from the cube studios in palo alto in boston bringing you data driven insights from the cube and etr this is breaking analysis with dave vellante when facebook changed its name to meta last fall it catalyzed the chain reaction throughout the tech industry software firms gaming companies chip makers device manufacturers and others have joined in the hype machine now it's easy to dismiss the metaverse as futuristic hyperbole but do we really believe that tapping on a smartphone or staring at a screen or two-dimensional zoom meetings are the future of how we work play and communicate as the internet itself proved to be larger than we ever imagined it's very possible and even quite likely that the combination of massive processing power cheap storage ai blockchains crypto sensors ar vr brain interfaces and other emerging technologies will combine to create new and unimaginable consumer experiences and massive wealth for creators of the metaverse hello and welcome to this week's wikibon cube insights powered by etr in this breaking analysis we welcome in cyber expert hacker gamer nft expert and founder of or system nick donarski nick welcome thanks so much for coming on thecube thank you sir i'm glad to be here yeah okay so today we're going to traverse two parallel paths one that took nick from security expert and pen tester to nfts tokens and the metaverse and will simultaneously explore the complicated world of cyber security in the enterprise and how the blockchain crypto and nfts will provide key underpinnings for digital ownership in the metaverse we're going to talk a little bit about blockchain and crypto and get things started there and some of the realities and misconceptions and how innovations in those worlds have led to the nft craze we'll look at what's really going on in nfts and why they're important as both the technology and societal trend and then we're going to dig in to the tech and try to explain why and how blockchain and nfts are going to lay the foundation for the metaverse and finally who's going to build the metaverse and how long is it going to take all right nick let's start with you tell us a little bit about your background your career you started as a hacker at a really really young age and then got deep into cyber as a pen tester you did some pretty crazy stuff you have some some great stories about sneaking into buildings you weren't just doing it all remote tell us about yourself yeah so i mean really i started long time ago my dad was really the the foray into technology i wrote my first program on an apple 2e in basic in 1989 so i like to say i was born on the internet if you will um but yeah so in high school at 16 i incorporated my first company and did just tech support for parents and teachers and then in 2000 i transitioned really into security and focused there ever since um i joined rapid7 after they picked up metasploit i joined hp as one of their founding members of shadow labs and really have been part of the the information security in the cyber community um all throughout uh whether it's training at uh various different conferences or talking you know my my biggest thing and my most awesome moments as as various things of being broken into are is really when i get to actually work with somebody that's coming up in the industry and is new and actually has that light bulb moment of really kind of understanding a technology understanding an idea or you know getting it uh when it comes to that kind of stuff yeah and when you think about what's going on in crypto and nfts and okay now the metaverse it's as you see you see some of the most innovative people now i want to start off but i want to first share a little bit of data on enterprise security and maybe nick get you to comment we've reported over the past several years on the complexity in the security business and the numerous vendor choices that secop pros face and this chart really tells that story in the cyber security space it's an xy graph we've shown it many times from the etr surveys where the vertical axis it's a measure of spending momentum called net score and the horizontal axis is market share which represents each company's presence in the data set and a couple points stand out first it's really crowded and that red dotted line that you see there that's 40 percent above that line it is the on the net score axis marks highly elevated spending momentum now let's just zoom in a bit and i've cut the data by those companies that have more than 100 responses in the survey and you can see here on this next chart it's still very crowded but a few call outs are noteworthy first companies like sentinel one elastic tanium datadog netscope and darktrace they were all above that 40 line in the previous chart but they've fallen off they still have actually a decent presence in in the survey over 60 responses but under that hundred and you can see off zero now octa big big seven billion dollar acquisition they got the highest net score crowd strikes up their octa classic their kind of enterprise business and z scalar and others above that line you see palo alto networks and microsoft very impressive because they're both big and they're above that elevated spending velocity so nick kind of a long-winded intro but this is a a a little bit off talk about topic but i wanted to start here because this is the life of a sec ops pro they lack the talent and the capacity to keep bad guys fully at bay and so they have to keep throwing tooling at the problem which adds to the complexity and as a pen tester and hacker this chaos and complexity means cash for the bad guys doesn't it absolutely um you know the more systems that these organizations find to integrate into the systems means that there's more components more uh dollars and cents as far as the amount of time and the engineers that need to actually be responsible for these tools there's a lot of reasons that you know the more i guess hands in the cookie jar if you will when it comes to the security architecture the more links that are or avenues for attack uh become built into the system and really one of the biggest things that organizations face is being able to have engineers that are qualified and technical enough to be able to support that architecture as well because buying it from a vendor and deploying it putting it onto a shelf is good but if it's not tuned properly or if it's not connected properly that security tool can just open up more avenues of attack for you right okay thank you now let's get into the meat of the discussion for today and talk a little bit about blockchain and and crypto uh for a bit i i saw a sub stack post the other day and it was ripping matt damon for peddling crypto on you know tv ads and how crypto is just this big pyramid scheme and it's it's all about allowing criminals to to be anonymous and it's ransomware and drug trafficking and yes there are definitely scams and you've got to be careful and lots of dangers out there but these are common criticisms in the mainstream press that overlook the fact by the way that ipos and specs are just as much of a pyramid scheme now i'm not saying there shouldn't be more regulation there should nick but but bitcoin was born out of the 2008 financial crisis cryptocurrency when you think about it's really the confluence of software engineering cryptography and game theory and there's some really powerful innovation being created by the blockchain community crypto and blockchain are really at the heart of a new decentralized platform being built out and where today you've got a few large internet companies they control the protocols and the platform now the aspiration of people like yourself is to create new value opportunities and there are many more chances for the little guys and gals to get in on the ground floor and blockchain technology underpins all this so nick what's your take what are some of the biggest misconceptions around blockchain and crypto and do you even you know pair those two in the same context what are your thoughts sure so i mean really we like to separate ourselves and say that we are a blockchain company as opposed to necessarily saying that anything like that we leverage those tools we leverage crypto crypto currencies we leverage nfts and those types of things within there but blockchain is the technology which is the underlying piece is something that can be used and utilized in a very large number of different organizations out there so cryptocurrency and a lot of that negative um context comes with uh fear of something new right without having that regulation in place without having the rules in place and we're a big proponent of we want the regulation right we want to do right we want to do it by the rules we want to do it under the context of this is what should be done and we we also want to help you know write those rules as well because a lot of the lawmakers a lot of the lobbyists and things they have you know a certain aspect or a certain goal of when they're trying to get these things our goal is simplicity we want the ability for the normal average person to be able to interact with crypto interact with nfts interact with the blockchain and base by saying you know blockchain and quotes it's very ambiguous because there's many different things that blockchain can be the easiest way right the easiest way to understand blockchain is simply a distributed database that's really the core of what blockchain is it's it's a record keeping mechanism that allows you to reference that and the beauty of it is that it's quote unquote immutable right you can't edit that data so especially when we're talking about blockchain being underlying for technologies in the future things like security where you have logging you have record keeping whether you're talking about you know sales where you may have to have multiple different locations users from different locations around the globe it creates a central repository that provides distribution and security in the way that you're insuring your data ensuring the validation of where that data exists when it was created those types of things that blockchain really is if you go to the the historical right the very early on bitcoin absolutely was made to have a way of not having to deal with the fed right that was that was the core uh functionality of the initial crypto and then you did you you had a lot of the um the illicit trades those those black markets that jumped onto it because of what it could do mature the maturity of the technology though of where we are now versus say back in 97 is a much different world of blockchain and there's a much different world of cryptocurrencies um you still have to be careful because with any fad um you're still going to have that flood that goes out there and sells that fear uncertainty and doubt which spurs a lot of those types of scams and a lot of those things that target you know end users from that you know we face as security professionals today you still get mailers that go out looking for people to give their social security number over during tax time you know male snail mail is considered a very ancient technology but it still works you still get a popular portion of the population that falls for those tricks fishing um whatever it might be it's all about trying to make sure that you have fear about what is what is that change and i think that as we move forward right and move into the future the simpler and the more comfortable um these types of technologies become the easier it is to to utilize and indoctrinate normal users to be able to use these things you know i want to ask you about that nick because you mentioned immutability there's a lot of misconceptions about that i had somebody tell me one time out blockchain's bs and say well hold on a second they say they say it's immutable but you can hack coinbase or you know whatever so i guess a couple of things one is that the killer app for blockchain became money right and so we learned a lot through that and you had bitcoin and it really wasn't programmable through its interface and then ethereum comes out i know you know a lot about ether and you have solidity which is a lot a lot simpler but it ain't javascript which is ubiquitous and so now you have a lot of potential for see the initial icos and probably still the ones today the white papers a lot of security flaws in there i'm sure you you can talk to that but maybe you can talk about help square that circle about immutability and security i mentioned game theory before it's harder to hack uh uh bitcoin in the bitcoin blockchain than it is to mine so that's why people mine but maybe you could add some context to that yeah you know it it goes to just about any technology out there now when you're talking about blockchain specifically the majority of the attacks happen with the applications and the smart contracts that are actually um running on the blockchain as opposed to necessarily the blockchain itself and like you said you know the um the impact for whether that's loss of revenue or loss of tokens or whatever it is in most cases that re that results from something that was you know a phishing attack um you gave up your credentials you somebody said paste your private key in here you know and you you win a cookie or whatever it might be um but those those are still the fundamental pieces when you're talking about various different networks out there the depending on the blockchain right depending depends on how the how much the overall security really is the more distributed is and the more stable it is as as the network goes the better or the more stable any of the code is going to be right the underlying architecture of any system is the key to success when it comes to the overall security so the the blockchain itself is immutable in the case that the owners are the ones that are have to be trusted if you look at distributed networks something like ethereum or bitcoin where you have those proof of work systems that disperses that information at a much much more remote location right so the more dispersed that information is the less likely it is to be able to be impacted by one small instance if you look at like the dow hack or if you look at a lot of the other vulnerabilities that exist on the blockchain it's more about the code and like you said solidity being as new as it is it's not javascript the industry is very early and very um infantile as far as the developers that are skilled in doing this and with that just comes the inexperience and uh the lack of information that you don't learn until you know javascript is 10 or 12 years old and you know the last thing i'll say about this topic and we'll move on to nfts but mts relate is that you know again i said earlier that the big internet giants have pretty much co-opted the the platform you know if you wanted to invest in linux in the early days there was no way to do that you maybe have to wait till red hat came out with its ipo and your there's your pyramids scheme folks but but with with with with with crypto which is again as nick was explaining under underpinning is the blockchain you can actually participate in early projects now you got to be careful because there are a lot of scams and many of them are going to blow out if not most of them but but there are some some gems out there because as nick was describing you've got this decentralized platform that causes scaling issues and performance or performance issues and people are solving those problems essentially building out a new internet but i want to get into nfts because it's you know the sort of next big thing here uh before we get to the metaverse what nick why should people pay attention to nfts why do they matter are they really an important trend and what are the societal and technological impacts that you see in the space yeah i mean nfts are a very new technology and ultimately it's just another entry on on the blockchain it's just another piece of data in the database but how it's leveraged in the grand scheme of how we as users see it it can be the classic idea of an nft is just the art or as good as the poster on your wall right but in the case of some of the new applications is where you actually get that utility function now in the case of say video games right video games and gamers in general already utilize you know digital items they already utilize digital points as you know in the case of like call of duty call of duty points those are just different versions of digital currencies you know world of warcraft um gold i like to affectionately say was the very first cryptocurrency there was a harvard course taught on the economy of wow there was a black market where you could trade your in-game gold for fiat currencies and there's even places around the world that you can purchase real world items and stay at hotels for world of warcraft gold so the you know the adoption of blockchain just simply gives a more stable and a more diverse technology for those same types of systems you're going to see that carry over into you know uh shipping and logistics where you need to have data that is you know a single repository for being able to have multiple locations multiple shippers from multiple global efforts out there that need to have access to that data but in the current context it's either sitting on a shipping log it's sitting on somebody's desk all of those types of paper transactions can be leveraged as nfts on the blockchain it's just simply that representation and once you break the idea of this is just a piece of art or this is a cryptocurrency right you get into a a world where you can apply that nft technology to a lot more things than i think most people think of today yeah and and of course you you mentioned art a couple times when when people sold his digital art for whatever was 60 65 million 69 million that caught a lot of people's attention but you're seeing i mean there's a virtually infinite uh number of of applications for this uh one of the washington wizards tokenized portions of his contract you know maybe he was creating a new bond you know that's but really interesting uh use cases and opportunities and that kind of segues into you know the latest hot topic which is the metaverse and you you've said yourself that blockchain and nfts are the foundation uh of the metaverse they're foundational elements so first what is the metaverse to you and where do blockchain and nfts fit in sure so i mean i i actually refer to the metaverse as just a vr um essentially you know we've been playing virtual reality games and all the rest for a long time and vr has really kind of been out there for a long time so most people's interpretation or idea of what the metaverse is is a virtual reality version of yourself and this right that idea of once it becomes yourself is where things like nft items where blockchain and digital currencies are going to come in because if you have a manufacturer say you take a an organization like nike and they want to put their shoes into the metaverse because we as humans want to individualize ourselves right we go out and we want to have that that one of one shoe or that you know t-shirt or whatever it is we're going to want to represent that same type of individuality in our virtual self so nfts crypto and all of those digital currencies like i was saying that we've known as gamers are going to play that very similar role inside of uh inside of the metaverse yeah okay um i i so basically you're going to take your physical world into the metaverse you're going to be able to as you just mentioned acquire things i'd love i loved your your your your wow example um and that so let's let's stay on this for for a bit if we may uh of course facebook spawned a lot of speculation and discussion about the concept of the metaverse and and and really as you pointed out it's not new you talked about wow second life really started in 2003 and it's still around today it's small but it's i i read recently it's creators coming back into the company absolutely and books were written in the early 90s that used the term metaverse but nick talk about how you see this evolving what role you hope to play with your company and your community in the future and who builds the metaverse you know when is it going to be here yeah so i mean there's right now and we actually just got back from ces last week and the metaverse is is a very big buzzword um you're going to see a lot of integration of what people are calling quote unquote the metaverse and there was organizations that were showing virtual office space virtual malls um virtual concerts and and and those types of experiences and the one thing right now that um i don't think that a lot of organizations have grasped is how to make one metaverse um there's no real player one um if you will oasis yet there's there's a lot of organizations that are creating their version of the metaverse which then again you know just like every other software and game vendor out there has their version of of cryptocurrency and their version of nfts uh the you you're gonna see it start to pop up especially as you know oculus is gonna come down in price um especially as you get new technologies like some of the vr glasses that look more augmented reality and look more like regular glasses that you're wearing things like that um the easier that those technologies become as in adopting into our normal lifestyle as far as like looks and feels the faster that stuff's going to actually come out to the world but when it comes to like what we're doing is we believe that the metaverse should actually span multiple different blockchains multiple different you know segments if you will so what or system is doing is we're actually building the underlying architecture and technologies for developers to bring their metaverse to you can leverage the ore systems nfts what we like to call our utility nfts as an in-game item in one game or you can take it over and it could be a t-shirt in another game the ability for having that cross support within the ecosystem is what really no one has has grasped on yet most of the organizations out there are using a very classic business model right get the user in the game make them spend their money in the game make them all their game stuff is only good in their game and that's where the developer has you they have you in their bubble right our goal and what we like to affectionately say is we want to bring white-collar tools and technology to collar folks right the we want to make it simple we want to make it off the shelf and we want to make it you know less cost prohibitive faster and cheaper um to actually get out to all the users we do it by supporting the technology that's that's our angle is if you support the technology and you support the platform you can build a community that will build all of the all of that metaverse around it well and so this is interesting because you point out if you look if you think about some of the big names we've had microsoft is talking about it obviously we mentioned facebook they are essentially walled gardens uh now yeah okay i could take tick-tock and pump it into instagram that's fine but it's really they're really siloed silent off and what you're saying is in the metaverse you should be able to to buy a pair of sneakers in one location and then bring it to another one absolutely that is exactly it it's up but and so my original kind of in investment attractiveness if you will to crypto was that you know the little guy can get in early but i worry that some of these walled gardens these big internet giants are going to try to co-opt this so i i think what you're doing is is right on and uh and i think is it you know it's it's aligned with the objectives of consumers and the users who don't want to be forced in to a pen they want to be able to live freely right and that's really what you're trying to do that's exactly it you know when you buy um an item say you know skin and fortnite or skin and call of duty it's only good in that game right and for not even not even in the franchise it's only good in that version of the game yeah you know in the case of what we want to do is you can not only have that carry over and your character so say you buy a really cool shirt and you've got that in your call of duty or what you know in our case we're releasing osiris protocol which is our proof of concept video game to show that this whole thing actually works but you can actually go in and you can get you know a gun in in osiris protocol and if we release osiris protocol 2 you'll be able to take that to osiris protocol 2. now the benefit of that is is you're going to be the only one in the next version with that item if you haven't sold it or traded it or whatever else so we don't all don't lock you into a game we don't lock you into um a a specific application you own that you can trade that freely with other users you can sell that on the open market we're embracing you know what used to be considered the black market you know i don't understand why a lot of video games you know we're always against you know the the skins and and mods and all the rest for me as a gamer and coming up uh you know through the many many years of various different uh call of duty's and everything in my time uh you know i wish i could still have some of this gear i still have a world of warcraft uh account i wasn't on you know vanilla burning crusade was was my my foray but i still have a character if you look at it that way right if i had that wow character and those that that gear was nfts in theory i could actually pass that on to my kid who could carry on that character and it would actually increase in value because they're nft backed if and then if needed you could trade those on the open mark and all the rest it just makes gaming a much different thing i love it all right nick hey we're out of time and but i gotta say nick donarski thanks so much for coming on the program today sharing your insights and really good luck to you and building out your technology platform and your community thank you sir it's been an absolute pleasure and thank you for watching remember all these episodes are available as podcasts just search breaking analysis podcast and you'll find them i publish pretty much every week on siliconangle.com at wikibon.com and you can reach me at d vallante on twitter or comment on my linkedin post you can always email me david.velante at siliconangle.com and don't forget don't forget check out etr.plus for all the
survey data this is dave vellante for the cube insights powered by etr happy 2022 be well and we'll see you next [Music] time you
2022-01-22