What We Discuss With Jason Meyers
We introduced AuditChain on Episode 5 a few weeks ago. As a refresher, AuditChain is building the world’s first continuous audit & real time financial reporting protocol.
As part of its long awaited commercial launch expected to happen at the end of the year, AuditChain recently launched its pilot project.
I had the pleasure to have Jason back with us where we discussed:
- The results of the pilot project so far;
- The upcoming listing of the AUDT token;
- What role will the AUDT token play – both for node operators and other stakeholders in the network;
- Other upcoming milestones on the roadmap up to the token listing;
- & How education is shaped by the innovators of an industry.
[00:00:00] Umar: Welcome to The Accountant Quits brought to you by AuditChain, the world’s first decentralized, continuous audit and real-time reporting protocol. On this podcast, we discuss how blockchain will impact the accounting profession and how accountants should prepare themselves for the future of work. My name’s Umar, your host and even if some might refer to me as the accountant gone rogue, my job is to provide you with the blockchain knowledge that will be relevant for the accounting industry as a whole.
[00:00:32] Umar: Welcome to Episode 15, and today will be a different episode. I want to provide you the listeners with an update on the progress of AuditChain.
[00:00:40] Umar: We introduced AuditChain on Episode five a few weeks ago, where I spoke to its founder, Jason Meyers. As a refresher, AuditChain is building the world’s first continuous audit and real-time reporting protocol as part of its long awaited commercial launch expected to happen at the start of next year. AuditChain recently launched its pilot project.
[00:01:02] Umar: I have the pleasure to have Jason back with us today where we will discuss the results of this pilot project so far, the upcoming listing of the audit token, what role will the audit token play both for node operators and other stakeholders in the network, other upcoming milestones on the roadmap upto token listing and how education is shaped by the innovators of an industry.
[00:01:28] Umar: Hey, Jason. Welcome back on the show. It’s always a pleasure to have you and to know how AuditChain is progressing.
[00:01:35] Jason: Thanks for having me here.
[00:01:38] Umar: To provide the listeners with the progress of AuditChain, could you maybe start by telling us what phase, what phase of the audit token sale is AuditChain currently at?
[00:01:51] Jason: So we had three phases, 5 million tokens at 10 cents, 5 million at 12 and a half cents. The last phase is 5 million at 15 cents. That is currently being moved over to Polygon in an effort to save significant amounts of gas costs because it’s cost prohibitive right now to operate on Ethereum. So over the next couple of days, the last phase of the private sale will be deployed on Polygon.
[00:02:26] Jason: It’s been a few more items on the development side that has taken a little longer than we expected. So that’s where we are.
[00:02:39] Umar: So at the moment, if people still want to participate in the private sale, they still have the opportunity to be whitelisted?
[00:02:46] Jason: Yes, but you’re not going to get whitelisted right away until the white list contract is deployed with the other contracts on Polygon.
[00:02:57] Jason: Right now, the token contract, which is dubbed as the child contract is deployed on polygon. Because it’s a child of the Ethereum contract already deployed with a significant amount of token holdings. Okay. Right. So, we’re putting a bridge up. So those with the audit token that bought it on Ethereumthem can transfer them over to the polygon network, using the same address.
[00:03:31] Jason: And by adding the RPC connections in your Metamask wallet, you’ll be able to walk across the bridge as we say.
[00:03:42] Umar: All right. And for your listing, I noted that there’ll be no IDO. So instead I noted AuditChain will list immediately after the final phase of the private sale. So just as to understand, wouldn’t it have been beneficial as a means to create awareness and potentially attract investors as well, to have an IDO?
[00:04:03] Jason: It is, but everybody’s focused on the metaverse right now.
[00:04:07] Jason: So in addition to that, IDO platforms almost always have their own tokens. So they have a formula that they persuade or as part of the selection, if you don’t fit within that formula, they’re going to find other projects that will, and that formula usually involves tiny, tiny market caps that are designed and engineered so that there’s a 100x pop. But nobody gets the benefits of the 100x pop. So except the people that actually bought on the IDO. So the existing token holders would be required to get locked, right. It would require cramming down the valuation to such an extent that it’s just not fair except to the people that run the IDO platforms because the overarching ambition is to pump their own token. So that’s the reason why we’re likely to do a direct listing. We are still talking to IDO platforms. Trust swap is one of them, but you know, we’re, we’re not making it a priority. When they come through and there’s some sort of a reasonable arrangement, then we’ll do it. But for now, the expectation is low.
[00:05:41] Umar: Let’s speak a little bit more about the role of the audit token. Firstly, could you maybe walk us through what will be the role of the audit token in the other chain network and how can different token holders be participating with their tokens?
[00:05:59] Jason: So there’s three main utilities for the token. One is staking.
[00:06:07] Jason: Where node operators must stake a minimum amount of tokens in order to meet staking requirements, to operate a node. In addition, token holders can elect to become validators and delegate their tokens to node operators in order to earn income. Then there’s the settlement function, which enables the settlement of all audit and reporting obligations on the network where the enterprise pays and the service providers receive.
[00:06:48] Jason: And that includes node operators. And then the probably it’s a really, really robust governance layer with so far, a single class of voter which governs things like the minimum number of auditors to an engagement contract or the amount that validators get paid per validation. The minimum quorum that’s required to be reached as part of the consensus in a quorum, as well as, , in a cohort as well as the open architecture. In addition, open architecture allows analysis of financial statements that have been filed already with regulators. The cohort layer is when an enterprise picks and chooses a minimum number of validators in their cohort before their financial statements for the purposes of validating prior to filing with regulators.
[00:08:03] Jason: And so there’s a, the governance feature allows you automatic invocation of a significant number of engagement structures, and ultimately it controls the amount of tokens that are emitted from the audit token contract by way of a call to mint function and the earnings are claimed. And so the community has the ability to invoke those changes to such a proposal is passed.
[00:08:37] Umar: Could you further elaborate on the second function of it? The settlement function, maybe give a practical example of it.
[00:08:44] Jason: So it costs money to validate a financial set of articulation of your financial state. And so your account will get decrimented to the extent of the obligation to the service providers, the validators for validating your financial statements before you file them is an example.
[00:09:06] Umar: And to become a node operator on the Pacioli network, what’s the requirement for someone. So they should be staking their audit token, and I believe it’s a minimum of 5,000 audit token.
[00:09:20] Jason: We may launch with 5,000 and the community may immediately propose to raise it, but that’s a whole other conversation. The requirement to operate on the open Pacioli network is a staking requirement. Now you don’t have to be a CPA or a chartered accountant or even an accountant, but it helps to understand accounting logic. And we’ve got a ton of documentation that would provide you or anyone with at least a superficial understanding of the accounting logic, because the node is logic based.
[00:10:01] Jason: It’s not just a validator from a blockchain perspective. It’s a very robust stack that is built using Prolog, which is a logic based programming language. And it uses the global standard syntax XBRL as well. So if you’re going to act as a, if you’re going to make attestations as part of an engagement as a member of a cohort, then you’ve got to be a CPA or a chartered accountant.
[00:10:35] Jason: And it depends on the jurisdiction that recording entity is recording or is based in. So for instance, if you file with the SEC as a large accelerated filer, you’re going to file pursuant to US GAAP. If you’re not going to trade in the United States or file with the SEC or likely report under IFRS, under that reporting scheme, and if you’re a smaller company that’s reporting, you may report pursuant to your local GAAP which is usually a subset of definitions containing both US GAAP and IFRS reporting schemes.
[00:11:17] Umar: A few weeks ago, AuditChain launched on Testnet. Could you share some of the results so far?
[00:11:24] Jason: Sure. Mostly it was updating the images. So a node is delivered to node operators on the testnet in the form of a docker image. So that we launched that image from an operating system.
[00:11:40] Jason: And so most of this test was working out bugs in the images themselves in a multi-node environment involving a small group, less than 20 node operators. And so, there were some bugs discovered in the Pacioli agent, which is the layer between the logic layer and the smart contract layer. And those were all updated.
[00:12:07] Jason: So we’re still in the process of working out some bugs. The next phase will be feedback on experience, feedback on logic. And then the third phase is going to stress test concurrent usage. For instance, because of the computational requirements, each node is going to be capable of concurrently processing a validation.
[00:12:39] Jason: So the tests in terms of that concurrency will occur in that phase. So if a node operator can only handle N number of validations on a concurrent basis, any additional service requests will fail over to other nodes that have sufficient resources, which is all based on hardware and RAM and memory, so on and so forth.
[00:13:07] Umar: When we spoke earlier this year, so you mentioned that, the company will be launching its, or will be commercializing its Beta Launch at the end of the year. Is that still on?
[00:13:22] Jason: If we, you know, we’ll push for it to be on the safe side, it’s probably going to be Q1 next year.
[00:13:32] Umar: And regarding the listing, what are we at this point? What are we waiting before the official listing takes place?
[00:13:39] Jason: As soon as this last phase of the private sale is finished. We originally mentioned September, the Ethereum gas prices have kept some of the smaller contributors away. And so a month ago we made a decision to move to a scaling solution and then a weeks ago, our first measure to that effort is to move to polygon. So it’s a penny sometimes less than a penny to do a transaction on polygon.
[00:14:16] Umar: And besides the listing, can you share some of the other upcoming milestones of AuditChain or maybe even some new partnerships you’ve entered into?
[00:14:28] Jason: I can say that we hired, we added another member to the team. We’re gonna announce that soon. He is a CPA and he is, he has a lot of connections to large accelerated filers because he’s, he’s done and continues to do a lot of work in participating in the preparation of, and filing of financial statements with the SEC and other jurisdictions. So we’ll announce that .You know our partnership is a little bit different because partnership, it’s not a typical partnership. They become members of the DCARPE Alliance Association. Members have all the power and get to vote on the evolution of the protocol. They also vote on the adoption of standards. So, you know, we have probably 75, a little over 75, somewhere between 75 and 80 members of the Alliance.
[00:15:34] Jason: And, you know, they all bring their own value to the table. Some are technical in nature where they allocate resources, some have to do with thought leadership. Everybody brings thought leadership to the table. Some are customers and some are service providers that provide components to the network that have customers that they’ll bring to the table.
[00:16:03] Jason: So, lately we’ve had a lot of CPAs become members of the Alliance because they all want to run nodes. The other thing is that, you know, we get approached all the time from other projects that want to enter partnership. But when we look at what they have, it’s either not launched yet or it doesn’t make strategic sense.
[00:16:26] Jason: And we need the MOUs. It’s more of a marketing partnership and a right for them to make public statements about a partnership with us. But at the end of the day, you know, it’s nothing more than a right to make public statements. It’s not substantive at all. And we get pressured from people, community to announce partnerships.
[00:16:55] Jason: We’re not going to enter into any sort of partnership like that, unless it makes good sense. Like, so, and in any event it involves them becoming members of the DECARPE Alliance. But if you don’t have anything to bring to the table, as far as the tech stack, if you’re a service provider or from a technical category, then what are we doing?
[00:17:22] Jason: Right. I make comments in the public channels. 90% of public announcements and projects are not really real. They’re just statements that rarely come to fruition if they’re even real at all. So when we enter into a real partnership, But we’re not going to sign an MOU with a company just because it’s useful to make noise.
[00:17:49] Jason: People getting a lot of trouble for that. That’s called misrepresentation. It’s called fraud.
[00:17:54] Umar: The imminent listing of the audit token is the culmination of years of research, and I’m sure you and your team must be very proud of bringing this project to fruition. Of course, this is only the start. My last question to you is, do you have any last thoughts to share to accountants, auditors, regulators or anyone else?
[00:18:17] Jason: Well, look, if you look at some of the more popular Twitter accounts in the crypto space, it’s likely to give you the idea that regulators seem to be losing. Then there are projects that, how should I say this? I want to be very careful. We think that by this time, next year, there will be 20 to 30 million voters in the United States alone that will either actively use crypto in some way, shape or form, or are well on their way of becoming active.
[00:18:58] Jason: And they don’t want to be told what they are allowed to do and not allowed to do. And one of the things that I tell our team, I tell new people that maybe join us. When we started this project, we had a vision, there is an existing reality, and that reality is comprised of what regulatory requirements are now.
[00:19:27] Jason: Then there is the reality or the prospect of what those regulatory requirements will be in the future. And there are most certainly will be some sort of compromise somewhere in the middle. We don’t know what that middle is, but we believe, and we know that it will, there will always be a requirement for financial transparency.
[00:19:55] Jason: And since we’re the only one focused on building a networker for decentralized disclosure infrastructure, in a good way and in a bad way, you know, it puts us in an accountable position to properly read a narrative in the crypto community, as the crypto community, rarely knows much about financial reporting.
[00:20:23] Jason: It’s not, as you know, it’s not export in a Excel spreadsheet out of an accounting system. There are globally standardized rules, which have resulted in, in our case, the development of controls based on those rules, that constrain logic, because a financial statement in our world is a multi-dimensional series of knowledge, graphs, and sub graphs that are anchored to, you know, our, our layer two protocol with the Merkle tree that refers each financial statement up to the dimensions, terms and graphs, hyper cubes within that statement.
[00:21:12] Jason: Which refers all the way back, ultimately to each individual transaction. So it’s, it’s a complex effort, right? But nonetheless, we think we’re best prepared to meet whatever compromise is reached between the crypto world and the regulatory world. Our protocol puts any reporting entity that complies with it, one click away from filing with regulators and we call that backwards compatibility.
[00:21:52] Jason: So one of the thing about, because you said statements made to accountants and auditors, they know that their skill sets will change. Our goal is to move institutional accountants from performing manual labor for hourly fees to developing and contributing controls, that automate and provide proof of assurance over accounting, audit financial reporting and analysis processes.
[00:22:25] Jason: So that every time those controls are used, the ones who create those controls get a royalty and they then begin to build a portfolio of NFTs because we had announced previously during summer, our intent to the development of those process controls, and so that they can be turned into NFTs, which is the same thing. If, an accountant is listening as developing software plugins to a much larger software package and in the accounting and advisory world, an enterprise may buy an SAP package, but they’re going to hire a big advisory firm to come in and install it, intune it, implement it and continue to attenuate how those controls interact with each other.
[00:23:13] Jason: So that, over time you have a tighter and tighter internal controls and controls over recording as time goes on. But that money is always gone because you spend X amount of dollars hiring. And there’s no real way to recover that except through maybe increases in efficiencies, which are not quantified in the manual report or quarterly statement, unless it’s specifically specified in a narrative somewhere, which it rarely is.
[00:23:45] Jason: So when an enterprise develops a portfolio controls, under a contract from an advisor, and those controls are turned into NFTs and contributed to use in the protocol. It’s a way to revolutionize an issue with balance sheet and turn what is usually a cost into an asset, which in all fairness, would, and should remain, those NFTs should remain intangible assets except that they generate revenue.
[00:24:19] Jason: And obviously when you record costs to develop them, but when you sell them, you cover the cost. And if you make a profit, you make a profit. So really there’s an opportunity for industry to revolutionize their balance sheet and transform into a truly digital enterprise. That’s where we hope accountants, chartered accountants and CPAs, CFOs, controllers, CFAs and other professionals focus their time. And that’s how we, that’s how we plan to move the institution. Accounting services into a decentralized professional services structure.
[00:25:04] Umar: I’m glad you brought this point up. So accountants need to evolve and be using the tools and techniques in this information age, we’re living in, and not be sleeping on those ones we had in the industrial age. What I want to ask you in maybe to summarize, because you know, there’s no university or the accounting bodies at this moment in time preparing the accountants for this transition to happen, to learn how to start creating controls for example, for the AuditChain protocol.
[00:25:38] Umar: To summarize, could you maybe share the subject areas that maybe people need to start looking at? For example, you mentioned Knowledge Graphs Fundamentals. This is one of them. Could you mention some of these subject areas?
[00:25:53] Jason: Look to the same extent that accounting curriculum at universities are not yet addressing these types of AIS programs, right, and MIS and AIS, they’re still teaching, you know, internet based centralized systems, but, but it’s also the same extent that economics curriculums at major universities are not necessarily implementing curriculums that provide the impact of what a digital currency with a finite supply will have on the world of economics. Yet it’s spoken about in the blockchain, specifically the Bitcoin community all the time.
[00:26:39] Jason: So I can’t speak for academia because that’s not my world. What I can say is that academia will be affected when big protocols who’ve done very well begin to contribute to those endowments at those universities and specify what curriculums will be taught as a condition for the pledge much the same way crypto.com put their name on the Staples Center now.
[00:27:12] Jason: And FTX put their name on what used to be the American Airlines Arena in Miami. When this money makes its way into academia, that’s when you’re going to see curriculums change. Not sure I answered your question though. Yes, you did. You know, curriculums are installed by corporations and donors to those endowments universities have their idea of what a curriculum is.
[00:27:42] Jason: But if you look at those endowments, there’s always strings on those contributions and those strings come with you know some pharmaceutical wants their doctorate program to be taught a certain way, right? Because that corporation would like the right of first refusal for all graduates to interview them and possibly recruit them.
[00:28:07] Jason: So, and that’s the type of blockchain adoption that nobody really speaks about, right. Because academia is funded by private industry. So you can say that the world, the industrial world shapes up by way of contributing to those endowments, which manufacture students that are ripe to work in the world that those donors visualize, right. And that’s not very often talked about because all those pledges come with strings, you’re going to teach them. And the students that come out of those programs, we want, we want you to send them to us first, but, and it may not be one company if you will or donor. It may be a number of donors that have the same ideals.
[00:29:00] Jason: So our education system is shaped by the very companies that those students eventually go out into the world and work for. And blockchain will soon infiltrate the endowment in the world of acedemia.
[00:29:16] Umar: To everyone listening,The Accountant Quits is about preparing accountants for a blockchain future. We will be having episodes further down the line on those topics that like Jason said, perhaps are not being taught at universities, but you accountants need to be aware of so that you can re-skill yourself.
[00:29:35] Umar: And so that you can prepare yourself. For the years to come.
[00:29:40] Umar: All right, Jason, this was a short episode. I mainly wanted to have you to share with the listeners the progress of AuditChain so far and speak a little bit more about the token. Thanks for coming today
[00:29:54] Jason: Thanks for having Umar.
[00:29:56] Jason: All right
[00:29:57] Umar: then. So we’ll speak soon.
[00:30:02] Umar: I would like to thank everyone for listening to this episode, you will find all the links of the episode, show notes and transcript on the website of The Accountant Quits at theaccountantquits.com. Please note that this content is for general information purposes only, and is not a substitute for consultation with professional advisers.
[00:30:23] Umar: If you do know anyone who could benefit from the episode and you care about, please do share the episode with them. All the episodes are available on Spotify, Apple Podcasts, and Google Podcasts, and by leaving us a review and rating, you will support the channel and all your fellow accountants. In order to be notified each time we release a new episode, do follow us on Instagram and LinkedIn. We hope to have you with us next time. Bye for now.