Cultivating Innovation with Dawn Newton - Co-Found

What is up guys welcome back to another episode of the Dippy Crypto Podcast. Today I am joined by Don Newton the founder and COO of Netkey. How's it going Don? It is going great happy to be here. Excited to have you. So before we dive into Netkey and kind of what you guys are working on. Let's talk about your origin story. How did you get into

this space kind of now being called Web 3 and formally crypto or both if you want to call it that but how did you get into the space? Right well I will be a self admitted dinosaur because I'm older so I was Web 1. I was in college and unhappy board really. First person and either side of my family to go to university because my family

was always working class and I can say that they were beyond thrilled that I decided to drop out and go work on this thing called the internet which no one you know understood. And I just went into it because I really thought it was going to change. It could have been wrong but it did. I liked the fact that it was going to democratize information. So

I started out early there and then wound up going and working at Net Zero which was the first ISP that was free and they were taking on giants like AOL and Microsoft and people were saying their founders were just absolutely nuts. How could the internet be free and they wanted it to be ad supported and what I really wanted to do was to get into the

space and I was like, I'm going to go and do it. What I really liked about that concept was equal and equitable access to information. You know that the internet should be available to anyone provided they could have a computer. And we achieved that. We went up to having 12 million users. We competed with the big dogs. We were beating them at their own game. And

that was really exciting to me. So after building and scaling that it was a lot. You know I went like just my department alone. I went from having you know four people working for me when I walked in the door and then when I left two years later I had over a thousand people reported directly into me. So you're talking about like rapid massive scaling. So

I quit and went to culinary school. And I said with regards to technology never ever again. You know the famous like Sean Connery statement. He was never ever going to do it again. And my co founder of Netkey has sent me the Bitcoin white paper he had been to a conference in 2014. It is absolutely on fire. This is the new thing. It's going to be

huge. You know you got to read this white paper. And I'm like, nah, that's not I don't I don't need to read the white paper. And I'm super glad that you found something that you're really excited about. But I'm good. And you know kept just being like no really really exciting. And so you know fine. I was like fine. I'll just read it just to you

know a piece him and I read the white paper. And I'm just sitting there. And I am you know F bombing underneath my breath. Just F F F F F F. And he's like what what like thinking I'm finding something wrong or you know there's a you know flaw. And I'm just continue to shake my head and F F and and he's like what what. And

I'm like. You're right. I'm like. We have to do it. We have to do it. And so you know the things that he and I he and I also used to work together in that zero. And so you know what our forte is is rather than looking at you know what Bitcoin was going to solve because we understood what it was going to solve. Our forte

is figuring out you know where you know new technologies are going to experience problems and work to solve for that. So kind of doing that you know rather than mining for gold you know right rather than mining for the new gold. We were like you know how do we create the pickaxes and the shovels that this community is going to need to have this thing really

accelerate forward incredibly fast. And for us that was you know identity was going to be able to how do you get you know everyone on the globe onto this platform successfully. Nice nice yeah I like that you kind of were dropping F bombs reading the white paper realizing how transformational it is. I think a lot of people experienced that and the difficulty was the initial mind

melt of reading it and sticking with it. I think a lot of people saw and we're like oh this is going to be great. Hopefully some smart people take it and do something with it. And it's it's cool that you kind of you know it's cool. We're stuck with it and in the space so let's talk about net key and how that came around with you

know your team and how that idea kind of came came to reality. Right. So you know we started to talk about it right is like where you know where are the nasty hard to solve problems going to be. You know to get people you know just you know average genes average Joe's to you know use this. And be on board it. And what we saw was

identity you know just like it and then zero we were not the first ISP out there but we were a transformational ISP because we made it free for everyone. Was like how you know where are you know where are the flaws in the matrix that exists today. That are going to be you know problems with having a global currency a truly global currency. And you know

what we what we saw was. We saw that there was around identity and with specifically with identity it was on a couple of key things. And you know those things are. You know one being able to read IDs around the globe. Because they're all not written in English and the current identity providers that are in the space because they were, of course, in the space because

they were reading identity for banks. You know and there's there's banks everywhere. But what the you know deep. So what I thought was was reading them in English and in taking the passport you know so they don't read Cyrillic and they don't read Arabic you know and they they don't read you know anything that's not I should say not English sorry let me correct myself Roman

character based. You know so they could read Roman character based IDs but outside of that they can't read anything else. And so that was something we you know wanted to tackle ASAP was being able to read. Identity documents in every language for every country because so many people do not have passports outside of the US and the EU. And if we're truly going to be inclusive

you need to be able to read everybody's identity. So that was number one. Number two what we wanted to tackle was the you know facial recognition algorithms. So if you're going to remotely identify somebody like if I was going to remotely identify you right I need to take your ID. I need to take you take a selfie and I need to be able to marry those

two things and say okay yes Steve is indeed Steve. And what we were finding is that and it's known to everybody it's public information. The current you know algorithms that are out there in you know in the public are you know bias they don't recognize people you know what are the most recent things that happened like you know during the pandemic in it last year was

that you know black man. And in the US went and bought an iPhone and he said it to do facial recognition the unlock and then he lost access to his phone because it could not recognize him as a human being. And so we wound up you know hiring you know technologists that we're going to be working heavily on you know facial algorithms and we created our

own started out with the ones that were public facing you know found the flaws and then worked on creating our own to be truly inclusive. And our first customer we did was bit out of Barbados and they they were early early days you know founded in 2014 and they wanted to get you know all Barbadians to have access because I over I think over 90% of

Barbadians did not hold bank accounts and they were you know a cash economy and you know Gabriel bad who founded the company who now you know as as a as luck would have it is the ambassador to the UAE you know for Barbados really believed in inclusion and specifically you know sought us out to ensure that we could identify the citizens of Barbados. And then lastly

the thing was and it still stuns me you know today is that you know I don't know that you know people are aware but English is not the only language spoken in the world. And so one of the things we laser focused on was you know having our you know app and our SDKs which go into you know other people's I recognize the the language setting

on the user's phone and the best and easiest way to onboard people especially if they're you know older and not really you know super savvy with all the apps speak to them of their own language. You know it's much easier to do that. So that's a great way to get here for them to be successful in getting on board it if you're talking to them and

coaching them in your own language. So that was pretty much our three things that we looked at. In order to onboard as many people to you know Bitcoin as we possibly could and other you know cryptocurrencies. Beautiful. Beautiful. And what stage are you guys at right now is it live I mean it sounds like you do have users coming. Yeah. Yeah. Thank you for asking. It's

been live. I'm not sure if you're going to be able to do that. We were live in 2014 and took on you know bit which was our first client out of Barbados and we're very successful with them. Most recently we got called in after the Chivo launch in El Salvador. You know by the the president and the people he tasked with running the Chivo wallet to

you know come in and help them get all of their users on. And so we went and you know we scaled our network by seven acts in a matter of weeks because we came into the project late which was you know it insane to have that level of scaling. And then we went and put four million people on the Bitcoin blockchain. You know we validated four

million users and then bits so who is a partner that are the ones that are doing the transactions. They just confirmed I think last month that two point. Six million users are still active. So that is a 65% take rate on a nation. They sent new technology brought into a country. I mean and that is just astronomical and speaks to the power of changing the financial

game for these people because over 80% of them had never had a bank account a traditional bank account. And think of that. About that for the first time these people had a positive balance inside an account. They are able to you know participate in a global you know financial ecosystem. And for them you know Western units an example charges 12%. So and when you're sending remittances

the remittances come mostly from the U.S. and from the EU to El Salvador. And you know people that are sending money to the EU. They are not sending thousands of dollars. So the rates then go down. They are sending like a hundred bucks at a clip. And Western Union takes 12 dollars. So they are getting 88 dollars sending to sent to them. Now with Bitcoin and

the fact that there are no you know no fees being charged to them to the recipients. You know they are not getting any charges at all. They are seeing a hundred dollars instead of 88. And when you are talking about a country like El Salvador. You know 12 dollars you know feeds a family of four for an entire day you know. And so it's a game

changer for them. And so it's fantastic. And then to see that the president is now talking to 40 other countries that they just had the summit. I think it was two weeks ago. You know you're talking about being able to significantly change a country's directory or trajectory. That I don't think many people are aware of. Do you mind if I keep going on this a little

bit? Oh yeah go for it. Go for it. So you know one of the things because I'm an early internet kid. You know Singapore had a 70% poverty rate. You know back in the in the late 90s. You know when the internet was being when the commercial internet was basically going public. And the leadership there was incredibly strategic took a gamble. But we're incredibly strategic and

they said this is going to be a big thing. So what they focused their funds on was infrastructure for the internet and education. And you then saw you know the countries trajectory do that like hockey stick with a VCs want to see where it just was consistently up into the right up into the right. And now if you're going to you know open a you know

tech office. You know over in Asia or establish any kind of presence in Asia. You know we're going to be able to see that. Where are you going to go? Where are you going to build? You're going to put your office in Singapore. And so they really you know lifted their you know country out of poverty and changed its trajectory. By going all in on a

new technology. And I think that you know president bouquelet and clearly other. You know leaders in Latin America are seeing that you know Bitcoin can do for them and digital currency can do for them. What the internet did for them. Yeah I like that comparison. And the idea that you guys were working with the Chivo wallet with the El Salvador concept is awesome. I didn't know

that. That's really a groundbreaking kind of example. And I remember reading about it. He was in January. It was it wasn't too long ago. Yeah. Yeah. And I guess from the the provider side. When you see all of a sudden millions of people coming through the system. What was kind of a bottleneck that you weren't expecting? Was there anything that that popped up? I mean I'm

assuming there is but. What's something you could share that you guys identified was preventing people from using it or maybe that helped people using it but something you didn't expect when that happened. Yeah I think that you know in hindsight the only thing that we saw so usage was great. You know once once they got online. You know usage was actually great. I think what we

realized is that while we were we were absolutely speaking Spanish to people. You know one of the things that we're going to do as an improvement is show a little video. Because one of the things we said in the instructions right on the on the screen of the app was to you know take off your hat take off your glasses take off your mask. And yet.

What we saw was not a lot but enough people you want them to have a smooth onboarding process and you want them to be a sex sex successful the first time. And what we saw was hilarious people with you know not that the hat the glasses and the mascot and with all of that we can't identify you whatsoever. And so we had to tell those people

you know that they failed and they had to go through again. So that was a learning experience for us you know especially in the time with you know people having masks over their face it covers such a significant portion. So that's one of the improvements we'll be making is to like a little video. You know whether it's a cartoon or some of these actual face to

show them taking off the hat taking off the glasses taking off the mask so that they can you know do do the selfie. Yeah. It was funny that we noticed the just as it's hit a bit older generation we're also going to show them like that this is a selfie because well the younger generation knows how to take selfies and you know and then and then

what a kind of like front-on picture was it was really adorable to see some of the older generation understand what they're clearly like their grandchildren talk them and so they were doing like the profile of their face with their eyes looking up. And it's really super cute and what we need them it's like no no no this is one of those times we need your full

face and and don't you know don't send us the glam model shot. We need to identify you. That's funny. And you guys are you did that kind of partnership. If you call it a partnership in a way and as I understand it you're doing this for corporations as well as this is there a model where you do this enterprise with businesses that are thinking about using

crypto. Yeah yeah absolutely so we you know kind of like our our equal opportunity no matter you know what what the product what the project is so you know the Chivo you know is a is a huge you know contract where we work with government we'll work with other governments but we work with you know other platforms like Hedera is one of our clients on polymath

with the poly mesh network is one of our clients you know so anybody with any kind of idea idea or concept where they're going to me to you know on board users and identify them you know from the for their project using blockchain is what we'll do and then the other thing you know that that people don't realize you know my co founder and I are

you know huge privacy advocates you know we've we've gone to actually you know protest to you know restore the fourth kind of you know and you know we believe that in the future right the legislation doesn't support it now but you know I personally really like where the EU is going where you and I should be the owners of our identity and like not like the

Facebook of the world you know owning our identity and we should have a lot of choice and so we can't say who but we are very very very pro self sovereign digital identity and we're working with you know one project that has a lot of content has you know an unbelievable booji crypto you know founder working towards that and that's something that we would like to

to be giving your ID that shows exactly what your you know what your address is and all of this other you know personal identifying information the bouts are only cares that you're over 21 and that's the only thing he should need to know and so I like the idea of being able to parse out you know bits of data and only share a portion of it

rather than sharing you know all of your identity information and throwing it over to the wall to these places who have shown us by and large that they're irresponsible and holding it. Yeah and I I like the concept that you know technology kind of being this this valuable aspect of our lives and privacy almost like a spectrum that you control how much technology you want to

augment what you're doing and I think that being able to kind of like you said throw just an age and not anything else. To get into places and not just throwing everything you have at them make the lot of sense and I feel like giving people that control over how much they're comfortable with kind of augmenting their life with technology as it gets more and more

intense. I think it's it's a really cool cool concept. So what's next for you guys I mean you've been around since you said 2014 was when you were getting started. What's what's on the screen? On the horizon for for Necky. Yeah that's a great question. So one of the things that we so Michael founder and I he started the Internet Service Provider's consortium which was the

first trade association for ISPs back I think he did it 97. And so you know and the sole purpose of that was running towards regulators instead of running from them. Back in the day it was you know there was so much spam coming down that and I don't know people were you know would remember or know right back. You used to pay for local calls. Those

were charged and the farther out your local calls were by miles you paid more and more and more. And so when spam happened you know people whose you know phone bill was normally like 20 bucks were getting hit with phone bills that were 750 dollars. And you know Congress was up in arms you know because citizens were getting hammered with these bills that they won weren't

aware that they were going to get you know get you know dropped on them and two couldn't afford to pay. And so Congress's solution back then was they were going to ask every ISP to identify every single user you know validate that you're you and I me. And then we were going to have to be you know like I was going to have to be dawn

dot newton at a well dot com and I would not be allowed to be anonymous and that was there you know solution to combat spam and back then there wasn't a way to do remote digital identity. So this was going to have to be that every single ISP we're going to have to have brick and mortar buildings all over the US for people to come in

like they used to go into the bank to identify that would have crippled that would have crippled these unanimation. We couldn't have been able to afford it. There's absolutely no way. And so the industry themselves came up with a way to deal with spam and worked with the government you know with Congress to educate them and and back off. And so we do a couple of

things you know one we're talking to regulators they want to do this travel rule. Which for people who aren't you know familiar with the travel rule what it basically says is that any transaction over three grand that identity information is exchanged in full between the providers for the individuals of the transaction. So Steve if I was going to send you three grand right in Bitcoin my

bank would take all of my PII and their identifying information and send it to your bank. Your bank would then review my information they would run anti money laundering on me and determine whether or not they want to allow me to do that. Allow you to transact with me and then if they say yes then your bank would send all of your PII and their you

know and their identity information over to my bank. My bank would run you and run all of your AML and see if they want to allow me to do the transaction and then it happens. Now mind you all this happens in milliseconds like instantaneously and yeah you're nay and this is going on it's in the bank secrecy act and it's you know been law for. Decades

and they want to you know governments worldwide want to put that on to crypto and because a lot of governments are nervous. About you know crypto currency they want to lower that not just from three grand they want to put that to you know a thousand thousand dollars someone to put it I believe it's. Switzerland I'm not 100% sure one of them wants it to be

anything you know anything any amount. And so right now the industry is wholly unprepared to handle that you know and and that is where the governments are leading to and they're starting to write regulation for it so where my co-founders sweet spot is is that he always knows he's got a great gift for knowing where regulation is going to go and preparing advance and so you

know ripple got a consent to create back in 2020 14 I think for not following the travel rule I've got find for that and it was right then in there that my co-founder was like they're coming they're going to come for crypto on this it is absolutely going to be a reality you know whether that's tomorrow or you know a decade from now they're they're going

to come so you know he went and created a BIP for the Bitcoin blockchain but it is agnostic and works for all you know blockchain so it's going to be a real deal. It works for Ethereum etc where you and I can exchange information privately not on team but can kind of do what the banks are doing where that information is sent privately encrypted you know

different comms channel the decision can be made between you and I or you you you you know by me we're up ready to do the transaction with each other and do it so you know that that's something that we're working on and getting it together. So we're getting information out right now to you know all the exchanges all the wallet providers the scary thing is is

that some of the governments are saying that it has to also include non-custodial wallets it's not just going to be you know the wallets that are hosted what we call hosted they call it non custodial but you know that's a huge thing that could cripple the industry you know if it if it goes you know into law and they give us that deadlines and so that's

something that we created in advance already and that it is working and it's just about spreading awareness. The other thing I think from a positive standpoint is that in doing this right I will be when I put in your information it will come back to me on my screen that you're you so we won't have this whole I've got to send you dust before I send

you a 10,000 dollar transaction so I think that you know while the regulatory side of the thing is driving you know creating this I do think the flip side positive side of it is that it could actually then drive adoption because a lot of people are afraid to you know get into the space because of not easily knowing who the other person is on the side

of the transaction if they send it to the wrong place they can't get it back and so I think that's not the right thing. That will make people feel much more secure if they turn around and they pop the you know pop the address in and then it comes back and it says oh that's doing good that's who I wanted to send the money to confirmed

and then they can hit said nice yeah it's good to go where the puck is going as Wayne Gritzky to the hockey player. You know what he uses that exact thing. It's a great thing. It's a great thing. Where the puck is going exactly that. Well cool I think we've covered a ton around privacy what you guys are doing the kind of we'll call it the

the benchmark case of the El Salvador you know wallet example there that's a really fantastic one and you guys have been around for a long time so you've seen a lot and we covered a ton so that's kind of all the questions I have for you where can people learn more about what you guys are doing at Netkey. Absolutely they should they can go to the

website which is you know at netkey.com but also follow us on Twitter we are at netkey.netkey.com and then I kind of am the one that tweets the most and I'm a dawn M. Newton on Twitter and I usually am telling everybody like where things are at not only with Netkey but kind of what's going on with our partners and what's going on in the regulatory space

and the innovation space with you know governments. Worldwide that I you know I'm speaking to that I can kind of cryptically say you know more to come so you know follow me if you kind of want to find out where things are going from regulatory perspective I share what I can when I can. Very cool very cool well wherever you guys are listening on iTunes or

Spotify all the links will be in the show notes that Don mentioned and that is it thank you so much for coming on in the show and sharing your story Don. Yeah thank you so much you were a great interview. Really appreciate you take of the time today.