Navigating New RWA Horizons: Rick Schmitz on Bridging Blockchain and Traditional Finance

Foreword So far, this is the third and last interview of my mini-series about interviewing industry leaders. So far, I have had a chance to have a conversation with James Whitehurst, the former CEO at Red Hat and IBM President, the interview of which you can read on my personal page , or the ongoing interview with Dr. Yonatan Sompolinsky, the founder of Kaspa, inventor of the blockDAG PoW paradigm, and member of the blockchain trilemma solving team. mickeymaler.com I have been interested in interviewing Rick for some time now, and his motive toward DeFi and RWA made me pull the writing trigger and compose a few questions for an industry leader who excels in applying blockchain technology in business and corporate solutions. Rick is also a founder of several companies and manager of a few successful startups. Thus, this text can provide a lot of useful information for those who seek the information needed to start their own game. Introduction Rick Schmitz, the CEO of LTO Network, brings a wealth of experience in blockchain and distributed ledger technology (DLT) to the forefront of the industry. His focus on bringing blockchain into business operations in blue chip corporations and governments across the globe has given him an edge to dream even bigger. Rick hit the bull's eye with his new approach to bridge liquidity from the blockchain world into the world of traditional finance and vice versa with his new ownables approach. Before founding LTO Network, Rick Schmitz developed a versatile skill set in technology and entrepreneurship through software development, project management, and business development roles. A well-regarded figure within the blockchain community, Schmitz's efforts in cultivating collaborations and partnerships and supporting blockchain advancement initiatives — including his work with the AI-generated imagery project, DALL·E — highlight his commitment to pushing the boundaries of technology and sparking meaningful industry evolution. Rick studies law with a specialization in M&A tax. This gives him a unique insight into many issues that have been quickly gaining relevance in blockchain technologies. Perhaps most notably: “What are the legal possibilities for bridging real-world assets to crypto?” This is the big question you need to address anytime a project touches on topics such as corporate finance, venture capital, and, on the other hand, tokenization. This is where LTO Network shines, designing unique tokenomics, blockchain implementation, token governance, and all other DAO aspects that are not just innovative but potentially game-changing. Rick's and LTO's collaborative efforts have led to the development of blockchain-backed solutions that are not only technologically advanced but also revolutionize real-world applications. Rick's past technological achievements have also contributed to this evolution, whether through his career at Delloite or his creation of Firm24.com, the largest European platform for setting up companies, securing legal contracts, and connecting with lawyers. My Two Cents Rick’s close ties with influential figures who have been there from the very start, such as the CEOs of Polygon, Chainlink, and Curve, and his extensive network in the real world keep him abreast of emerging trends and pave the way for fruitful collaborations and strategic partnerships. This network, a testament to Rick's influential stature, significantly enhances both LTO Network's market presence and his own leadership journey. Under Rick's guidance, a humble startup has come to generate over 10 million USD in revenue within a decade. This underscores his exceptional leadership, strategic foresight, and unwavering dedication to growth. Rick's relationship with regulators is a testament to his pivotal role as a bridge between groundbreaking technology and the necessary regulatory frameworks. His proactive involvement in government projects and regulatory advocacy underscores his commitment to compliance and policy development. This commitment safeguards the industry's future and fosters innovation within a conducive regulatory environment. Rick is a smart, high-energy, hyper-commercial go-getter and a hobby kickboxer. A person who makes connections and helps people cooperate to increase outcomes for all. A real crypto OG that spots opportunities and invests in projects that are complementary to his LTO Network from either a strategic or investment perspective or both. A very social person with a high propensity to win people's support. He’s also a very smooth talker who sometimes comes across as a little salesman-like, but he knows his craft to the bone when it comes down to business, accounting, tax, and running a company or managing start-ups in general. Join us as we delve into the journey, challenges, and insights of an industry leader dedicated to integrating real-world use cases, business needs, and legislation with blockchain technology. Phase 1: How It All Started Out? Hello Rick! Thank you for agreeing to the interview. Let's get straight into it. So, what motivated you to start your blockchain venture, and what impact do you aim to achieve in the industry? We didn't think about starting a blockchain venture until we saw a competition from the Ministry of Justice to automate processes across multiple justice system departments. Data needed to be kept private (each in their own silo), legacy systems remained being used, and data was super sensitive. We thought, wow, that's something for our new deterministic workflow engine. When we won, we launched it as a separate project - a hybrid blockchain for process automation. So, it all started with automation and orchestration, but then it expanded towards anchoring verifiable credentials, DIDs, and cooperation with the United Nations. Can you reflect on this use case expansion and what you learned? A lot of this tech wasn’t there in the beginning. We had a dream of bringing a blockchain network to the market that could handle sensitive business data. Nothing is more sensitive than land registration. While the initial use case here was a bust due to the events that transpired in Afghanistan that we all know about, it showed the world and proved that our network can handle something of this magnitude. From there, we built all the bells and whistles, DIDs, Verifiable Credentials, and so on... But what that showed me is that we have something here that can really make an impact and change the game. Can you discuss your startup's significant challenge and how you overcame it using blockchain technology? What upcoming blockchain trends will significantly impact startups in the next few years? Our Firm24.com platform, which I started in 2012, needed a qualified signature. It also needed to comply with the highest authentication standards from a Dutch notary law perspective and be 100% authentic. We solved that by implementing blockchain (Bitcoin) timestamps on the documents to provide immutability. This was back in 2014. DeFi will make the biggest noise but differently from how it did in 2021. In 2021, there was a full focus on AMM/farming/staking, etc. I think the new DeFi trend is more looking into replacing the old TradFi structures. This generation is not bringing all their money to the bank anymore; they are allocating part of it to crypto. This allows for more TradFi solutions in a crypto jacket. How do you foster a culture of innovation and adaptability in your startup and companies? We have Innovation Fridays at the office. Half the day, we work on something cool that has zero to do with making your work sprints. Many cool innovations emerged from this, including , a distance app for Covid/Proofi; Ownables was actually one of these things that was more of an idea being made as a thought process exercise of legalfling.io “How would we make NFTs better?” What advice would you give aspiring entrepreneurs looking to enter the blockchain space? Learn on a medium-sized project first and make some airtime. Getting big in this space is difficult if you are not connected. Phase 2:Blockchain and RWA Integration What will be the game-changing feature or advantage determining the success of projects focusing on real-world assets (RWA)? Understanding the frameworks required to make RWAs actually worth something in the digital space. Many people are interested in tech, but when I look at the future, I see a technology that, if not implemented right, will become a problem-filled instrument. So, RWAs in blockchain need to ensure the tech is rock solid, but they also need to handle the legal and regulatory aspects to have a green light on all fronts. How would you describe the current blockchain DeFi RWA scene? Do you believe something is still holding this movement back? There’s clearly a lot of interest, but it’s too centralized. Nobody has figured out how to do this in a way that means the RWA is protected from the central party disappearing. This is where we come in; we have a fully decentralized system that solves all of this. It’s not the other project’s fault; it's just that they don’t have the tech or the networks to solve this. Our Layer-1 network has a privacy layer that allows the asset's true value to be recognized. From a legal perspective, what actions are necessary to enable a user to tokenize a property in their possession and subsequently act upon it, for example, by making investments in assets such as a bar of gold, a stake in Private Equity (PE) that invests in cryptocurrency, or a stake in Venture Capital (VC) funds that invest in cryptocurrency? There are a couple of hot topics in this question. First of all, you need to make sure that the tokenization is done through a DAO. The ‘middleman’ entity that gets the VC/PE tickets assigned cannot tokenize or offer them to the public. Also, the middleman entity needs to be an accredited investor; otherwise, the PE/VC funds cannot be allocated to you. Last but not least, a DAO-appointed director should be ensured to operate on behalf of the DAO. This is for a legal action that the middleman entity needs to do. These include tokenization, distributing the proceeds to the token holders, executing capital calls, etc. People often discuss Real-World Assets (RWA) in blockchain as the next significant development, yet many may not fully grasp its potential. Why should we be interested in RWA, and what are the most common misconceptions about RWA that you have heard recently? The fact is that RWAs and blockchain are perfectly aligned to be the next big disruptor. So many assets are parked and not achieving anything useful in terms of liquidity on a daily basis. And blockchain is looking for things to peg itself to for yield that hold measurable value. Once people realize just how powerful this combo is, it will eclipse the entire DeFi and crypto market as a whole. Can you describe one RWA operation that would demonstrate what is currently possible on LTO Network and how the world can benefit from its strengths? So, you can legally verify and claim any RWA on LTO Network using our architecture and Tokenization platform should the need arise. This is because it’s fully decentralized, and we have a system that allows RWAs to be brought onto the blockchain and allows RWAs from the blockchain to be pursued in the real world. What was the biggest lesson the crypto world taught you during your career? Liquidity is king. It doesn't really matter what your token price is doing; as long as you have liquidity, you are sorted. Also, price action is the best marketing instrument. Oh, yeah, last but not least, at a certain size, the project is bigger than the person behind it. To finish this section off, what is your vision for crypto? To demonstrate that crypto is serious, its long-term value will be in use cases that bring real utility and solve real-world problems. There are many problems to be solved in identity, such as bridging liquidity from TradFi to DeFi and vice versa, and many business solutions that use crypto in their end-user solutions. But what's the biggest use case so far? Crypto equals casino. That's still the best use case for them all. People are investing to make money and go wherever the yields, returns, or gamble on an x100 are the highest. Phase 3: LTO Network What distinguishes LTO Network (LTO) from the competition and contributes to its success in this area? From the outset, we have been focused on solving real-world issues, whether less glamorous topics such as reducing the logistical overhead for inter-border waste management or solving land registration problems for countries where corruption is an issue. Our goal has always been to solve real problems. How do you plan to utilize LTO’s strengths to their full potential, and what are your strategies for addressing aspects that still require improvement? Our blockchain network used to be a decentralized blockchain for our own projects, but we have been working towards a more open model where our network is used by other projects and even other blockchains. The Dapps on our network now offer a range of tools that solve broader issues such as identity, digital ownership, and privacy. These tools are now usable for people outside of our organization, so this is how we will implement the full strength of LTO Network by being a powerful operator in the real-world utility space. What was the most challenging task when developing the hybrid blockchain model we now know as LTO Network? Our main challenge has always been not following short-lived hype trains but instead focusing on developing a project that businesses worldwide need to solve their needs. The crypto space has so much noise that it’s easy to get distracted from your goals. Keeping a firm eye on the vision while ensuring that we evolve with the rapidly changing scene is what we excel at. Are you more in favor of cooperating with other blockchain platforms, such as Ethereum, or would you rather develop one comprehensive solution under one roof on LTO Network? It's best to work together. We all have open-source technologies, and working together saves us from wasting scarce development resources. Better, take something from the shelf that works well and implement it. In software development, that is the new way to go. It's the era of super niche. What future development would you propose for LTO Network, and why? We have always been about bridging solutions from the crypto space to the real world. We will keep on doing that, but this time, we are adding a little bit of spice and casino style to the mix. How do you think the LTO Network and its competitors will evolve under the current market conditions, and why? I think treasuries are bulking, and that's good for surviving the next bear. I've seen three so far—probably not my last. Do you guys occasionally agree on a certain blockchain solution but forget to consult this with Arnold or Sven beforehand? Thus, they need to say, "Yeah, sure guys, the devs will figure it out; keep planning. :)” Yeah, that always happens in sales processes (over-promise features) and with new tech features on the roadmap. Things take more time than biz devs and sales guys think. I learned that the hard way. What are blockchain technology's major challenges and limitations, and how can they be addressed with LTO? Web3 needs a seamless identity solution for all sorts of online actions. Think about opening an account at an exchange, opening a bank account, proving whitelistings, etc. LTO’s technique of verifiable credentials (proofi.com) solves this problem. What other blockchain solutions or innovations leave a lasting impression on you? Our latest solution for bridging real-world assets (RWA) on a chain is extremely cool. You can now tokenize everything in a so-called “ Ownable” and hold/trade and consume these in your wallet. Is there a blockchain flaw or screw-up that you are glad you can only learn from and not repeat yourself? Yeah, there are so many scammers in this space. Before you know it, you are wiring cash to the wrong person. That deffo happened. Be aware. Anything regarding LTO Network that ended as a good move, however, today, you know it could have been done better or more innovatively? Captain hindsight is always right. I think we made too much stuff ourselves where we could have better integrated existing solutions and focused on the core things. But I still learn every day. Phase 4: Startup, Entrepreneurship, and Technology Adoption Challenges What was the hardest decision you have ever made as a founder? Massive layoff during Covid-19. I protected the company from potential bankruptcy at the cost of laying off people who put their hearts and soles into LTO. In hindsight, I was too fast to make that decision. What is the blueprint for a successful startup? First, your core team needs to be rock solid. It's best you do it with people you work with or have worked with before. Second, access to capital. You need at least EUR 1m to make a splash in the blockchain scene. Last but not least. Community first. That is the key to success. Don't even start/launch your project without an active and loyal community that believes in what you are trying to accomplish. What advice would you share with those founding their companies or about to do a fair launch? Exactly the same as in the answer above, ser. When businesses wanted to adopt blockchain solutions, what was the major problem holding them back? The world of the unknown. Bitcoin is for money laundering. How do I know my data is not in the blockchain? These are questions I dealt with over the last few years. This educational part is the biggest hurdle to implementing blockchain in business solutions. Many times, it stays in that state. Can you share an example of a blockchain project you led or contributed to, focusing on the outcomes and lessons learned? I guess you have plenty of vital tips gathered throughout your career. Liquidity is king in crypto. I have helped many projects with their listings, including VIDT, Gearbox, Florence, YOM, etc. That's what really matters in terms of making it in this industry. Imagine a new startup or company approaching you, willing to build their solutions using blockchain, and would like to have you as a consultant. What would that process look like? I hold advisor positions for new innovative projects. It's always nice to help fellow crypto entrepreneurs. Sharing is caring. You can always send me a DM with your deck. How do you stay updated with the rapidly evolving blockchain landscape, and how would you apply new knowledge to the advantage of a startup or a blockchain-backed company? I go to conferences, talk to VCs, and read up on new stuff my team sends me. This is a 24/7 job. Educating yourself constantly will help you see the direction the world is moving in—not only in the Web3 space but also from a geopolitical perspective. The new drivers behind this bull are ETFs, Institutional money, Conflicts in the Middle East, Russia, and Ukraine, elections, and interest rates. There are so many factors that come into play. Shower yourself with knowledge. Phase 5: Personality Imagine you're at the grocery store when a charismatic 27-year-old woman approaches you. She holds a Rolling Stone magazine featuring a creatively altered version of your LinkedIn photo. She inquires, "Could you demystify the term tokenization of something touchable in the simplest terms without delving into technical jargon?" First of all, this strikes me as a pretty unlikely scenario. If you were to say a 27-year-old guy who plays World of Warcraft, I would consider this a probable case. But let me try to answer it anyway. Tokenization of assets is nothing more than shared ownership or mortgage-backed financing. The only difference is that your mortgage is split into many small pieces, each worth 1 USDT, instead of the whole mortgage at one bank. Got it, Rick. How do you maintain a healthy balance in your life? Can you share some biohacking practices you have discovered over the years? My grandparents are 95 and both active and kicking. Try to move every day for 30 minutes. It doesn't have to be a proper workout; you just have to move and stretch. Eat less! Enjoy life to the max. Amen to that. What can you tell us about the things you are passionate about? I love traveling, meeting new people, eating in good restaurants, and kickboxing. Can you share a photo of your library and tell us your favorite pieces and the most inspiring book you have ever read? I don't have a physical library; these days, it's all in the eReader. I love Michael Lewis' books, such as Liars Poker, Flash Boys, and The Big Short. But the most inspiring book I ever read was The Count of Montecristo. It's about ultimate betrayal and how the sweetness of revenge tastes. It's a must-read. Can you tell us something about the most adventurous trip you have ever made? Yes, I was in Sumba last year. It is a very remote island in Indonesia that has been untouched by tourism. It is way bigger than Bali and Lombok, which makes it even more impressive that they managed to keep tourism out. I have never seen more beautiful landscapes in my life. Rick, do you have a personal motto or motivational ideology that helps you reach new goals? I have a can-do mentality. For everything out there, a solution is at hand. I never take no for an answer; if I really want something to happen, it will. I love to surround myself with smarter people who challenge me. The best day for me is one in which I learn something new. I try to do that every day. It can be a small thing, as long as it is something new. What kind of advice would you give to a young Rick Schmitz now? You have nothing to prove to others. Be the best version of yourself. What would you do differently if you had the chance? I don't regret any choices I made. They all lead to a certain state in life, and if there is something that you are unhappy about, then you can alter that state by changing the course of action. I'm not talking about health issues here, but just the state of life. Thank you for your valuable responses. The end.