboarding and driving people through? We want to take the opportunity to look where business will be in one and a half to two years time, and develop the right blockchain to support that. And that then leads to an ecosystem that would allow for Dapps and those type of things. If that makes sense.

Scott Melker:

Yeah. So I have a ton of questions here about the token.

Sean Rach:

Oh, wow.

Scott Melker:

So let’s [crosstalk 00:24:23]-

Sean Rach:

Okay, yes, do it.

Scott Melker:

… Which I know you probably want to go through, so let’s jump in just very quickly. “Could you walk through the tokenomics of the hi token?”

Sean Rach:

Yeah. You bet. And again, if this is a familiar refrain, we thought about this, we went through and said, “Why would we do this?” And so we did something that we haven’t seen on too many projects, which is we have decided to tie the growth of our token to our membership base. And so we mint on a weekly basis. Now that may sound good to some, and it may sound awful to others, but the intention is that we keep them together so that we’re incentivized to build the business, build the members. If we had pre-minted, the tokens then everybody would be scratching their head and saying, “Okay, well we think this.” And then if there’s a price to the token, they’d be like, “How can you justify that value?”

Sean Rach:

So for us, the minting of the tokens comes from several components, and if I can break those down very quickly. One, as I mentioned, there are daily rewards. The rewards that members get for saying hi, they need to answer a question, if you haven’t seen it, we have some serious questions, but they’re generally a bit of fun, maybe make you choke on your coffee a little bit, but something that just drives engagement every day. And our engagement on that is extremely high. So that’s one.

Sean Rach:

The next thing is if they invite their friends, their friends sign on, they get a portion of that. Again, I’ve been in the direct marketing space for pretty much my whole career, and we thought about it, and we said, “What would be the best referral program you could possibly have?” And the idea was not to give you 50% of a 0.3 commission, which is, last time I checked, 50% of zero is still zero. Instead we said, “What if we gave you 50% of whatever your downstream earned?”

Sean Rach:

And it’s earning, there’s no concerns that this is some pyramid scheme or those types of things, it is not related to anybody’s purchase or sale, there’s no sale required, there’s no purchase required, no deposit required. The idea is if you refer your friend, they then, let’s say they’re earning one hi dollar a day by saying hello to us in the app, then you’re going to get 0.5 hi dollars. And so it adds up. And as you can imagine, I probably have a long list of those coming in, even micro, micro fractions of that. And the idea that adds up. So we need to mint for those.

Sean Rach:

And then also the way that we had worked with our pre-sale is that our pre-sale, all of the members who bought tokens, they agreed to a four year lockup. Again, you don’t hear too much about that in a project, but the idea that we had was that shows the commitment to the project. And if you’re not in it for a longterm, if you’re looking for a pump and dump, we’re probably not going to be the place for you. So the idea is that commitment means that every… Sorry, the four year lockup with daily release, so a small fraction of what the person has put in principle when they originally bought the tokens then is released each day. And so we need to then do the calculations and determine what do we need to mint to match that?

Sean Rach:

Now, the question that people have had is, “Well, then what is the total supply?” And I’m sitting here today, I don’t know what the total theoretical supply could be. When we initially started, we did have a theoretical max, but as we looked at the weekly minting, we changed our mind on that approach. Our intention, again, based on feedback from the community, based on how it’s working, is that we probably do need to find ways to ensure that we’re incentivizing the people who actually are helping to build the ecosystem, meaning people that are referring people that are actively engaged, and probably pull back on some of the rewards to people who are not that active, but that’s something that we’re looking at. And again, I think with any cryptocurrency startup, any startup, part of what we do is we have to adjust the model as we go, but that’s the core component of it.

Sean Rach:

If I can just say, the last thing that’s so important is that it’s all about membership value. And so, you see with a number of projects, they generate profits, and then they take a portion of their profits, they buy the token back, and they burn it. So if you would call that putting the membership value in there, some of them, the big ones, you know who I’m talking about, maybe up to 25% of the profits go into the token value. And I think that’s worthwhile. We just took it to the extreme, 100%, all of it goes towards the token. So when we say not-for-profit, we’re not saying we’re charity, and to be very clear, we’re not, the idea is that we will do things at cost so that everything else is put into the membership value. And the membership value means that people who purchase our tokens get services on a tiered level based on how many tokens that they’ve purchased, and ultimately are they staking.

Scott Melker:

This leads right into this, and you touched on some of it, but, “What kind of membership benefits do you plan to offer?” Perfect.

Sean Rach:

Yeah. I was going to say, wow, that’s a excellent segue, credit to your team, or whoever asked that.

Scott Melker:

Oh, no, that’s not our team, this is your fans.

Sean Rach:

Awesome. Cool. No, the membership benefits, we’re that close to announcing a… I put out a little video today that gave people a kind of a glimpse into September. There might be our first one in September. It may be in October, but we’re finalizing some things there. Let’s talk about the broad category. First and foremost, the categories would be the interest that you can earn from depositing. So the rewards that we talked about. So from that perspective earnings, our intention is to be able to take that live in September. The next component of it are trying to look at the lifestyle, heaven forbid, and hopefully we can all use them, travel benefits.

Sean Rach:

So we would like to be able to offer a range of those. They will be something that you’ve seen from other folks, but we also we’ll give it a twist and do something a little bit different. Some of the digital subscription services are easier to offer, but there are a number of things that most of us haven’t used in a year and a half that we think could be worthwhile, hopefully as we’re coming out of the pandemic. But our intention, again, it would be to start small and start ramping those up. And again, by tier.

Sean Rach:

And what we have put in the white paper, I think we put four tiers at this point, we’ll probably be in that range, maybe four tiers. I don’t think three tiers will be quite right, but a range of four, try not to go to 19 tiers, but something like that, that can help. And then people, I think will… Our belief is that once people start to see that membership benefit, not only from the staking capability, but from the actual, tangible things that they’re able to get, then that will also drive some of the tokenomics.

Scott Melker:

Perfect. “I heard hi are building their own blockchain, can you tell us a bit about it?”

Sean Rach:

Yeah. I think we’re at that stage where the white board is full, it’s a question of…

Scott Melker:

Writing on the walls. Beautiful Mind style on the windows and walls.

Sean Rach:

Yeah. I was just going to say Beautiful Mind, thank you, yes. We do write on the windows too. But I think the component there is some really great blockchains have come out recently, and I think we’re all very interested in seeing how the level two, level three projects work. Looking at the intricacies that make sense, I guess, the easiest way, and maybe just to keep it relatively simple, I’ll use the hockey analogy. We’re going to try and skate to where the puck is going to be versus where the puck is now. And I think that’s something that is not going to be just done by us, by all means, we’re building a blockchain team. If anyone is interested, please, I think it’s careers@hi.com, please hit us up. But we’re looking to try and say, “What will help us?” In particular things that we’re focused on, obviously are the key ones, which is faster and then cheaper.

Sean Rach:

And then our ambition is actually not cheaper, it’s actually free. So there are some interesting ways to make the transactions free to the end user, and we would like to pursue that. So I’ll put those just broadly because I don’t think saying, “Oh, it’s going to be built on this chain or a fork of this. And it’s got this on top of it.” I don’t think that’s relevant at this point. I think probably in about six months time we’ll probably be ready to have a consultation paper, get some feedback from the community, see where the state of play is because I think then when you get into properly building it, let’s say a year worth of effort, you want to make sure that you’ve measured it a couple of times before you do that cut.

Scott Melker:

Sure. I would argue that if it’s six months, a year, or two years down the road, that everything will be so interoperable that it won’t even matter.

Sean Rach:

This could be a case as well. And I guess, I don’t think we’re closed. If there is a good solution, then why wouldn’t you use it? And that would be great.

Scott Melker:

“How does hi fit into the future of defi? How is hi thinking about and preparing for the future?”

Sean Rach:

Yeah, I think this is a great one and maybe it’ll help to address some of the concerns that some people have in that we have to be very clear, we are a centralized service to start off with, and that is principally to make it as easy as possible to onboard people and for them to have their first experience with crypto in a user experience that’s not too jargon filled and too potentially scary. However, we are all about, and we believe that defi is the ultimate approach, getting rid of all the middlemen, minimizing those costs, and allowing people to transact between each other with as little interference as possible.

Sean Rach:

So for us, the components of that are really, I would say, what you’ll see pretty much through this year would be the core setup of our capabilities, both on the crypto side, and also we want to be able to offer in traditional currencies. So doing that is a big ask. And then I would say going towards next year would see things like noncustodial wallet capabilities, the blockchain, those types of things, so that we can really be able to be part of defi on our own chain and giving the token a whole nother set of utility to focus on that. So for us, it is that process of being centralized for now, but leading to defi.

Sean Rach:

And our job in, and we were talking a little bit about financial literacy, we need to bring crypto literacy, digital asset literacy so that people are comfortable with that. And as you said, whether it’s the blockchain, the regulation, all those things, people need clarity, especially when we’re talking about their life savings, or what we think will replace, maybe supplement initially, but then ultimately replaced the traditional banking system.

Scott Melker:

“Not-for-profit means volunteers or employees? How do they make their salaries?”

Sean Rach:

Yeah. Great question. Great question. Again, the term is not-for-profit, not non-profit. And so the idea is that we do have costs. And in fact, I was just mentioning the traditional services. When you’re working in the fiat space, you need to have licensed banking partners to be able to do the transactions initially. And so we will work with partners to be able to provide those services, and then ultimately transition hopefully to our own, get our own banking license, do all of the things that are necessary, and it made me not be a banking license, but whatever the requirements are.

Sean Rach:

How does it work for our staff? You might be surprised, not, I think most people in crypto understand that people are heavily incentivized by the token. And so if you check our white paper, we have 9.2% of the tokens are set aside for staff. And so a big part of what we want people to believe in is the fact that this token is of value, and we’re going to create value together. And if you look at the traditional system of pretty much any company in capitalism in general, I’m a capitalist, but I think somehow we lost the way. And what I mean by that is we got so focused on generating profits that we didn’t focus on driving that membership value.

Sean Rach:

I don’t know if you remember this story, you’ve heard the story, but supposedly it goes that Henry Ford, when he was making the Model T, realized that his factory workers could not afford the car. So what did he do? He raised the wages. I think that mindset somehow got lost along the way, and I won’t go into the politics, but if you look at the profits that have been generated by these companies, it’s not going back into their workforce, their society, it’s going to the shareholders. And if you’re a shareholder, you appreciate that. But if you’re not a shareholder, you’re missing out. And so for us, all of our staff are stakeholders and that’s very important for us.

Scott Melker:

Yeah. You mentioned your white paper and your roadmap, and I read your roadmap and said that you had basically five separate phases-

Sean Rach:

That’s correct.

Scott Melker:

Where are you now in that process, and can you talk about what that will look like?

Sean Rach:

Sure. I would love it to be in the day that we can write a white paper and have no changes, that would be a miracle.

Scott Melker:

Of course.

Sean Rach:

So phase one got nearly done, except for the project that I’m actually spearheading, which is the pay with buy hi with credit card. So we’re still finishing that up. It takes a little bit of extra effort, anything that’s in the fiat space. So we’re pretty largely into phase two. And September we’ll, again, we call it beyond an MVP, but we’ll have a basic mobile app so that people who prefer that in engagement can have it, it’s a better graphical interface, those types of things. But I’ll be honest with you, it’s not too far away from what our web app offers so we have a web app, web.hi.com, that you can go into and do some of the basic stuff. So we’ll do that. So phase two, through most of the next couple months, we should be completing that. And then phase three is stuff like exchange services, and pushing further phase four gets us into the fiat services, which that’s going to take some effort. So I would say that’s about where we are so finishing up one very strongly into two.

Scott Melker:

And I guess there’s a follow-up. “Can we get a debit card and buy the hi tokens directly from the app?” Is that the fiat services phase?

Sean Rach:

So first step is buying with a credit card is one thing, getting a debit card and issuing that is another thing. So again, I think I have the scars still on my back from Crypto.com, the process.

Sean Rach:

But the way that it works is you have to do it jurisdiction by jurisdiction. So the EU is wonderful. If anybody else, any government leaders, once I have more trade groups like that, that would be very helpful. But after you get the EU then it’s pretty much every market by itself and that just takes a very long time. I’ve lived that, it is unfortunately out of the company’s control, it is all about the partner. So for us, that’s why we wanted to make the mobile phone the key part of it.

Sean Rach:

I would also say to you, in that space, and I’m not sure how you’re seeing it there, but I think the form factor of a credit card is going to die really soon, I kind of hope so. So the thing that we have looked at it, and if you do look at that, we put in there the word virtual debit card. And so ideally we would be able to do that, but believe it or not, they’re also concerned about virtual debit cards, the criminal rings have looked at those and they get some virtual debit cards and then they start trying to cycle money and stuff. And so again, you have to balance that so that you can do it safely.

Sean Rach:

But that is on our roadmap, we would like to have it, but I would see it not being particularly a physical card, maybe you need a physical card in your jurisdiction, but ideally to me it would be something that goes right into your Apple Pay or your Google Pay or whatever, and you’re able to use it. So that capability to access your funds if you want to use them both on a traditional currency basis, or on a cryptocurrency basis.

Scott Melker:

Yeah. That seems like a natural jump at this point. You’re right. We keep seeing cards issued, but I mean Apple wouldn’t be putting their money into Apple Pay and Google into Google Pay and all of these, if they thought that physical credit cards were still the future.

Sean Rach:

Well, and look what COVID did. Most people really kind of… It was a very big step forward. So now you just tap and pay. And so this idea of not scanning, and touching, and handing, and all that stuff goes away. I think you look at that. And if you look at the situation in Asia where things such as WeChat Pay and Alipay really have completely leapfrogged the whole world, and people just pull up their phone, they make a scan, the scan takes you to the wallet, you make the payment, and you’re done, and there’s nothing else.

Sean Rach:

I’ll give you the vision and I think it’s important because maybe I wasn’t that explicit about it, why to have a blockchain and why to do all this stuff is what I just said. If the idea is that, Scott, I need to pay you some money to pay you for some coffee. That’s great, we’re friends, we’re both on the thing, I can do that relatively easy. But Scott, let’s imagine you’re the barista of the place, and this is your point of sale. And guess what? This is my payment mechanism, it’s the same thing. Then there’s a whole big chunk of the network pie that was called question. And I think we’re right to call it into question, what is the value that’s being provided? What it ultimately means to a merchant is that somewhere between, let’s say 1.8, 2.3, could be even up to 3% of their profits, every sale that they make, maybe people don’t know this, every bit of the sale that they make, that goes to the network. And I think that that needs to be right-sized as well.

Scott Melker:

“What are the advantages of hi dollars comparing to other cryptos like Bitcoin and Ethereum?”

Sean Rach:

Wow.

Scott Melker:

Tough question.

Sean Rach:

Yeah, I don’t want to sound arrogant, “Oh, we’re better than them.” I think, do we have a belief that we can build a better blockchain? Yeah, we do have a belief that we can build a better blockchain, and that’s not meant to throw rocks at anybody, that’s simply to say, look at Bitcoin and what has, has happened and what has been developed. And sometimes we’re able to move things forward, but you then see all the other variants of it. You look at Ethereum, the team is very, very smart, but just feedback is it’s taking too long to put the changes in place to help. But moving from Bitcoin, proof of work to proof of stake, and then as we move forward, you’re going to see advances.

Sean Rach:

So when we look at the advantages of hi Dollars, I’ll try to actually answer the question, maybe I’ll say something that’s a little bit tongue-in-cheek, and it’s not meant to offend any maximalists, because I’m not a maximalist, but I’m kind of on all those, I think you’re closer to that, is I would call it Bitcoin with benefits. Okay. As I said, tongue-in-cheek, don’t throw anything at me. The idea that you’ve got a cryptocurrency that also gives you benefits. And our ability to not only… You earn, you then unlock some membership benefits is very powerful to people. So I guess that’s how I would answer it.

Scott Melker:

I guess they’re asking, what are your KYC rules?

Sean Rach:

Yeah, I think I know where this comes from. We were very clear about we use a market leading partner, their name is Sum&Substance, I think they actually do it very well. The way that it works is that in the app or on the web app, it’ll spawn the process and it will detect, by your jurisdiction based on your phone number, which document you need to provide. And then you need to do a liveliness test. So that’s not just a selfie, unfortunately and I’ve seen it, the strange things that we see are, it’s a little bit of an insight into humanity.

Scott Melker:

Proof of life.

Sean Rach:

By the way, I’ll make a joke for everybody, and hopefully we’ll all have a good laugh. Guys, when you’re doing your KYC, can you put your shirt on please?

Scott Melker:

Do you really get shirtless guys like with their ID and today’s paper?

Sean Rach:

Yeah. A little bit too much of that. But anyway, no, rules of KYC are pretty much there. When it comes to restricted markets and stuff, it is as I describe, especially in the last, probably two years to 18 months, the FATF, which is kind of a global group that has looked at places where it’s a range of things from money-laundering, terrorist financing, fraud, all of these things, there are a number of markets that are on the hotspot list. And so we need to abide by that.

Sean Rach:

But then really the whole thing is we want to be able to verify that your identity is there, and we want to verify that you’re there, and that’s called identity verification. And as long as you’re not a wanted criminal, it’s usually really quickly complete. I think it’s about 30 seconds for you, the user, and then processing is about three minutes and then hopefully we send you an email that it says you’re all good to go. If there’s something else that if you have a name like John Smith, that does throw the system off and you have to go through some other stuff, but for people with common names that tends to lead to a manual review, and then we just want to make sure that everything is fine.

Sean Rach:

But usually it can be resolved pretty quickly, but the people who try to cheat the system, I’ll just say that we have pros working on this so I’m very proud of our team, and it was pretty much the first hires that we made into the company were in the space of compliance.

Scott Melker:

Maybe you somewhat touched on this, but, “Sean, I have a question. Do we have a plan to move to Polkadot parachain?”

Sean Rach:

Oh, wow. Not really. I would say, we’re going to go to our own chain. I think that… And it is in due time. I think the challenges that we all see with ETH fees and stuff like that, we did choose… Again, what’s the first step you take? ERC 20 token, make it something that’s easy for people to access, but then what can we do to get more accessible by looking at some of the other areas? Our community, not really looking at Polkadot parachain, but looking at BSC, I think they’ve really come a long way in terms of adoption. And you probably weren’t aware of this, some of our community happened to see some of our test transactions. So did have to come clean and say, “Yeah, you’re right. We’re looking at it.” So we’re hoping to announce that very soon.

Scott Melker:

Jason would like you to know that he’s shirtless 24/7 and wants to know what happened to inclusiveness. He didn’t say you guys are not welcome.

Sean Rach:

This guy, Jason, you may have just won the internet, I love that. That’s the right spirit.

Scott Melker:

I had to share.

Sean Rach:

I hope you are part of hi because that is exactly the right way, I almost want to disrobe myself.

Scott Melker:

No, I don’t think… I think we’ll lose all of our viewers if I take my shirt off. “Is there a lockup period of one to four years, like in an FD that will pay interest?”

Sean Rach:

“Like in an FD?”

Scott Melker:

I don’t know…

Sean Rach:

A fixed deposit, I guess-

Scott Melker:

Fixed deposit, yeah.

Sean Rach:

Yeah. So the way that we’ve done it, and again, as I mentioned, Scott, we’ve done some things that are unique, and some people may not like it, and some people do. We offer people the ability to purchase the token at the spot price, which currently we’re only listed on Uniswap. So their ability to get a market price, they can buy it through Uniswap, they can buy it through us, which is using that price. Or then they can get a one-year daily release. Sorry, one year lock with daily release, or a four year lock with daily release, but you get better prices.

Sean Rach:

So the idea is that this person is asking, can we have those plus the interest? That’s coming. And so the idea is we won’t do it to where you buy it right away and then immediately get the interest, the idea is that you can deposit currency in, and then, excuse me, you deposit currency in, or you buy at market price, meaning it’s not already locked, then you can earn interest. So that’s how we’re looking at it. But we’ll take that on board that somebody would like to do that, we would probably need to look at the pricing and how to manage that, but it could be quite an interesting way to do it.

Scott Melker:

My own question. You talk about getting from a million to a billion users, what does it look like at scale at a billion users because I have to imagine that, at its present iteration, it wouldn’t be able to handle that so what is the process like scaling for a future where a 10th of the world, more than a 10th, but depending on how long it takes, 15% of the world is using the platform?

Sean Rach:

I think you must have been bugging our conference room because that’s exactly the kind of questions that we talk about. I think the key word is refactoring, if you’re honest with you. We’re looking at when do we need to refactor so that we can scale? Initially, in fact, we’ve completing it right now on one of the components that we had to refactor, because as we built it, initially, it was built with a mindset we didn’t know. “Hey, build it quick, let’s get to 100,000, let’s how it goes.” When you get to a million, it starts to slow things down, and then as we go. So that’s part of it.

Sean Rach:

I think the way that we’ve looked at it is having the multiple access channels, including the mobile app, will make that process probably a little bit easier because for us, there are inherent challenges, I won’t go into it, but let’s just say the various channels, whether it be Telegram, WhatsApp, we’ve looked at Line, we’ve got Facebook Messenger all of those type of chat channels, some of them actually have throughput, challenges that we have to engineer for. So I’m not saying it’s a limiting factor, but it’s a factor that we’ve had to consider.

Sean Rach:

Having a mobile app then allows people to be much more in control of their thing. And it’s really on us to keep the file size down and manage it from that end. So for us, I think it’s an important point to point out that our intention is that people don’t have to have an app so they can choose to operate the system with the core features without the app. But if they want to look at transaction history, they want to look at graphs, they want to do all of those types of things, that manages. But the question for us, it’s really the one million to 10 million, which is now the space that we’re in. The 10 million to 100 million, that will be another generation of how we manage it, and then the 100 million to one billion, that’s how the vision comes to life.

Sean Rach:

So you are right to ask that question, what does it look like at one billion? What it looks like would be obviously tons of transactions. And I guess from a end user perspective, we have to keep the latency on everything as tight as possible because otherwise it kills itself. But I think the way that we’ve gone about it and in those chunks, what will allow us to kind of 10X, 10X, 10X, then, then it gets us there.

Scott Melker:

It’s interesting to think about the fact that a million to 10 million is effectively the same mentality is 100 million to a billion, even though you’re adding 900 million users rather than nine million users. But I guess really, when you’re scaling, it is the percentage growth that matters.

Sean Rach:

Well, and also this is part of the thing that we’ve been trying to figure out and bring to market and get feedback is the drive to refer friends. And if we’re at a point where let’s say it’s 10 million, 10 million to 100 million, just to put it in context, PayPal is 400 million. Okay. So 400 million is pretty ubiquitous for a lot of people.

Sean Rach:

So how do we get to that point because what you ultimately have is you have momentum driving it because you and all your friends are on it, and you and all your friends are on it, and so it makes it even easier to do various things. And I guess that’s where it becomes quite interesting is, as I said, if this is the point of sale, as well as the payment mechanism, you’re not carrying a card, you’re not having to go to a little doot and do all that stuff, then it starts to actually accelerate. At least that’s what we believe we’ll see.

Scott Melker:

Exponential growth works [crosstalk 00:57:04] hockey stick.

Sean Rach:

Yes, exactly.

Scott Melker:

Yeah.

Sean Rach:

Yeah. Exactly.

Scott Melker:

Second reference to hockey.

Sean Rach:

Yeah. We’re killing it over here yeah. Well, I guess when I grew up in Florida, we didn’t have hockey, but now we’re a hockey championship state. So I guess I’m allowed to talk about hockey now. “If my flexible wallet has $1,000 and locked wallet has $1,000, both have interest?”

Scott Melker:

Okay. So everything is about how you manage a thing. And so for those who are not members of hi, but please join, the flexible wallet is exactly that, that’s your wallet, where you’re able to transact, you deposit crypto in, you can also deposit crypto out. It’s also where that daily release goes. So you have the flexibility to do whatever you would like to do with it.

Scott Melker:

Currently we only have what we call the rewards wallet, which is your daily rewards are locked for one year. Okay. It is free money, but it’s locked for a year. We need to build our ecosystem, so yes, there are some rules here. Okay, so that’s the situation. We have a third one, which is the vault, which is where you bought your hi dollars, and we put those there. And again, that’s where it releases from so those three.

Scott Melker:

The fourth one that people are asking about, which is, “How do I earn interest?” Is what we’re going to be calling earnings, we were calling it savings before, but then the lawyer showed up and said, “No, let’s call it earnings.” And we said, “Oh, let’s call it earnings.” So we’re calling it earnings. So earnings will be coming out shortly, and that’s where if you have money in you’re flexible, you can deposit in into the earnings, there will be a range of terms that you choose the time that you put it in, and then you will be getting a APY, a yield coming off of that, the lawyers also said say yield, not interest.

Sean Rach:

That’s right, I’ve heard you’re allowed to say earnings and yield and reward, you’re not allowed to say interest. “What is the minimum deposit limit?” [crosstalk 00:59:04].

Scott Melker:

Great question. Minimum deposit. Wow, I don’t know if I know it off the top of my head. I want to say it’s probably 100 bucks, but it’s probably less. I think the minimum that we purchase is 10 bucks, I think we’re trying to do something. I mean, sorry, I’m caught out on that, I apologize. It’s mainly, probably too many things going through our heads/.

Sean Rach:

You’re not supposed to know everything.

Scott Melker:

I should. I think the intention is, whatever it is, it should be an amount that drives mass adoption. And so for us, for the purchase, I think I’m pretty clear the purchase is $10. Minimum deposit probably is by currency and it should be something relatively small as well. I think one of the challenges has been for us, especially about a week ago or two weeks ago when Eth spiked up, we were seeing that, wow, for people to put things in through the ERC 20 network was a bit expensive. So we may have raised the threshold a bit simply because it would make no sense to try and transfer in $10 and pay $20 in the transaction fee. If that makes sense.

Sean Rach:

That’s challenging.

Scott Melker:

Yes.

Sean Rach:

Yeah, it’s challenging. So I just realized that we’re actually up against time here. So I’d like to give you the-

Scott Melker:

Oh, wow. Hey, it’s been too good.

Sean Rach:

… Opportunity… I know. Love to give you the opportunity to give final thoughts, anything we may have missed, anything that you want people to definitely take away from this. And then obviously tell us where everybody can sign up. Oh, and I should say, all of that information is in the description right below the video for all you guys so you can link to hi down there, you guys can check that out so you don’t have to remember it and type it in or anything crazy like that.

Scott Melker:

Well, I guess the thing I would say, and this one, I think will put a big smile on your face. I think that the central banks are the best marketers for crypto we could have ever had. So I’ll give them a…

Sean Rach:

Free advertising. Thank you.

Scott Melker:

I mean, fantastic. So from that perspective. I think when you look at hi and the ecosystem we’re building, we’re just at the beginning, and we’re working every single day, and I do mean every day, that means Saturdays and Sundays, to build out an ecosystem that delivers the financial services that not only we want, we need. And I think we wouldn’t be doing this unless we felt that way.

Scott Melker:

You’ll be seeing the membership benefits coming on between the travel, the lifestyle. But we’re crazy, we’ll try to come up with some other stuff. And it’s always great to get feedback from the community in terms of what they think is appropriate and where we go. But I think that this is the start part, gets us really the digital financial services.

Scott Melker:

We’ll be pushing, you’ll see some stuff coming soon where we’re looking at gamify. I think this is a very cool space. How do we take gamify and bring that out? And then further down the line that’s when we look at the blockchain, what will be the world’s best blockchain? What can we do? I mean, you can’t go up there and say, “I can’t wait to [bunt 01:02:08].” You’re going to swing for the fence. So we want to figure that out. So when we say world’s best blockchain, okay, yeah, you can throw something at us, but the whole point is, that’s the challenge. What can we that makes it something that’s fast, cheap, and ubiquitous, that works for everybody? I think those are the things that really start to drive us.

Scott Melker:

We are just every day thankful for the support that we have in our community, the way that it’s developed so quickly, it is what an entrepreneur hopes happens. But at the same point, an entrepreneur also has to be wary of when you hit a home run, that you can have problems as well. And so for us, as you mentioned, the scaling and stuff is stuff that we’re working on all the time to try and make sure that it works.

Scott Melker:

I think other than that, I really enjoyed talking with you. I’m a big fan. I love the show. I love the insights. I love the insights, I love the asides in particular, but I hope we get to cover a lot of the questions for the community, and I hoped you enjoyed it as well, Scott.

Sean Rach:

Yeah, I absolutely loved it, and I think it’s incredible what you guys are doing. And I think we covered at least most of the topics. There were a lot of questions, but a lot of them obviously sort of were under the same umbrella. So I was trying to search through them and not be too redundant. So everyone, once again, A, well, Sean, where can everybody follow you on Twitter? Sean Rach, right?

Scott Melker:

Yeah. I’m really complicated, Sean Rach, just fill it in, I’m there. We’ve got, obviously the one day Jack will give us hi, but a two letter Twitter handles pretty hard to come by so you can find us out there on hi_official, and we’ve got a number of those things. Love to see people in the Telegram community, we’re just launching a Discord community. So those places you can get direct interaction. Yes, I am there from time to time, like all the time, lurking, but hopefully we can… for us customer service or member service is very important, we don’t want people to have a bad experience. If there’s something that’s not working, we’ll try to fix it. And if we can’t fix it right away, we’re human, we’re working on it. But no, it’s been really, really cool to see, and we really like to get as many people, especially on the Western side of the world, to start really embracing what we’ve done and telling their friends, invite your friends, and get on in.

Sean Rach:

Well, I’m personally trying it myself and excited to dig in deeper. I love the concept and really incredible, 1.2 million users in days. So I think that a billion might actually happen [crosstalk 01:04:47].

Scott Melker:

Well. We’re going to push.

Sean Rach:

Awesome. Well, thank you so much for taking the time. Everybody, thank you so much for taking the time and sharing your time with us and asking you all of these amazing questions. [crosstalk 01:04:57].

Scott Melker:

Yeah, it was great.

Sean Rach:

Besides my community, that you have your own very passionate community who are there, they know a lot about your project and they absolutely love it. So everyone, I will be back again at the same time tomorrow for my normal weekly charting session. But otherwise, I guess we will see you tomorrow. Thanks so much again, Sean, excuse me, Sean Rach, thank you once again.

Scott Melker:

All the best guys, thanks so much.