• Thu. Feb 29th, 2024

SmartFi CEO Aaron Tilton talks to us about their New SmartCycle Token


The cryptocurrency space has had its fair share of organizations that claim to deliver on their ecosystems but in the end, the experience usually leaves much to be desired.

SmartFi launched by cryptocurrency end-to-end solutions company Power Block Coin LLC caught our eye and we decided to dig under the hood to find out more.

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We spoke to Aaron Tilton CEO at SmartFi who is also apparently a former Utah State legislator. Here is what he had to say.

Aaron Tilton SmartFi CEO

Aaron Tilton CEO at SmartFi

E-Crypto News:

Congratulations on your successful launch! What’s next for SmartFi?

We are working on the SmartCycle Token sale at the end of this month.  Also we are incorporating cryptocurrency backed funding with traditional lenders.

E-Crypto News:

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Please, can you tell us the main concept behind SmartFi? 

SmartFi is a unique cryptocurrency monetary system. It combines monetary policy with the freedoms of cryptocurrency to create self-sustaining open-lending platforms. The holders of SmartFi Token become the beneficiaries of the wealth creation that would otherwise accrue to traditional lenders like banks. Token holders also participate in the monetary policy that manages the system. The SmartFi networks also eliminate transaction fees

E-Crypto News:

How did you get involved with cryptocurrencies and their underlying technologies? 

SmartFi  originated  from  a  company  called Power  Block  Coin.  Formed  in  2017,  Power Block  Coin  worked  developing  energy infrastructure  for  cryptocurrency  mining companies  and  provided  loans,  investment hedges and innovative financial transactions  for  crypto  related  businesses. The  founders  of  SmartFi  are  specialists  from the  energy  industry  who  saw  many correlated  opportunities  in  the  crypto markets.  Ultimately  Power  Block  Coin’s market  expertise  and  experience  led  to  the ideation  and  creation  of  SmartFi’s  self sustaining  open-lending  platforms  and  its novel  innovations

  of  CLP  and  SmartCycle protocols.     Since  its  inception,  SmartFi  has  continuously evolved to  solve  a  problem that has stymied crypto-related  businesses  and  the  crypto mining  community.  That  problem  is  the funding  of  mining  operations  during  crypto bear  markets.  Miners  and  other  cryptorelated  businesses  do  not  want  to  sell  their most  valuable  assets,  cryptocurrencies,  at the  bottom  of  the  market  to  fund operations.

To  address  this  problem,  the SmartFi  team  developed  a  lending  process and  started  lending  capital  to  these companies.  When  Power  Block  Coin  began  in  May  of 2017,  Bitcoin’s  price  was  approximately $1,500.00.  At  the  end  of  2017  BTC was peaking near  $20,000.00.  The cryptocurrency  market collapsed  shortly  after  this  peak  and  BTC  fell to  $3,500.00  within  the  next  few  months.

Many  miners  who  had  invested  in overpriced  mining  equipment  at  the  time became  unprofitable  almost  overnight. Crypto-related  businesses  were  struggling to  survive,  let  alone  break  even.     Since  the  SmartFi  team  had  experienced similar  ups  and  downs  in  the  energy business,  they  were  well-equipped  to  deal with  volatility.  Firstly,  SmartFi  started  lending US  dollars  to  pay  for  current  costs  of  the mining operations and other cryptocurrency-related  business.

E-Crypto News:

How has the journey been so far? 

So Far so good, to  date,  SmartFi  has  completed over  $1  billion  in  transactions.  We love the fast pace, although it is not without its challenges though.  Scaling with automation and trying to keep our customer centric empowerment focus is a constant challenge.  Making technology simple requires accepting the fact that sometimes we do not get our user experience optimized in the beginning when launching products.  It also requires a willingness to change which can delay bringing a product to market.

E-Crypto News:

What are the features of the SmartFi ecosystem? 

SmartFi has two maximalist cryptocurrencies one USD stablecoin (SFUSD) the other a speculative token (SMTF).  SFUSD has no transaction fees SMTF will get rid of its transaction fees in Jan of 2022.  Both can be redeemed on the SmartPortal for the exact original value.

SMTF’s value is designed to increase and resist bear market volatility.  It does such a good job at it, if you purchase it in the SmartCycle Token sale, we will always buy it back from you any time after one year, could be 10 years later no questions asked.  In addition to the crypto backed loans We have a decentralized exchange, a centralized exchange, and coin interest accounts.

We have a referral program that pays a percentage of the product transactions for the life of the customers referred on the SmartPortal.

E-Crypto News:

How can these features help cryptocurrency users solve problems that currently exist within the cryptocurrency space? 

No transaction fees, is obvious I think.  Being able to redeem a speculative token for the original purchase price provides safety.  Although if the price of SMTF is higher than what you bought it for you won’t send it back.  The way we can offer that is that our process has fundamentals.

We don’t sell all the SMTF tokens at once and the value of the SmartFi token is tied to the loan portfolio. SmartFi uses its SmartCycle token sale proceeds to directly fund loans.  If the loan portfolio is growing the SmartCycle SMTF token price is going up.  If the loan portfolio is shrinking the US dollar reserve is growing, therefore we have the $ on had to offer the buyback on SMTF.  It is pretty simple really.  Our design is bank-like, but not a bank.

E-Crypto News:

Please, can you give us a brief history of Power Block Coin, and what’s in store with SmartFi?  

What’s in store is the following:

Centralized Platform

  • SmartBusiness  –  Small  business  loans,  not  cryptocurrency  collateralized
  • SmartPay  –  A  Person  to  Person,  and  customer  to  merchant  payment  system, replaces  credit/debit  card  and  other  smartphone  payment  apps  using  the SmartFi  minable  stable  coins.
  • SmartAdvisor  –  US  Registered  Investment  advisors  manages  your  digital investments
  • SmartSelf-IRA  –  Cryptocurrency  self-directed  IRA

Decentralized Platform

SmartFi  Decentralized  Network  Loans 

  • Decentralized  Peer  to  Peer  network  for  OTC  Derivative  Transactions

  • ISDA Contract  (smart  contracts)

  • SmartTreasury  Pool  –  Implementation  of  Commodity  Layer  Protocol  Block Rewards

  • Equality  Prices  Discovery  Risks  Metrics  and  Economic  Codes

  • Sophisticated  Accounting  Integrations

E-Crypto News:

Where do you see SmartFi in the next decade? 

We have always believed that for crypto to reach its full potential people have to be using crypto without knowing they are using it.  Next month we will have an announcement that incorporates the successful execution of that very concept.  That means we will be competing with traditional finance next month. The next ten years we will compete with them at scale in financial products.  The goal is to go from $1billion in transactions to over $100 billion in loan portfolio.

E-Crypto News:

What are your thoughts on the regulation of the cryptocurrency space? 

As a recovering politician, current and potential regulation are always shaping our product design and company operations.  The constant hope is, the simpler and safer the experience with our cryptocurrency products the less regulatory oversight will be sought by policy makers because they will not be hearing complaints from voters.

By voluntarily incorporating things like SmartFi Sheriff nodes that can reverse transactions by putting bonds in place and having a personal appearance required to dispute a transaction you can dramatically cut down on fraud and theft. By just having a process to reverse transactions even though it would require a bond and be difficult, thieves would concentrate their efforts on blockchains that do not have those features.

Sheriff Nodes were conceived from a piece of legislation I passed in the Utah Legislature (the governor vetoed it) related to environmental litigation.  It requires someone to post a bond to engage in litigation.  If you lose the litigation then you pay the bond to whoever you sued.  If you can force someone to show up to an in person venue to adjudicate a transaction reversal, only honest people will show up.

If you are a thief and you know there is such a thing as a sheriff node that can reverse transactions and that process requires the parties to make an appearance to convince the sheriff node from reversing the transaction, you would never show up because of the threat of being caught.  Which means your unlikely to commit theft or fraud on a blockchain that can reverse your transactions.

E-Crypto News:

Do you think that smart-contract-enabled cryptocurrencies like Ethereum will outpace legacy cryptocurrencies like Bitcoin? Please, can you tell us the reasons for your answer?

Yes absolutely, if the smart contract enhances simplicity and better user outcomes.  If they tend to focus on complicated transactions then no.

People want money to be simple and 95% of people do not have time to learn complicated smart-contract transactions.

E-Crypto News:

What are your thoughts on the recent dip in prices within the cryptocurrency space? 

Unnecessary bear market crypto volatility is the result of single market tool core design flaws i.e. speculation only features of virtually all cryptocurrencies.  Simply put they have no fundamentals for forward price curves.  There is no exact correlated hedge on-chain, therefore there is no market safety.  This results in unnecessary bear market volatility.

This design flaw is something SmartFi corrected in its SmartFi ecosystem SMTF design.  SMTF resists unnecessary bear market volatility with its fundamentals.

E-Crypto News:

Individuals like Elon Musk recently had an outsized influence on cryptocurrency prices.  What do you think should be done to limit the influence of such individuals and institutions? 

I don’t think there should be any restriction on the expression of opinions.  Opinions are not the problem.  I think people should not rely on the opinions of celebrities to make investment decisions.  Designing better cryptocurrency ecosystems that don’t rely on speculation only market prices will solve that problem.  Fundamental in market design with cryptocurrencies solves this problem, without encroaching on free speech.

E-Crypto News:

Do you think Proof-of-Work will be replaced by Proof-of-Stake? What are the reasons for your answer? What other consensus mechanisms do you think people will think of next?

All  cryptocurrencies-regardless  of  consensus  algorithms-need  basic  commodities,  such  as electricity,  servers,  or  computation.  Even  in  proof  of  stake,  the  commodity  costs  (coins  staked) that  go  into  consensus  algorithms  need  to  be  calculated  and  shared.

If  basic  commodities  are not  factored  into the cost of the network and correlated to the value of the native toke,  regardless  of  technical  innovation,  the  cryptocurrency  will  be  plagued  with  the same unnecessary bear market volatility issues  previously  stated.

Staking  alone  is  also  a  one-sided  speculation  without  a  hedge. Without  a  correlated  on-chain  hedge,  and  the  balance  needed  to  address  inflation  and deflation,  staking  algorithms  cannot  overcome  the  design  flaw  of  speculation-only  source code.

Staking  is  not  inherently  flawed.  In  fact,  a  similar  type  of  model  is  a  Balance  Coins  fundamental in  the  SmartCycle  of  SMTF.  However,  it  is  not  used  for  consensus  but  for  speculating  in  the  future time  value  of  money  or  savings.

Proof  of  Work  (PoW)  and  delayed  Proof  of  Work  (dPoW)  is  used for  consensus  in  the  SFUSD blockchain which ties the coin to objective discernable value derived from  the  past  cost  of  commodities.

SmartFi uses a delayed Proof of Work (dPoW) for consensus.  SmartFi’s  consensus  mechanism provides  the  same  level  of  security  as  the  Litecoin  network  and uses the  Litecoin  network  as  a  storage  space  for  “backups”  of  SmartFi  transactions.  By  this  method, in  the  event of an attempted attack on SmartFi’s blockchain history,  even a single surviving copy of  the  SmartFi  main  chain  will  allow  the  entire  ecosystem  to  overwrite  and  overrule  any  of  the attacker’s  attempted  changes.

A  key  difference  of  SmartFi’s  dPoW  consensus  mechanism  from  regular  PoW  networks,  is  that the  dPoW  consensus  mechanism  does  not  recognize  the  Longest  Chain  Rule  for  any transactions  that  are  older  than  the  most  recent “backup” of the SmartFi blockchain. For conflicts that  may  arise,  which  refer  to  transactions  that  are  older  than  the  most  recent  “backup,”  our consensus  mechanism looks to  the  backups  in  the  chosen  dPoW  blockchain  Litecoin,  to  find  the accurate  record.

E-Crypto News:

How do you think the mass adoption of cryptocurrencies will occur? Please, can you give us a practical scenario?  

Crypto mass user adoption will occur when cryptocurrency can be used without thinking more about the transaction than about the actual purpose of the transaction, in other words everyday transaction like buying a meal does not cause you to think about the risk of the future value you may be giving up to make the purchase.

Mass user adoption will be possible when there is actually an economic advantage to cryptocurrency use.   When a retailer can eliminate the merchant fees (3%-5%) by accepting a cryptocurrency that does not have a transaction fee.  The merchant will encourage his customers to pay him with a currency that makes him more profitable.  Mass adoption is not about who holds a currency, it’s about who will actually accept it.

E-Crypto News:

What are your thoughts on the massive amounts of institutional flows into the cryptocurrency space?

Institutional participation in cryptocurrencies is about creating leverage in derivatives. Creating derivatives is the natural evolution of a maturing market.  That is basically how SmartFi started 4 years ago.

Historically derivatives are always an extension of trade and market expansion.  We have a section on this in our SmartFi More Than a White Paper.  The Institutions use derivatives interchangeably to take risks on or de-risk transactions, here is a quote on the view on Institutional derivatives.

“The world has been engaging in contracts that act as a  medium of exchange for thousands of years, some more successful than others.  Today’s derivatives markets are no different.  Fiat currency-denominated contracts are used for exchanging value without the actual notional value of the currency being traded.  Basically,  these are settlement contracts that reduce the risk of an underlying asset  (hedging)  with the option for speculation for one or both counterparties.

Once  again,  the trade is real and the majority of the settlement is virtual,  only a fraction of the real currency exchanged.  In  2017  the derivatives market was notionally valued between  $550 trillion to  $1.2  quadrillion,  more than  13.3  times the  $90  trillion broad  money market value then.  These analogue virtual currencies settlements,  created by the derivatives market, affect virtually every aspect of commerce today.  When combined with significant leveraged debt,  the effects can be astounding. The derivative market is closely tied to other financial markets as demonstrated by the mortgage-backed securities crisis of  2007.

At  that time,  mortgage-backed securities comprised 3%  of the derivatives market.  The collapse of this market,  due to overleverage,  brought the fiat currency supply,  the money market and banking industries to their knees while the rest of the derivatives market was relatively unaffected.  The  government  responses  to  this  liquidity  crisis were  the  inspiration  for  the  creation  of  the  world’s  best  known  digital  currency,  Bitcoin.”

E-Crypto News:

What are SmartFi’s plans for generation Z?

My children are part of Generation Z. Personally my plans so far have been to make sure the 2 kids that my wife and I contributed to this generation understand a good moral upbringing which includes treating others as you would have them treat you and realizing individuals are accountable to themselves, society and God.  SmartFi as a company is somewhat an extension of that philosophy.  In our More Than a Whitepaper we have a few sections that answer that  (I will share below) not just about Generation Z but anyone who uses our networks.

“Money,  like  technology, is  neither  good  nor bad  by itself,  it  only  makes  you  more  of  what you  are.  It  provides  convenience  and amplifies  the  consequences  of  actions. Neither  money  nor  technology  has  a purpose  without  input  from  a  person(s).  Its usefulness  in  improving  our  circumstances is  subjective  by  individual choice.”

“At SmartFi we will always use technology that can account for human behavior of agency. We plan for changes in technology so that our cryptocurrencies systems will adhere to time tested principles, not to the fads or whims of changes in people’s current behavior, but in the principles of choice and freedom.”

“SmartFi  gives  control  to  SMTF  holders.  They  set  the  value  of  the  Balance  Coins.  No  transaction fees  mean  no  manipulation  –  the  network’s  success  sinks  or  swims  on  what  its  participants  do. They  must  provide  credit  and  financial  products  to  the  market  at  a  rate  and  quality  that  is  in balance  with  the  market  expectations,  and  they  must  serve  each  other  equitably.“

If Generation Z or anyone else for that matter learn to treat each other equitably because the SmartFi Cryptocurrency products work best in their favor when they chose to make choice that serve others as well as themselves we will have lived up to our potential as human beings and crypto will live up to its potential as freedom of choice.

E-Crypto News:

How do you think automated solutions help improve the adoption of cryptocurrencies and their underlying technologies?  

Choosing a technology is like hiring a sheriff.  All of us have days of reckoning to societies and their hired  “sheriffs”. At the end of the day, when using cryptocurrencies,  we are actually hiring a sheriff to protect our property.  This sheriff is empowered by us  Sheriffs can be software technology or a board of people.  It is important to ensure that you retain the ability to replace the sheriff.  In the beginning,  a  sheriff may serve you well,  however,  the sheriff can become a tyrannical master through fees or taxes.

The sheriff may get outgunned by superior technology and can no longer protect your property. When making that decision about how to protect your property and freedom,  you will be best served when you retain the ability to hire and fire the sheriff. SmartFi’s ideology is to never give up the ability to choose to use another technology, platform,  etc.    We will always build our systems with choice in mind.  When a  newer, better technology comes along,  we will adapt and innovate that technology to meet our ideology of choice and freedom – fire the old sheriff and hire a new one.

Automated technologies that we hire can more easily be fired because we personally hold the only vote that matters.  People and governments that do not serve our best interests are not so easily dismissed. Most people who understand the benefits of freedom and choice will usually adopt technologies that promote that idea.

E-Crypto News:

Do you have any plans to launch an independently distributed ledger in the future? Please, can you tell us the reasons for your answer? 

We already have with our SFUSD stable coin blockchain.  We innovated a new protocol and set of algorithm’s called the Commodity Layer Protocol.  This is a necessity for many reasons, but one of the key reasons is that it creates the incentive mechanisms for the DEX version of our SmartFi open lending platform and  creates a minable stablecoin.

Virtually  all  cryptocurrency  algorithms  today  use  a  socialized  mechanism  to  subsidize cryptocurrency  value  and  rewards.  The  designers  of  these  new  cryptocurrencies  were  unaware of  the  pitfalls  of  relying  on  transaction  fees  and  socialized  reward  incentives  patterned  after  the old  banking  and  payment  systems.  How  ironic  that  in  the  very  creation  of  a  new  monetary system  intended  to  liberate  people  from  the  old  tyranny,  the  creators  used  some  of  the  main features,  socialized  rewards,  and  transaction  fees  that  helped  create  the  tyranny  it  intended  to supplant.  The  old  tyranny  has  essentially  been  replaced  by  a  new  kind  of  crypto  tyranny.

SmartFi  is  unique  in  that  it  connects  this  data  to  an  algorithm  called  the  Commodity  Layer Protocol  (CLP).  This  protocol,  along  with  its  reward  algorithm,  provides  the  SmartFi  Network  with a  balance  and  stability  of  its  minable  native  protocol  coins.  In  this  section  we  will  describe  the Treasurer  role,  hash  rate  inputs  and  reward  mechanism.    The  block  reward  is  an  auction allocation  model.  The  highest  ranked  Treasures’  hash  rate  reported  receives  first  allocation  of block  reward.  The  block  rewards  are  generated  from  the  Block  Revenue  which  is  the  interest paid  on  loans. The  CLP  combines  data  from  three  sources  to  create  the  algorithmic  lending  platform:

  • Treasurers’  (self-reported)  hash  rate  commodity  cost,
  • Total  liquidity  value  (from  lenders),  and
  • Total  loan  value  (from  borrowers).

Using  the  Treasurers’  hash  rate  cost  information,  the  CLP  correlates  the  cost  to  run  the  network with  the  block  rewards  gained  from  the  loan  interests.  This  effectively  hedges  the  Treasurers’ rewards  to  the  base  currency  (SFUSD)  of  the  hash  rate  costs.     The  CLP  embodies  the  foundational  basis  for  the  value  of  all  cryptocurrencies.  All  virtual currencies  or  cryptocurrencies  possess  this  element,  but  no  system  to  date  has  been  able  to capture  the  price  discovery  needed  to  effectively  govern  this  key  element.  In  fact,  there  has  not been  a  project  that  has  demonstrated  an  understanding  of  the  need  for  incorporating  this component.

E-Crypto News:

If you had three wishes and a genie that could make them come true, what would they be for SmartFi?

All we want is for people to come see for themselves the difference in using SmartFi cryptocurrencies, safety first, speculation second, ok and maybe a never ending pistachio ice cream cone and waterproof socks would be good too.

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Kevin Moore - E-Crypto News Editor

Kevin Moore - E-Crypto News Editor

Kevin Moore is the main author and editor for E-Crypto News.