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Episode 11 of PatSnap's Frontier3 podcast

Zero-Knowledge Proof: Circular Economy and Web3 with Mesbah Sabur, Founder of Circularise

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About the Frontier3 Podcast

Welcome to Frontier3 by PatSnap!

This series is dedicated to unpacking the innovation ecosystem of Web3. Featuring our Co-Founder, Ray Chohan, and various industry experts, Frontier3 explores how Web3 will fundamentally change how we live, work, and play.

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In This Episode of Frontier3

Mesbah Sabur, the Founder of Circularise, joins Ray to share his visions for the future of the supply chain and his company’s role. As a sustainable design engineering minor, Mesbah realized there is a lack of transparency, trust, and traceability in global supply chains. His newfound awareness compelled him to build a business focused on digitizing and tracing materials across the supply chain and Circularise was born. Mesbah shares how a circular economy fills the void of depleting resources, therefore creating a more sustainable future.

Episode Highlights

  • How Circularise’s mission to build transparency, traceability, and trust in supply chains go hand-in-hand with the pillars of a circular economy.
  • How sustainability will disrupt the global market, and what companies can do to prepare.
  • Why enabling transparency and data sharing in complex global supply chains strengthens circularity efforts.
  • The future of zero-knowledge proof, and why it’s key to facilitating data sharing on a public blockchain while maintaining confidentiality.
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The Experts

  • Episode Guest:

    Mesbah Sabur

    Founder of Circularise

    Mesbah Sabur Founder of Circularise

    Mesbah is the founder of Circularise and is on a mission to make global supply chains more transparent to enable circularity.

    Connect with Mesbah Sabur on LinkedIn

  • Host:

    Ray Chohan

    Co-Founder & VP New Ventures at PatSnap

    Ray Chohan Co-Founder & VP New Ventures at PatSnap

    Ray started PatSnap’s western operation from his apartment in 2012, helping grow the team to 400+ by 2020. PatSnap now serves 15,000 companies worldwide – supporting R&D, Innovation & IP teams with market and technology intelligence research. Their SaaS-based platform helps Deep Tech innovators connect the dots between technology, markets, and people. PatSnap officially became a Unicorn in 2021 and now has over 1,100 employees and 15,000 companies using its software across EMEA, North America & Asia. The ultimate mission is to provide intelligence that improves R&D and Innovation productivity to help innovators bring their ideas successfully to market. Ray also works closely with Blockchain & Web3 community and is a passionate angel investor in this space.

Episode Transcript

Ray: Mesbah, welcome to Frontier3, really excited to have you on the show today, and I would love to kick off with your background because as I touched upon off air, Circularise really stood out to me because we’ve been trying to keep a close eye out on enterprise software businesses, which have that Web3 component and you guys are a brilliant example of that. So Mesbah I would love to kick off with just the original genesis story. Your professional background, your personal journey, and how you came to starting your own business.

Mesbah Sabour: Well, first of all, thanks for having me, Ray. And to give you a background, so I was born in Afghanistan, in 1992 and lived there for a couple of years when I was very little, obviously due to the war and the conflict moved to the Netherlands when I was only seven. And that’s where I spent the rest of my life, never really been back. And I was always interested in engineering and in all kinds of different mathematical problems, as well as architecture and design. And I decided to do Industrial Design as a Bachelor. So that was more than a decade ago now I, where I met Jordi who’s my co-founder now. Within the first couple t through the chamber of commerce because Jordi had a great idea. We were, “Awesome. Let’s just start a company.” So, we’ve been kind of entrepreneurs for more than a decade now with several startups in the past and really loved doing that. And while Jordi quickly moved to do an MBA, I really fell in love with Industrial Design. And I’m not sure how much you know about a Bachelor Program, but there is this big part called a minor, which is six months or so of program, that you can choose yourself as a student. So, I was late in enrolling and all the nice stuff that everybody was picking and the popular stuff was kind of gone.

And I had to choose from whatever was left. And one of these courses was called Sustainable Design Engineering. And it was a course six months together with Aerospace Engineering and then to teach engineers how to incorporate sustainability and a different way of thinking into their day-to-day activities. And that’s where I met some professors who are now on our board and they were introducing the idea of a circular economy. And I was like totally sold with within a couple of weeks. And I was, “This is way more important and interesting than simple Industrial Design.” And back then that faculty was just a couple of people with… So, the Department, “Circularity and Sustainability,” were just a couple of people within the faculty. And now it’s like a full department with lots of PhD students and it’s really, really grown in the past couple of years. That’s how it started. So, I decided to focus on circular economy and trying to understand the problem as much as I can. And in 2016 we kicked off Circularise from the results of my Masters thesis, which identified the problem of a lack of transparency, trust, traceability, in global supply chains.

Which is prohibiting a move towards a circular economy. And that’s has been our mission all along to enable that. Had very little affinity with blockchain and Web3 back then. But as you can imagine, there’s this great tool to solve traceability and transparency, and introduce trust where it is lacking. So we became kind of experts in that area as we went into that journey and tried to learn as much as we can. And that’s it, in a nutshell actually.

Ray: And Mesbah, what is the circular economy? Because there’ll be many of our audience listeners who might have heard about that term, from a hundred thousand for overview. But in a nutshell, what is the promise of a circular economy?

Mesbah Sabour: So the easiest way for me to think about it is understanding the current economy. And we just often refer to as the linear economy. So linear means that we are extracting resources from the planet, all kinds of materials, raw materials, and what have you to make our products. Let’s just focus on a simple example, a smartphone, right? There is a lot of different elements and materials that go into that. So, most of that are extracted from the planet, made into different parts and components, and eventually the final phone. And over 90% of the cases, that phone will never make it back into the economy after the first life cycle. Right? So, the idea of a circular economy is that we shouldn’t design systems that always end up either in landfill or incineration at some point. That should be prevented at all costs. That’s leaking from the system, meaning you’ve got all these great resources, but landfill or incineration means you lose the resources. So, what we need to do is design systems to keep those, ideally the whole phone, but at some point, that’s going to be at a real end of life.

And then the components, and then eventually the raw materials keep looping them back into the economy by using refurbishing, reintroducing into the system, repairing, and as well as recycling methods. So that’s it in a nutshell, to explain circularity. To keep these materials and resources into the economy as long as possible. Which is not only good for the environment, but also really on a financial perspective, it makes sense, but it is very, very complicated because the world’s supply chain hasn’t really been designed for this at all. And that means there’s all kinds of challenges when it comes to collaboration within these supply chains, as well as data sharing. Because most of the time when at once a material, or a part, or a final product is manufactured and it’s been shipped to the next party in a chain, all that data is lost. It gets stripped from all that data. And you do need that to make these circularity decisions and activities happen properly.

Ray: Well, your timing is absolutely perfect, Mesbah, isn’t it? In terms of, you’ve got this key ESG journey that we’re all on, thankfully. And that’s picking up pace, touch wood. And then at the moment, really unique unprecedented supply chain challenges. So it’s the perfect cocktail, isn’t it for you guys being a solution tackling some of these problems. But taking a moment to pause, so the current state, is it fair to say it’s very much monolithic linear economy, because that’s the legacy, that’s where we’ve been entrenched in the past. Looking forward now into this decade, what are some of the big things that need to change at ground zero to enable a circular economy? And out of a hundred, how far are we along to that circular economy promise? Because it sounds amazing, right? And it sounds like the right thing to do from a environment standpoint. From an economic standpoint, it makes perfect sense. So for our audience to understand those two dimensions, what are the big, hairy problems we need to solve first? And then how far along are we as we sit here in March 2022?

Mesbah Sabour: These are a lot of important questions and I wish I had all the answers, but to unpack that, there is a number of different pillars, which the circular economy concept is relying on. And one of these is transparency, and traceability, and digital tools. Which is what we’re working on. But there’s a whole different pillars as well that has nothing to do with this. But they’re much more around product design, and consumer acceptance, and business models. And these are all fields that are under heavy development and we have seen some great examples, but I don’t think we have had such a great adoption as a skill that we can say, “We’ve got these pillars solved.” We don’t have all the answers when it comes to digital capabilities and digital enabling technologies. We don’t have all the answers when it comes to business models. Because, we see a lot of these examples, where you’re moving to what is called a Product Service System. Where you sell products by their usage, instead of by the actual product. So there’s a company that sells washing machines and you get the washing machine for free, essentially. You get to borrow it almost. But you’re paying per cycle, right? And that means that the ownership is still with the company and they are incentivized to keep that product as long into the economy as possible.

Build something that can last for ages as opposed to something that they don’t really care about if they would’ve been selling the products. And then there’s a whole realm of products designed, like, how do you make something that is easy to repair? If you like at a smartphone, there is this strong trade off right now. We’ve lost repair possibilities in smartphones, right? Because they have been glued to each other. And it’s very, very complicated if not impossible for consumers to repair smartphones. But there has been counter movements, where things like fair phone. Where they have a modular smartphone that consumers could take apart and replace the screen, or a battery within seconds and minutes. So in all three of these pillars, product design, business models, as well as in digital enabling tools, we are just at the brink of trying to see and getting some sort of a clear picture, how it can be solved. But then next challenge is how do you scale that beyond these smaller examples and towards massive option. And some companies like Apple, are doing a great job. They’re moving towards recycled content. And a lot of their products, they have this concept around product disassembly, robots, which is amazing. But then again, small scale doesn’t happen across the board.

And it’s not that your current iPhone can be stripped away from some of these parts and become a new iPhone yet. That’s the dream. But we’re not there yet, and there’s a lot of challenges. There’s a whole different area I haven’t touched upon, which is to do with regulatory aspects around, “How can regulation, pre-enroll standardize things?” Specifically in a digital realm where there’s a lot of different solutions, different markets, but there’s also a lot of what I refer to as cross contamination between industries. Where if you have a smartphone and that contains chemicals and that contains metals, et cetera. And then you start to build something that could work for these areas. And then you go to these chemical suppliers and then they’re, “Yeah, but I’m only supplying a few percent of my materials to the smartphone industry. The majority goes to the medical equipment, or to construction buildings.” Well, now all of a sudden, you’ve introduced such levels of complexity, that without standardization is kind of impossible to go and solve these things. So there’s also a big regulatory aspect.

Ray: Got it. It sounds like an end-to-end journey, right? From early-stage ideation, R&D, product design, to the business model, to the digital capability. The exciting thing, Mesbah, and hence your excellent growth, looking at things at a macro view out of a 10, 15 year outlook, you’ve got really good tail winds in the business, right? Because those three vectors you described, let’s face it. They are front of mind, right? Maybe not executing on them right now, but most boards at large public companies, emergent businesses know this is coming. So let’s start doing something now, or we got to get our act together by at least 2024, 2025. Because really you follow out what you described there, it’s inevitable, right? We have to get there.

Mesbah Sabour: Absolutely. We are convinced that this is the case, it’s really inevitable. We have to get there. And the question is rather, “Who’s going to be doing that first? And how much are they going to benefit as opposed to laggards?” Right. And I think a lot of the companies start realizing that and putting a lot of resources into all these areas. And we have often said, like five years ago in 2016, when we started, we were probably too early. We were doing a lot of education. Now with a lot of the recent developments in supply chains, and as well as some regulatory aspects that are coming up. There has been such a acceleration happening that we strongly believe that in the coming years it’s going to be too late. A lot of these markets will be getting much more saturated and mature. So, it’s a very exciting time.

And we do also see… sometimes we don’t even look them up anymore, because we were working with these larger corporates, and virtually all of them they have very strong ambitions that they have made statements on publicly. And often you can just find them on their website. And it’s funny where we were talking with some of these employees who aren’t really aware of it, and you’re screen sharing, go to their own website, and it’s, “Hey, let me see what your guys are committing to in 2025, 2030, 2040.” And then all of a sudden, their eyes open up and, “Oh, how are we going to realize that, if we don’t have the right tools and everything?” So, there is a lot of momentum that have been building up in the last couple years.

Ray: Yeah. Because Mesbah, you described a couple of really compelling forcing functions there, right? If I unpack one, the business model component, where everything is as a service, right? It’s that SaaS business model is now in the consumer realm, in various factors from my Whoop band on my wrist where I didn’t pay for the hardware. And I just pay my $30 a month for my sub to even, various other products, right? Where we just pay for the sub and the hardware is free. So you’ve got some natural consumer driven, forcing functions already happening in the background, which is great for your business, but going down to say product development, or just the digital capability across an enterprise. What are some of the big forcing functions, which are picking up pace naturally within the enterprise, which are accelerating your business, which gets you excited in the morning?

Mesbah Sabour: So there’s a few. One of them is that indeed, that you’re rightly saying, product service systems and products as process service are becoming much more the norm, even within enterprise. Whereas it didn’t start that way, right? It was all mainframes, and a lot of on-prem. And now it’s getting much more acceptable to do everything as a service. And it’s rightly so because that whole development and that field has been maturing so much. And there is a lot of proof that these things can work and can operate safely. And then on the other hand, there is also a growing awareness of Web3, even within enterprise, I would say. There’s a lot of movements towards standardizing credentials and identity, et cetera, using Web3 principles or principles that are not necessarily Web3, but are very close to that philosophy of self-sovereignty. So these are very exciting things and there is a still to be honest, a lot of companies that we work with that have no idea. But there is also a smaller group of companies that are really… I wouldn’t expect them to be leading these efforts from a large, very international corporate perspective. They’re really leading in some cases, the Web3 adoption within their organization, which is really amazing, inspiring to see.

Whereas we were most of the time under the impression, a couple years ago that in the beginning, it won’t really be fully decentralized because a lot of companies aren’t ready for that, and they will be managed by others. But we do see very strong interest from enterprise themselves, towards Web3 concepts, when it comes to their identity management and then some of the credentials that they’re having. So that is very exciting, as well as auditing schemes and auditing bodies. Which issues, certificates, et cetera. There has been also lots of interest from that perspective, which is very exciting to see as well. I think it’s getting more into the beyond that level of basic understanding for most people now in this space, where initially the question was, “Okay, go. So, wait, what is blockchain,” right? “What is it even like? Can you explain me the difference between this and Bitcoin? And that question has luckily been less relevant recently, where most companies get a good understanding of that. And they’re moving beyond that towards better or more sophisticated concepts such as credentials.

Ray: Okay. So I just want to pit stop here, because this part’s fascinating, right? And this is a big part of Frontier3’s mission is unpacking this wonderful world. Because I share your sentiment, I think we are getting there and it’s exciting, but if I just benchmark, analyzing things on LinkedIn, in terms of views, likes, re-shares. Energy around Web3 posts, it’s there, but still not there. If you take 10 steps back and look at the wider community on LinkedIn, which is a brilliant community, right? Some amazing practitioners there who should be working in Web3 in my opinion, but have not even started their learning journey. So just to pause on your business model so, could you describe the very day and the very moment, where you are building Circularise, and it’s this… I’m guessing back then, a classic enterprise software play, and you get touched by this wonderful primitive, which is going to change the world and the blockchain. So could we turn that day or that week, or those months into a 4K definition moment? Because that would be great for the audience to understand. What was your, “Aha,” moment and why?

Mesbah Sabour: Yeah. It was a lot earlier than you might expect. Because again, going back to beginning of the conversation, the problem we identified was, there’s a lack of transparency in collaboration and trust in supply chains, leading to inefficient efforts towards the circularity. So then the next step is, “All right, how do we enable transparency and data sharing in complex global supply chains?” Well, you could do it in a traditional source model and then try to collect all that data and have a great experience for suppliers doing that and figure out incentives for all these stakeholders to start doing this. But then inevitably, you’re creating this central data bank of all that data. And without even going into that area, we ask ourselves, “Is that something we want to do? Is that something that companies would even accept that skill? Having this central repository of supply chain data.” Which either is going to be relevant data, and then it’s a gold mine, or it’s going to be irrelevant data, which we have seen in the past that it exists and then it doesn’t really help anybody, right? So that is kind of where we started. And early on, we were, “Okay, we need to have a solution for this.” And obviously one of the solutions that you can very easily come up with when it comes to a lack of trust is blockchain.

You can introduce trustless ways of handling certain transaction also, or the data points. However, it still doesn’t deal with privacy and confidentiality. And on a contrary, it makes the problem even worse because now everything is public. So that is why you could go into different routes and this is still very early days, within the first six to 12 months of the company, we were in this crossroads of, “All right, we can either do it on a central way, or we could do it on a blockchain way.” But then do it all privately and run the whole system and the consortium ourselves. But that really didn’t feel right, right? It feels like, you’re trying to something, but at the same time you’re taking away the most valuable aspect. Which was the decentralization and security aspects, and trying to put it in your own control. So then there was this whole gap over it, blockchain on itself, if it’s public, it solves the trust issue. But it introduces complexity, certain privacy, and confidentiality. And it’s the other way around with a centralized system, where you can solve privacy by essentially storing all the data and encrypting it, but you introduce trust into the system. So that wasn’t real solution, right? And that is where we started digging in deeper into the realm of Zero-knowledge proofs. Which was, 2016, 2017, very early days of this field.

And as we know now, everybody is now looking at investing in this technology. And we started looking in how this specific cryptography, Zero-knowledge proof cryptography, can then enable data sharing on a public blockchain without risking anybody’s confidentiality. So this was really the working idea, “Either we do it this way, or it’s going to have so many compromises, that it’s not going to be a tool that can be used globally, and achieve the grand mission. Which is enabling circularity.” Right? Our mission is not to enable traceability for a couple of companies. For that you don’t need blockchain. You need something that works, and it’s probably central. But if the mission is able circularity, at a global level, you can’t have a tool that doesn’t scale beyond just a couple of companies. And in order to have something that can… And I mention this earlier, we work suppliers who supply to virtually any market out there. The same materials that they’re manufacturing, they go to automotive equipment, they go to electronics, they go to consumer household appliances, goes to construction. It goes to medical equipment. It goes to the fashion industry. Imagine the complexities, right? And you can’t have closed private systems running these things. Unless the same company’s going to install 12 kinds of different traceability tools, each for every other customer that they’re serving.

So, given that mission of enabling global supply chain, circularity. You have to come up with a solution that does not make any compromises around trust nor any compromise around confidentiality. So that’s our initial thinking, very early on within the first couple of months of the company’s existence, “Either we do it this way, or we’re not going to be able to actually fulfill our mission. Never.” So, we took the hard route of investing in 2017, 2018, in Zero-knowledge proofs, and understanding that making a solution or an architecture solution around that actually resulted in a patent. So, which is still patent pending right now on specific previous application. And we’re rolling this out right now in a lot of different industries, primarily focusing on plastics and chemicals. But again, these go into virtually every market.

Ray: Wow. So Mesbah, you guys were early, right? So late 2016 talking, discussing, huddling as a team. And then 2017, 2018, unpacking Zero-knowledge proofs, rolling up your sleeves, and trying to build when a lot of those primitives, even now with Zero-knowledge proofs… I know that we’re getting there with the technology as a good promise, but what I’m hearing in the market, if you really look underneath the hood and speak to the developers, they’re, “We still got a long way to go.” Is that fair to say so? Actually before we geek out too much on Zero-knowledge proofs, because that can sometimes scare our audience. What is… Because Zero-knowledge proofs, when I quickly understood them, I was like, “Holy shit. This is going to change everything. It’s going to be massive.” But I want to pass the ball to you. What are Zero-knowledge proofs?

Mesbah Sabour: I had the exact same reaction. The first time you hear about it’s like, “Holy.” This is going to change everything. And it is important to understand that this is a technology that is probably going to change the face of any matter that touches privacy and confidentiality, not just supply chain has. It has applications way beyond supply chain and enterprise use cases. So the best way, I really tend to think about it from a very simple analogy perspective is, imagine you have a person who wants to buy alcohol. And right now the thing that we do is we force that person to show their identity. Which reveals a lot of data, right? That reveals their, birthday, place, it reveals their social security number, and depends on how the ID is made. And all kinds of different aspects that might totally be irrelevant for that exchange of proving, that you’re of a certain age to be able to buy alcohol. But that’s the kind of the best thing we have. Another solution could be to centralize it. Have some sort of a central authority, always in the middle, but that’s also very impractical, right? So then you get this realm of Zero-knowledge proofs. Which kind of introduces a very paradoxical solution saying, “what if you could prove that you’re of a certain age without showing your age?”

Or the names your knowledge proof is coming from, “How do you prove something without revealing any knowledge about that proof?” And on the first site it becomes… It’s almost like, “What do you mean? How can you know something without… How can you prove something without having knowledge?” It’s a paradox. However, it seems to be the case with Zero-knowledge proofs that this is definitely possible. So actually, if you look at the technology from a very first principle perspective, it’s very simple. It relies on game theory and probability. The way it works is that you can prove something with a mathematical proof without revealing the secret behind it. And in the case of the age with alcohol, you could prove that your birthday is of a certain characteristic, meaning it’s beyond a certain date, or after a certain moment without revealing the actual date. You just do mathematical calculations and then a proof of exchange between the two parties. And by doing that over and over again, you can prove it. So one of the easiest ways to explain this and that analogy has some shortcomings, but it works. Is that you can explain it with the game, “Where’s Waldo?” Have you ever seen this game?, You’ve got these pictures with all kinds of different little characters on it. And somewhere there is a character hidden called, “Waldo,” and he usually has a very distinct outfit. And imagine-

Ray: I’ve heard of the game, but never personally played it.

Mesbah Sabour: So if you Google, “Where’s Waldo?” You get all these pictures, it’s almost like illustration. A very, very simple, detailed illustrations of a random environment where those hundreds of characters. And one of them somewhere is a very specific guy, with this very specific outfit. And the game is almost a puzzle, where you need to figure out where this guy is. So one of the ways to prove that you know the location of this character in this picture, without showing the location, is to actually take that picture, put it behind a black sheet of paper and just cut out the location. Just cut out the Waldo’s character. Take that picture where he is, put it behind a black sheet of paper and cut out his location. So by doing that, you can show somebody, “Look, I know where Waldo is, because I literally put his picture behind this black sheet of paper and cut out his silhouette.” But you don’t reveal the location, do you? So that’s a very simple analogy of proving that something without showing the exact secrets to the thing that you know. In this case, the location of Waldo in a very complex picture of hundreds of characters.

So that’s a probably very long way of saying, “It is possible to prove something without revealing the secrets.” And that has been a new whole frontier in cryptography that is exploring, all right, “How can we then implement this in practical levels, where you don’t have to give anything as a consumer or as a business without proving something about about yourself or about the business.” And in our case, in supply chains, it’s often around supply chain data, transactional data, material composition data, and all potentially very sensitive information points. “How can you prove some of these characteristics potentially that prove that your product has been made from recycled content? Or proving that your product adheres to certain regulatory aspects and doesn’t contain harmful chemicals?” Without showing the actual chemical composition or without showing the actual full history of that products manufacturing.

Ray: Thanks for that context Mesbah, because when I first understood that primitive within cryptography, I was, “Wow, this is going to unlock the Zero-knowledge proof economy.” It’s going to be a whole sector in itself, right? Because the use cases are endless and I think that’s going to be so powerful for our audience, just to initially get their arms around this and then kickstart their research on YouTube. I recommend everyone do something, a16z, do a bunch of presentations, right?

Mesbah Sabour: Oh, yeah.

Ray: On explaining that what Zero-knowledge proofs are. So, that’s fascinating. So going back to your specific use case, and now looking at Utopia, right? We’re three, four years out, you now have gone through that learning journey or educating journey with your customers across various industries. What does good and great look like for customers? When you described the supply chain, I can imagine you might have a smart phone OEM saying, “This all sounds great Mesbah and team, but I don’t want my competition knowing X, Y, and Z in my supply chain, because that’s my competitive moat. We spent years building those relationships and getting that momentum. I’m never going to share that publicly.” That’s an obvious one, right? And that probably applies across all industries, but this holy grail of Zero-knowledge proofs and abstracting out an ESG statement, a regulatory statement, something which invites other people to come into their ecosystem because they can offer X optimization in a supply chain. This all makes sense to me. I can see how this would be an amazing vacuum for a big company to build on their business in terms of new revenue, hit certain goals in terms of ESG, build their brand.

Dude, this ticks so many boxes. It’s crystal clear. I love what you guys are doing there. It’s crystal clear in my mind. But where are we today in the reality, if you go to a customer, so I can see you’ve got amazing automotive manufacturers, some amazing brands as customers, where are we today on that blockchain capability? On actually them using Zero-knowledge proof capability. Are they actually using it today in a meaningful way, where they can express their entire supply chain and only abstract out key promises or key bits of data, which allows them to hit their ESG targets, their supply chain, economic targets, their business development targets. Are we there now?

Mesbah Sabour: So we are there yet. We are there already in certain closed cases. We’re not there yet as a generic model that is easily scalable across a full portfolio of ESG claims, as well as a very complex multi-tier continuous end-to-end traceability systems. That is really the challenge of the coming years to scale that towards that level. Today we can do it. It is often however, tied down to more simple claims, as well as relatively simple, or not necessarily simple, but short pilot based supply chains. We’re not there yet at a level where we’re working with a company like Apple, and all of their suppliers, which can be thousands, right? So that is really the challenge that we’re facing, in the coming years to really these operations, to that level. And we’re learning a ton of stuff, working with suppliers right now in closed environments. Where we’re talking about a couple of dozen suppliers instead of thousands suppliers. And that is really where we’re at right now, as well as, and we kind of touched upon this, Zero-knowledge proof technologies are really, really recent. Even though we started thinking about them in 2017 or even 2016, they were not at a level of production capable systems.

And there are some today that are getting to that level. And that has also, “What are the limiting factors, in getting this towards large scale environments.” Because a lot of these pieces are now coming together, the demand and interest from suppliers, as well as the technology getting to a mature level. So, in the coming 12 to 24 months are going to be crucial in terms of scaling these smaller scale, couple of dozen supply chain examples, and use cases to hundreds and even thousands of suppliers being connected into these environments. And then it’s going to be amazing to see the level of Zero-knowledge proof. So OEMs can do then, on data from thousands of suppliers and then build that into their reporting as well. So there is a lot of different things that we can do, and it’s really going to be extremely exciting because, this is like one part of it. But there is so much automation and that’s been the vision from the company very early on, without a proper infrastructure to share data and supply chain, we won’t be able to unlock a lot of the circularity activities.

And nowadays, now that ability to share data in a supply chain is getting closer and is becoming a reality. We can already start, dreaming about what this can unlock for circularity activities. Imagine products, having their own unique NFT almost, that can be used by OEMs, and brands, and suppliers for take back schemes and put them back into the economy. And have a level of traceability and sharing data that is almost impossible to even dream about a couple of years ago. So I think that’s really where it’s going to be super exciting, where you might even get offers from suppliers in the near future, they want to buy back your old products. And that all that stuff can only be enabled by the right level of traceability and confidentiality.

Ray: Wow, God. You took me down a different rabbit hole there now, Mesbah, when you talked about Zero-knowledge proof, converging with an NFT capability, right? So if I’ve used said product for… Say my Peloton, for example, I’ve used it for three years. But then they ping me and say, “Look, here’s a give back scheme and you get rewarded Ray with X, Y, and Z to participate as a customer.” You now even invite the consumers to participate in the circular economy, right? So the incentive structure is literally end to end.

Mesbah Sabour: Absolutely. And not just consumers, but also recycling companies. Where you might not be able to reach consumers in all levels, but in some products it might naturally end up at end of life collection centers. And then upon entry, there is a more a centralized way of scanning these end of life products. And instead of them all being processed in the same way right now at like a municipality level, you might have bids from all suppliers, all around the world, depending on supply and demand. Start extracting these resources back. And we’re talking with a lot of suppliers who are concerned about their future feed stock. They want to start making everything that they manufacture traceable today, so they can in the future take their own products back and put that back into the economy and recycle them and make new materials from their own materials. But for that, they need to know that it’s been their material. They need to know the quality, they need to have them traceable, and identified at the end of life so they can put them back into their own operations.

Ray: Yeah, this makes sense. Because what you described there optimizes a vertical integration play, tops that up. But also some folks who can’t vertically integrate because they just can’t, that gives them this additional piece of value as well too, to say, “Optimize the economics and optimize their outcome.” So God, it’s fascinating Mesbah how far we can go with this. But one other thing I was keen to unpack, because now our audience will look at this, right? So you described earlier that the challenges… One vector of the challenge was hearts and minds, within the customer base. Because at the moment you mentioned they are on board, but they’re using very small pointed use cases. Which is great for now, because you’re just landing and then hopefully you’ll expand. And then there’s a second part, which is just a pure technology problem. We’re not there with the Zero-knowledge proof capability, and some of it isn’t production ready or scalable. In a pie graph form factor. How would you split that, versus hearts and minds in the customer base, and a technology problem? What’s the split right now as we stand?

Mesbah Sabour: That’s a good question. I would say technology is less of a barrier. It’s probably anything between 20% to 30% of technology, and the remainder is not necessarily the hearts and minds of customers, I think that though the hearts and of minds are probably at the right place, is much more guiding them in a way that it makes this digestible, right? There is a gap that is in user experience. If you imagine yourself as somebody working at a big corporate that has tens of thousands of employees, hundreds of manufacturing facilities around the world, and thousands of SKUs, that all need tracking, and thousands of suppliers that need to be connected, hundreds of customers that need to be connected. And you’re tasked with something like this. It’s very easy to become extremely overwhelmed, because ESGs, that whole portfolio is, there are so many different elements to it. And I think that is probably the majority of that pie is, it’s very easy to get overwhelmed, and it’s very hard to have a user experience from, “Okay, this is a problem we need to solve it, to all right, this is the exact way to solve it for us.”

Because it’s such a complex, broad problem. Just traceability in general, enabling all activities around carbon emissions and [inaudible 00:43:39] So that is probably the biggest portion of the pie. Where their hearts and minds are probably just a few percent and the technology as well, the majority of it will be making the technology so easy and accessible, that we don’t need experts and super early pioneers who are willing to dive into the rabbit hole and understand everything themselves. Because that’s not going to scale. You really need a technology that is easily digestible, abstract away all the unnecessary things, and then speak to the heart and minds of the early majority. And the larger groups out there who are interested in doing so, but they’re not the group who’s going to watch YouTube videos on Zero-knowledge proofs and try to understand that. Those are the early pioneers and we really need to get serious steps towards also catering to the wider groups.

Ray: In a way I’m maybe already doing this now, and you and your team, but I’m just maybe visualizing a year out from now, or even this year. Where you get on a screen share demo with the economic buyer prior to that call, they were able to share some data with the team, with an NDA. So you can quickly demonstrate Zero-knowledge proofs without going too deep, and go, “Here you go. We’ve abstracted out all of the data, which you don’t want the world to know, but this is how it looks like in a graphical output.” And if I look at what you guys are doing, there’s a great business and maybe you can correct me from, but there could be a day where you could be… there’s a great business called Dune Analytics, where a lot of the dashboards are public, right? So they could one day be just an open public marketplace, where a company is expressing their supply chain, ticking certain boxes.

Ray: And then that invites the entire world from a B2B standpoint to go, “Actually, hmm, I should be working with those guys. I can optimize that part.” And that head of supply chain doesn’t even know it. This is a window into their world without knowing the knowledge, but just knowing the abstracted piece out. So the optimization capability is huge, right? Because you don’t know what you don’t know, right? So if I look at what Dune have done, they’re just inviting people to look at those dashboard. This is more from a capital allocation standpoint. But the concept could be expressed for what you guys are doing. So well, you guys could build something really special here. I think it’s a fascinating business. And so at the moment, what is your business model for our audience? Is it a SaaS type business model where someone would just subscribe for a year and pay in annual upfront payment, like software? What does it look like?

Mesbah Sabour: So our traditional business model has been very, very similar to what you just described. It’s a SaaS model where there is a fee per month that is being charged for companies to start using our system. We do have some very exciting new stuff that is upcoming, which I can’t publicly disclose yet, unfortunately. But it is going to be very exciting to see what new upcoming technologies that are going to enable us to do here. So I think at the end of the day, it’s all boils down to whether traceability and transparency, and the data that then makes something traceable and transparent. Whether that holds that value. If it doesn’t, then there is no real business, right? But if it is, if there is somebody in that supply chain looking for that data and interested in that data, I think that’s where the business model is at, right? So, we’re going to start experimenting with a lot of different models as well in the coming months, next to our traditional model, where there is a… because that also is easy to explain to enterprise. It’s a model where they’re paying a fee to access the system per month.

Ray: And just say, “Look, don’t worry about the blockchain. Don’t worry about Zero-knowledge proof.”

Mesbah Sabour: Exactly.

Ray: “It’s software. The rest, don’t worry about it.” I think Kevin O'Leary one of my favorite capital allocators, and he’s always doing great sound bites on YouTube, and now LinkedIn. He just goes, “It’s software. The blockchain is software, USDC is software, like it works with software rails.” I think that’s probably just a really thoughtful way of just cutting through all the learning journey. Because most buyers and enterprises go, “Okay, I get that, it’s software. It’s just a version of software.” So I think, that way of working it. So obviously you’re now using Zero-knowledge proofs, the blockchain primitive, where do you think you’ll be in two years’ time, in terms of your Web3 effect within the business? Will it evolve to NFTs, tokenizing, certain dashboards? Where are you guys heading, do you think?

Mesbah Sabour: I think in a one to two year timeframe, what we also want to… because to be fully frank, there is a lot of centralization in what we do, right? Even though we do use blockchain. We’re actually running a lot of our stuff on public main net ethereum. So we try to get as decentralized as possible, but there’s always some weak link somewhere. And oftentimes that comes down to wallet management and that stuff, where it’s still centralized and breaks the whole decentralization aspect. So I think that is really in a one to two year timeframe, our mission to become as decentralized as possible, at least for those customers who are willing and capable of running the whole thing themselves without any interference from us. And then if you look at maybe five to 10 year timeframes, I think there is a really interesting development where, there’s this concept in blockchain where everybody’s talking about, “Garbage in and garbage out,” right? Especially a supply chain, if you’re feeding the blockchain and the system with a lot of garbage, that’s what you’re going to be storing permanently, and temper proof, and immutably. So that will also get out of it.

So that is a different way of saying, “Quality data input is really important.” And right now, in all use cases that I’ve seen so far, that data input relies on third party certifications, auditing, and third party attestations, right? So I think in a five to 10 year timeframe, we’re going to see some sort of a fusion between Web3 blockchain enabled tracking databases, essentially, and Web3 enabled IOT devices. So imagine a manufacturing facility that is enabled with all kinds of IOT hardware and sensors, which report directly to the blockchain. Meaning that level, the quality of the data input is extremely high, because it’s coming directly from a machine to the blockchain. And it can be fully signed and sealed, and independent of human input after it’s been installed. Meaning you could get rid human input in certain cases completely. And there is no more garbage in, there’s just quality data in those cases. I think that is something that I’m excited about. The long term vision of five plus years.

Ray: That machine to machine flow is one of the holy grail, right? Because when it comes to data quality coverage governance, it’s an untouchable business model. That’s why we’ve had the team from Helium on the pod, which will be coming out soon. I love what they’re doing around connectivity and connecting manufacturing devices at the moment. I can see them only scaling and probably converging with what you guys are doing, right? So how you’ve got all these great businesses like yours and Helium, all one day partnering together. And that’s like a Venn diagram in terms of transferring value. So, Mesbah, today’s been brilliant, we could probably go on for hours in terms of building [inaudible 00:52:26] but I just want to say massive congrats. You’ve got a fascinating story, and I’d love to check in for part two, maybe near Christmas time, to see how far you have come. We are big fans of the business. So hopefully-

Mesbah Sabour: That would be great.

Ray: … part two.

Mesbah Sabour: Thanks again. Great for having me.

Ray: Mesbah, take care. Bye bye.

Mesbah Sabour: Bye.

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