Today Aaron Tilton joins us to discuss financial tools to earn, trade and lend crypto with Smartfi.
Aaron Tilton is the Chief Executive Officer of SmartFi, which he co-founded with a vision to empower users by explaining the confusing nature of cryptocurrencies to a broad audience and making the modern tools of wealth generation accessible to all. Aaron is also the President and CEO of Blue Castle Holdings and Power Block Coin.
As co-founder in 2007, Aaron has chief responsibility to oversee the development of the leading new nuclear plant project in the Western US. Previously Aaron developed and negotiated equity positions and power purchase agreements with municipal and investor owned utilities throughout the Southwest. Aaron led these activities for two new power projects in the region. Aaron had also advised a venture capital firm on state regulatory matters for an online pharmacy that utilized an online medical consultation.
Aaron has broad experience in pharmacy automation software and hardware solutions. Aaron is a former Utah State Representative, having originally been appointed to the seat by Governor Walker when it was prematurely vacated. He was formally elected to the position in 2004, and again re-elected in 2006. Aaron is a Utah native where he lives with his family. He is active in his church and loves to ride Motocross with his son.
The following transcript was created using artificial intelligence. There will be some grammatical errors below.
00:01:12:09 – 00:01:28:09
Richard Carthon: Hello, everyone, welcome to another episode of Crypto Current, your host here, Richard Carthon, and today I have a special guest all the way out in Utah who’s working on a really cool project to help you earn even more money with your Crypto. We have CEO Aaron Tilton with SmartFi. How are you doing today?
00:01:28:24 – 00:01:30:11
Aaron Tilton: I’m doing good, Richard. Thanks for having me.
00:01:30:28 – 00:01:36:19
Richard Carthon: Of course, man. Well, before we learn more about SmartFi, want to first learn a little bit about you, can you give us some background on yourself?
00:01:37:27 – 00:02:12:25
Aaron Tilton: Yeah. So, my background primarily is in energy infrastructure development, we also have a little bit of a background in politics. And when the two of those kind of worlds came together in Cryptocurrency, it was kind of an interesting confluence. Early on with the company, it’s been around for about 15 years, we worked on developing nuclear power projects. We’ve also built oil and gas pipelines in Colorado and North Dakota.
00:02:13:10 – 00:03:29:16
Aaron Tilton: And then, also myself personally, I spent some time working on a couple of other projects that were technical. And made sure we had an IVR project that I worked for, a hardware and software company where they developed their own A6 and deploy those into chain store pharmacies, which are basically the technology that when you call the pharmacy and it answers the phone for you and you can push the buttons and order things. And then, also spend a lot of time on a project where we developed an online facility that prescribed medication to people without actually seeing a doctor face-to-face. So, some technology involved in there and energy, all of which was a really interesting confluence in 2017 when we were introduced to Crypto and we saw the two components in energy, you know, very heavy component in energy with Crypto. And then, obviously, the technology side of things, my background allowed me to kind of recognize an opportunity that we took advantage of, and that’s when we started Powerblock Coin and SparkFi.
00:03:29:18 – 00:04:03:02
Richard Carthon: Man, that’s amazing. First, I want to spend some time just on a little bit on your background. From nuclear energy to working in the healthcare side of things, I mean, you’re in two like, very different type of sectors. And then, you find this underlying technology, which I believe Blockchain, you kind of get introduced to that in 2017 and that kind of brings you down the rabbit hole of alright, this whole Cryptocurrency thing, let me look into this. So like, when you’re introduced to it, like, what opened your eyes and said, Wow, I need to spend time on this?
00:04:03:28 – 00:04:27:23
Aaron Tilton: Well, so, it was really we started getting all these calls from Cryptocurrency miners wanting to know if we had power out of our nuclear power plant, which haven’t been built yet. We were just developing. And it’s a long, long process to develop, you know, a new energy source like that. And so we thought, Oh, Okay, what is this? Who are these guys they’re using, you know, enough power to power a city?
00:04:27:25 – 00:04:28:10
Richard Carthon: Wow.
00:04:28:12 – 00:05:17:04
Aaron Tilton: And what are they doing with it, right? And so, we quickly learned that they were using application specific integrated circuits, which I had a little bit of a background in to do a computation application and basically mine Cryptocurrencies, in particular Bitcoin. So, we understood that side of it. And then, when we started helping them develop other projects around the western U.S. and other places around the world and Bitcoin, the price continued to go up and up and up and up. You know, and I think when we first started working on it, Bitcoin was around 1,500 bucks. And, you know, it went to 20,000 at the end of the year. And then shortly thereafter, it was back down to like 3,000 bucks, you know, $2,800.
00:05:17:13 – 00:05:52:29
Aaron Tilton: So, all the people that we were working with on building these projects, you know, said, “Gosh, we don’t have any money anymore, I gotta hold on to my Bitcoin.” And so we said, “Well, look in the energy business, people do a derivative off the forward price curve of their assets or their commodity. So, why don’t we do this, why don’t we lend you the money, you give us your Bitcoin, we’ll hold onto the Bitcoin, we’ll give you the money and you could start developing more projects? And away we went. And that’s how our lending platform began.
00:05:53:12 – 00:06:26:27
Aaron Tilton: And initially, what we were doing was just helping a lot of real, large scale, you know, high net worth Crypto hoddlers get behind their cash flow, their Bitcoin cash flow. We started giving them dollars and they gave us Bitcoin, we’d hold on to it and then they could decide when they were going to sell or when they were going to exit or pay off their loans with a capital appreciation of Bitcoin. So, most of our large scale clients were in China. We have people in South and Central America, we have people in Europe and here in the US and Canada.
00:06:27:16 – 00:06:53:25
Richard Carthon: Man, that’s amazing. So, just identifying an opportunity through utilizing nuclear energy to help with miners, collecting the Bitcoin and then, like once a bear market happened, which what happened in, you know, the run up in 2017. Kind of like you described 1,500 all the way to two, back down the three and we saw a bear market for about two years from 18 and 19. And now, we’re on this bull run from 2020 to where we are now. As of the moment of this recording, Bitcoin is now at 48,000.
00:06:53:27 – 00:07:14:14
Richard Carthon: So again, he was doing this around 1,500, do the math. I’m sure, yeah. I’m sure Aaron you’re doing pretty well with all of this. But all the same, you created what is now SmartFi, which like you said, is kind of a lending platform. You have a couple of different products on there, smart interest, smart loans, smart trade, smart exchange. Can you kind of just talk a little bit about each of those?
00:07:15:19 – 00:07:57:10
Aaron Tilton: Yeah. I mean it was just really the outgrowth of this structure where when a Cryptocurrency miner, when they were coming to us, they were looking for liquidity, but then they also, you know, they were looking for a partner to help them with their cash flow. But what that really translates into it translates into safety, right? As a business, you can’t have your volatility control your cash flow. So, what we did is provided them safety with cash flow. We couldn’t give them 100 percent hedge because obviously there is no 100 percent hedge for Bitcoin.
00:07:57:29 – 00:08:52:18
Aaron Tilton: And that concept right there led us to look at source code, the mining process and effectively, what we decided to do from that point forward was create our own Blockchain with a decentralized lending structure. But what we did is incorporated that safety first approach or a hedge, basically. And so, what we’re in the middle of doing is basically we’re deploying a lot of these products. As you mentioned before, the lending product, the coin interest product and smart interest and smart loans, that’s all available on our CeFi platform. Smart interest to be deployed out of our testing phase, I think it’ll be next week, but our small loans have been up for quite a while and then our exchange, all of these other things.
00:08:53:29 – 00:09:40:02
Aaron Tilton: But going forward, we have a technology that we have worked on with a group called Komodo, which is a decentralized community, and they built a peer-to-peer trading platform in a DEX. And so, they forked that technology with us. We’ve given them the innovations that we need to do to structure our lending platform on there. So here, shortly by the first of next year, you’ll be able to access all of our products on a DeFi platform, a DEX, a decentralized exchange that you can trade on. Right now, you can trade on it, but then you’ll be able to borrow and land on that platform.
00:09:40:23 – 00:10:25:02
Aaron Tilton: We also have in one of our Blockchains, a minable stablecoin. And so, that was where this innovation came from of providing a hedge first and then speculation later. And that’s all possible because of the way that we restructured the block reward when we looked at Bitcoin and Ethereum and all the other Cryptocurrencies that you can mine. What you were faced with in this mining process was this volatility, right? This is why we started in this business in the first place. There was enormous volatility, which meant that you know, it was, you know, chicken one day and feathers the next, right?
00:10:25:04 – 00:11:02:17
Aaron Tilton: It was very hard to basically structure a business around this volatility, so, we invented a protocol on an algorithm that mines a stablecoin. So, you get your reward in stability already in a dollar denominated Cryptocurrency, then you get to choose when to speculate and what to speculate in. So, there was some very unique things that we’re doing in that structure, which basically is an approach that is 180 degrees from the way that Crypto’s normally approached.
00:11:03:18 – 00:11:46:20
Richard Carthon: Right. So, let me just unpack that for a moment. So, I believe your stablecoin is called SmartFi USD. And so essentially, if I come in and I get a loan for whatever venture that I’m doing, I can have the opportunity to instead of tagging it to like a Bitcoin, an Ethereum or something like that, I could put it in this SmartFi USD, so, that we know that whatever returns come is in that stablecoin. So, technically there won’t be losses with the volatility. So, there might not be as much upside, but there also won’t be nearly as much downside. So, it’s just another option that as all of that’s happening, that you kind of stabilized the interest that you’re making on a loan, is that kind of how that rolled?
00:11:47:20 – 00:12:22:27
Aaron Tilton: Partially, you could do that way, but think of it this way, when we disburse loans, you can either take it in dollars or asset USD. And if you’re on a DEX, you have no banking integration, right? There’s no way to get back to Fiat, to get out to the real world, to buy equipment or do these other things. You can buy it in Crypto, but the idea is that you always want to hedge, so, that you can maintain the upside of your Bitcoin, your Ethereum or whatever you’re going to do, right? So, there are pieces of what you just talked about that you can utilize, but we also have a speculative coin.
00:12:23:10 – 00:12:57:10
Aaron Tilton: So, we have both sides, right? This kind of a yin and yang of Crypto is that you need that kind of lightning in a bottle, you know, the crazy returns that are structured, so, you can speculate, but then you also need safety. So, by employing two different clients from two different Blockchains, you can get from safety to speculation on the same platform with inside the same ecosystem. And you can borrow against it or you can loan against it. So, you have both sides.
00:12:57:12 – 00:13:35:07
Aaron Tilton: When you look at Cryptocurrencies, their inception, they were really just payment systems. They were not really built to do all the things that people are trying to do with them now, right? They’re essentially just a payment system. And when you disintermediated a third party from spreading a risk across the balance sheet, which is basically what a bank does and you became only a payment system, then you had massive volatility based on this deflationary structure, right? So, we added one layer in there, which is the lending protocol, and we do that both on CeFi and DeFi.
00:13:35:19 – 00:14:37:14
Aaron Tilton: But when you add a lending protocol in there, it now allows you to basically structure a decentralized, I know I hesitate to say the word bank because it’s not a decentralized bank, right? A bank is something that is regulated and has a bunch of structures that also have negative connotations. But what we’ve built is something that has Cryptocurrency monetary policy. So, you look at the way as the Federal Reserve or a central bank works, but then you decentralize structures and now you have a true opportunity to become what Cryptocurrency, what everybody sees in the value of Cryptocurrencies, but there are limitations and still are limitations in the core designs of the tech stack. So, we tweaked it, you know, modified it 180 degrees, made it into a decentralized lending platform that has Cryptocurrency monetary policy.
00:14:37:16 – 00:15:29:16
Aaron Tilton: So, people who own the SmartFi speculative coin, they can vote on interest rates and they can hold the Cryptocurrency as an index, so it creates a forward price curve like you would have with other commodities or other lending structures in the real world. And you can also get to safety and hold a Cryptocurrency that is a complete hedge, has zero volatility and there’s no peg associated with it, right? And our stablecoin, there’s no pegging it. It actually uses the lending platform to structure the value without some minting burning protocols, all of these things. It is born as an exact hedge to a dollar and stays that way without some, you know, complicated algorithm.
00:15:30:18 – 00:16:13:27
Richard Carthon: Right. And to break that down a little bit, it sounds like you’re basically creating this unique way that someone can come in and get a lot of what you would get in traditional finance, but doing it in a decentralized way through your platform, from getting both a stablecoin that you can be a little bit more secure in, but then also having a speculative side, like you said, allowing it to be able to, you know, appreciate and whatnot that you can still be able to have massive potential returns from, but then also have it as a way to lend out, earn some APY, annual percentage yield because you are have storing some of this coin that is then being utilized by other entities. So, you’re kind of getting the best of both worlds.
00:16:14:19 – 00:17:42:13
Aaron Tilton: Yeah, exactly. And because of the unique nature, the way that we’ve incorporated this lending process into the coins, just like if you were to open an account at a bank, you expect that when you put the money in there, you can go back in a year from now, 10 years from now and pull out that same amount of dollars, right? Or whatever the Fiat currency is. And so, we incorporate those same hedge structures or safety features, but we incorporate that into the speculative side. So for example, if you were to buy our SmartFi coin from our what’s called our smart cycle, it comes with 100 percent money back guarantee where whenever you buy it, whatever price that was, you know, in terms of dollars, you know, after a year, you could come back and always get your USD value. You could put it to us and we’ll give you the USD value, but you can also keep it and hold it for the speculative value. So, if our loan portfolio continues to increase, the price of that coin is indexed to that structure, so you can either hold it for safety or you can speculate on the loan portfolio and sell it for a higher value as the portfolio goes up. So, you have both sides of that equation that you can engage in in a single coin.
00:17:43:06 – 00:18:04:09
Richard Carthon: Yeah, and that’s very unique. It’s a very unique approach to it. And I think that’s, I mean, I think that’s why a lot of institutions and companies are looking towards SmartFi. So, walk me through someone listening to this right now and they’re like, Wow, this is really cool. I potentially want to sign up for one of these, can you walk me through the process of what that looks like?
00:18:08:21 – 00:19:32:11
Aaron Tilton: Yeah, it’s actually super simple. So, currently you would go to the CeFi platform, SmartFi.com, sign up, provide some basic KYC information, sign up for the account and then if you had Bitcoin, Ethereum or whatever Cryptocurrency you had that was supported on our platform, you can basically trade it on a very simple converting tool. So, the same kind of tool that Coinbase, you know, made their name on, which is just a tool you can sell for you know, Bitcoin or buy Bitcoin. We have the same kind of tool available, and you can buy all those same currencies or buy SmartFi with Bitcoin or with dollars or any stablecoin, really.
00:19:33:15 – 00:19:39:13
Richard Carthon: Got it. And is this open to retail investors or is it only open for institutional?
00:19:40:10 – 00:20:11:17
Aaron Tilton: No. Anybody, right? Because it’s not a security. What you’re not doing is you’re not buying this coin trying to get a yield from the interest rates that we charge. What you’re doing is it’s basically an index, so, as the portfolio grows, the price of SmartFi token is indexed, much like other token sales that you would see that go out and say, Hey, we’re going to really so many coins for this amount of dollars, you can buy in, right? And then it has a utility.
00:20:12:04 – 00:20:50:28
Aaron Tilton: Well, our utility is lending and the price is indexed to the portfolio. So, what we did is took a forward price curve like you would take from an energy industry. We took those same kind of modeling structures and prices for indexes and created that in our coin. So, at the very beginning, the coin has a lower value, and every time that we hit a higher value in loans, the coin isn’t sold at a higher value. So, it in a smart cycle is a continuing token sell, but we don’t sell all the coins at once. That’s not how it works, right?
00:20:51:00 – 00:21:28:27
Aaron Tilton: We only sell a very small percentage of the coins to fund the loans. And then, as the loans get funded, the price of the coin goes up and then we have more loans. We fund those loans and the price of Bitcoin goes up and continually goes up. So, the basis for the investment in the project continually pushes the price of the coin up and has a structured basis in there. So, for example, every time that we hit a certain milestone for, let’s say, at the very beginning, we’re seating the platform.
00:21:28:29 – 00:22:12:05
Aaron Tilton: We’ve got, you know, say, about $40,000,000 worth of loans on there, the coin would be worth about six bucks. In the very beginning, the coin is worth 70 cents off of a $5,000,000,000 notional value along the platform, and as we continue to head towards 100,000,000, it’s worth $16. So, you can look, it’s an exact correlation to the loan portfolio. So, you can say, Hey, if today the loan portfolio has a demand for $100,000, but we’ve only funded, say, $40,000,000, you know that there’s $6 in the coin for growth because the demand for loans is there. So, it’s very easy to plot a forward curve and know that you’re buying the coin at a discount.
00:22:12:23 – 00:22:35:29
Richard Carthon: Right. I would equate that to like market capitalization as you look at a bunch of Crypto’s that are out in the space right now. You can generally understand where the price speculation can be, depending on what the entire market cap for that particular coin is. And it sounds like a pretty similar calculation for how you would be able to calculate the price of the SmartFi coin.
00:22:36:15 – 00:23:16:19
Aaron Tilton: Yeah, really similar because I would, Instead of calling it a market cap, we’d call it a basis, right? So, you have basis risk in any investment that says, you know, from taxes to capitalization and then like a bank, right? The market capitalization for a bank. So, we would say it kind of the same way. But the difference is and I’ll use Bitcoin as an example, if you knew the price at which everybody had acquired their Bitcoin, that is currently holding it, you would know at the level where there’s capitulation in the market, right? Where people would either sell or hodel, right?
00:23:17:05 – 00:24:13:09
Aaron Tilton: So, if you knew what that price was, you could find the bottom or the hash, right? Or the risk would start to lay off if it runs up, you know, super high compared to the basis of what everybody invested in, you would know that it was overheated and that it could go back down to a certain level and then everybody stops selling because they’d start taking losses, right? Well, we’ve done that, but we basically structure that as an index that is published to everybody. Everybody knows what everybody else bought the coin at, so, now you know what the bottom is for the coin. And we also have this structure that let’s say we lend out a billion dollars to different institutions, miners and basically other groups, real estate investors. And so, we lent that out, but everybody does really well for a while and they start paying it off.
00:24:13:27 – 00:24:47:21
Aaron Tilton: Well, what happens is that let’s say they pay off, goes from a billion to 500,000,000, all that really happens is the US is sitting on $500,000,000 in cash now. And what we would do is you as a SmartFi hoddler would say, Okay, let’s lower the interest rate to get the dollars back out the door. So, you have a way to respond to what people would look at us maybe there’s a drop in the price of our coin, but we have a way to respond to that. We lend more money. And because we have it, it’s all sitting there, has been all paid off.
00:24:48:01 – 00:26:01:15
Aaron Tilton: So, it runs more like a central bank with this Cryptocurrency monetary policy. So, you can resist bear markets, right? And because the capital came in that effectively has no debt service, SmartFi can actually compete with bank rates just like a Federal Reserve would. You can actually, if you really wanted to, you could go down to zero interest rates and lend all the money out in a single day because everybody would come for their money, right? So, you can structure this decentralized, I hate to call it, it’s not a Federal Reserve, but I’d say it’s a bank-like structure that nobody controls, right? In terms of centralization, it actually has a decentralized aspect to it. So, it really becomes like a real currency issuing central bank, but it has none of the drawbacks. It’s not tied to a government, it’s controlled by the holders of the token and there is a real utility in its structure and has a real forward price curve that you can structure capital around.
00:26:02:21 – 00:26:53:21
Richard Carthon: Excellent. Well, I mean, there’s so much amazing information to go back and unpack. For everyone listening, make sure you go back and make sure you really, really, really see like, how deep this type of structure is and is going to grow and I think has a lot of utility in the future. And if you’re looking for a way to potentially access loans, have some speculation in there and be able to hedge against prices out there, SmartFi sounds like a great way to do that. But Aaron, as we kind of wrap up here, I always have two final fun questions I like to ask. The first being all the information that you’ve been able to gather over the last 15 years or so or even as you’ve, you know, kind of started this Crypto journey if you can impart two to three pieces of wisdom to yourself when you first got started on this Crypto side of things, what would you tell yourself?
00:26:55:15 – 00:27:33:06
Aaron Tilton: I think, you know, probably what you see a lot of times is people are in such a hurry. They think they’re missing out, right? That’s kind of what drives the market, the fear of missing out on some certain price. Well, you see that price continually come back, go up, come back. And I think what people need to do is they need to look for opportunities that have some level of safety. It’s no fun going from 1,500 bucks to 20,000 back down to 2,000, right? So.
00:27:33:08 – 00:27:34:14
Richard Carthon: It’s a gut punch.
00:27:34:24 – 00:28:23:18
Aaron Tilton: You do have to get into the market, you have to take the plunge, but now, knowing what we know and what we built, you know with SmartFi, there’s the ability to de-risk the opportunity, but not miss out and not have FOMO, right? So, I think that’s one of the things that you would look at. And then also, I would say, look at things that have real utility. There are a lot of yield farming plays and all of the things in DeFi, but the reality is a lot of those businesses are not going to be around or those platforms of those algorithms are not going to be around in two years, right? So, look for something that is easy to understand and has real utility.
00:28:24:26 – 00:29:06:27
Aaron Tilton: You know, one of the things that we’ve done is we have already started lending in the real world. We just did a couple of weeks ago, we did our first test lending cases where we lent dollars to small businesses for equipment backed loans, and they have no idea that Cryptocurrency was used to fund their loans. That’s when you get real user adoption. Look for those type of protocols that are making a difference in people’s lives without really having to change their habits. That’s when you know you’ve got something that people can adopt without even knowing they’re adopting Crypto.
00:29:07:15 – 00:29:15:21
Richard Carthon: Absolutely. I mean, I’ve brought up that example multiple times. How do we get there? It’s when people are utilizing Crypto and they don’t know that they’re using Crypto, right?
00:29:15:23 – 00:29:16:08
Aaron Tilton: Yeah.
00:29:16:28 – 00:29:27:17
Richard Carthon: And it sounds like that’s already starting to be implemented. So, kudos to you for that and figuring out how to structure that. But as we wrap up here, man, what is a final thought that you want to leave with all of our listeners here today?
00:29:29:03 – 00:30:22:29
Aaron Tilton: Well, again, I think that would be kind of it is that when you’re looking at this, there are a lot of new people looking at it coming into Crypto, I have a lot of my family that, you know, they knew that like, there’s something in Cryptocurrencies, but they don’t really know what it meant or what it was. Make sure that what you’re doing has a safety first component to it and follow your instincts. Typically, people know how to use money for the most part, and if you’re doing something that feels very unsure, don’t do it, alright? There’s no rush. Look at things that have the prospect of future proofing and can tie back into the real world and have real utility use.
00:30:23:27 – 00:30:41:18
Aaron Tilton: Follow your instincts, they’re usually right. And do a little research on what you’re doing. So, there’s no reason to jump into things because you think you’re going to miss out on something. The things that are real and good will be around for a while. And start small to grow big.
00:30:42:18 – 00:31:06:27
Richard Carthon: Absolutely. I think that’s a great final thought. Do your research, get some good education and when you’re comfortable and confident, jump in, dive in. There’s no immediate rush, but there is a lot of opportunity, but you want to make sure that you feel good about the decision you make before you dive in. So, Aaron, thank you so much for all the information, what are ways that people can learn more about SmartFi and also be able to learn more about you?
00:31:07:23 – 00:31:29:04
Aaron Tilton: Go to SmartFi.com honestly to access the portal, and then you can follow us on SmartFi Portal at Twitter. And you can find out all of the newest information. We do have our token sale for the smart cycle that’ll start in about 10 days. So, go there and have a look and see if it’s something that you’re interested in.
00:31:29:29 – 00:31:34:13
Richard Carthon: Excellent. Well, again, thank you so much for your time and for everyone listening. Stay, Crypto Current.
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