Luxe Radio Interview

Sara Rami:Today we welcome Cédric Nicolas, CTO and country manager of the EMC2 group, an expert in Web 3 blockchain and crypto assets. With him, we will attempt to answer this question: Where is the digital economy headed in the era of Web 3, crypto assets, and NFTs? Hello Cédric

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Cedric Nicolas: Good morning

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Sara :Thank you very much for joining us. So let's talk about architecture and digital sovereignty. To begin, Web 3 is often presented as a new decentralized paradigm compared to the centralized models of Web 2. Concretely, how are we redefining the architecture of the Internet and what technical disruptions are we observing? A way of asking you, what is the difference between Web 2 and Web 3?

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Cedric:In fact, Web 3 owes its origin to something everyone has heard of, namely Bitcoin. Bitcoin is based on a technology called blockchain, which is a decentralized system of many computers whose purpose is to secure transactions. So, initially, it was really this idea: to be able to send money without an intermediary. This blockchain technology is the legacy of 40 years of technological evolution in cryptography, distributed computing, and networks. It was paradoxically initiated at the time of a major economic crisis, the 2008 crisis, and Bitcoin was launched in 2009. The blockchain was then improved and extended, and there are many providers of this technology with many variations, but always on the same principle: to use a large number of computers spread around the world to secure transactions that were initially financial and now can be of many other kinds to secure documents, contracts, etc. So that's the paradigm shift.

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Sara :Web 3 actually adds the ability to pay, to exchange value, and to secure peer-to-peer, so directly from person to person, and that's where this revolution comes from. So we can say that Web 3 is based on blockchain, the decentralization of identities, smart contracts. With the break with centralization in general, we talk a lot about digital sovereignty, Cédric Nicolas, but according to the European Parliament's 2023 report on blockchain, less than 3% of Ethereum nodes are hosted in Africa. How can we develop an infrastructure that is therefore sovereign on these technologies in countries like ours?

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Cedric:So there is a paradox here since what we are looking for through a blockchain is to have a secure and resilient system, that is to say, one that does not fail, and clearly this technology allows for this. But to ensure these qualities, a large number of computers are needed, and they must be geographically distributed, particularly to prevent risks of war or attack, etc. And so it is through geographical distribution that we will obtain these qualities. Sovereignty, which consists of saying that data must be controlled by the State or by a nation, conflicts a little with this. We can imagine, for example, a Moroccan-only blockchain; we would have a certain number of benefits, but we would not have the panacea in terms of security, decentralization, etc. I don't know if you remember the recent power outage in Spain, which also affected Morocco indirectly because some telephone centers were in Spain. You know the story, we can see that a defined territory can be in danger at a given moment and therefore there is this paradox of sovereignty. So what we have to understand is that for the majority of blockchains we are talking about public blockchain, moreover we are also talking about decentralized public registers, if we generalize these blockchain technologies a little. What does public mean? It means that not only can everyone access it but also that the data that is visible on this blockchain is publicly accessible, this is also what defines the security of transactions, it comes from Open Source etc. From the moment things are public everyone can come and verify that the things that are written on it are true so obviously it is advised or even strongly recommended that there is no personal data on the blockchain.

So if we come back to sovereignty, this brings a solution to what I was saying earlier, namely that private data, sensitive data, will not be stored on the blockchain. We will store encrypted data on the blockchain, or what we call hashes, that is, identifiers that will represent this public data but in an encrypted way, so we find a compromise in this way.

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Sara :Our country has just recently announced initiatives around the digital dirham, so perhaps there is no point in me asking you how to articulate central bank digital currency and crypto assets in the same system since you say that blockchain is already ultra secure.

Cedric :So here we are in a question that would require a lot of development, but this transition is interesting. The first big difference between a central bank digital currency and crypto assets is that the central bank digital currency is issued, by definition, by a central bank, so in some ways it is the State that is the guarantor and creator of this system, whereas other possibilities like Bitcoin and stablecoins and other means of payment that we may talk about again, they are issued either by private entities, or in the case of Bitcoin it is totally decentralized, no one controls it, it is the developers who propose an exchange protocol, and which is accessible to everyone and which works on its own, so to speak. So there is this opposition there and in terms of currency, indeed the question of sovereignty is essential, that is to say, would a currency that would be issued by decentralized entities or private entities have a sovereign character? We can ask the question. In fact, it is possible, it is simply enough that the guarantees of these currencies, that is to say the collateral reserves which will ensure the solidity, stability and liquidity of this currency, are controlled or regulated by the State and therefore we can find compromises and this is what is happening today in the world. The blockchain is invading or massively integrating global payment infrastructures because it is simply more efficient, so we do not risk cannibalization, but rather complementarity, that is an excellent question.

For me, monetary sovereignty is also an urgent matter. Why? Today, blockchain currencies, and stablecoins in particular, are essentially denominated in dollars, with an overrepresentation compared to traditional currencies. Should the private sector be allowed to create private currencies under state control, or should the state itself create its own currency and reform it? This question remains open. Both have disadvantages and advantages.

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Sara :Perhaps the wisest thing of course, I ask you the question, you are the expert, would be a possible complementarity between a digital currency created by a state and regulated stablecoins?

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Cedric :Absolutely, there is a possible complementarity. We simply have to be careful about one thing: the ability of the public, of users, both individuals and businesses, to accept and use a new currency. Because if you launch something that is not accepted, you will have lost a lot of money, and that is a major risk for central bank digital currencies because many users will probably be wary of a digital currency controlled by the State. Couldn't the State at some point block my money, or even cap it, or monitor everything I spend, whereas when we use cash, bills, coins, this is not the case?

If I give you money, unless there's a camera, the state can't see what I'm doing. So there's a real risk here that needs to be addressed from the outset when designing the system.

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Sara :In 2024, we are told that 70% of Web 3 projects failed within 18 months. Is this a governance flaw in DAOs and decentralized autonomous organizations? Which model really works?

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Cedric:So that's an interesting question. Well, it must be said that at the beginning of the web, most web projects also failed very quickly, that's the general phenomenon of start-ups. We know very well that after 5 years, more than 2 out of 3 start-ups have disappeared. Well, it turns out that on Web 3, we're introducing something new, it's an evolution of the web to transport value. The development of applications is more complex because obviously, if there are problems, a lot of money is immediately lost. We've seen many problems in the world of Web 3, hacking, etc., which have been very harmful for this sector, even if it's now starting to calm down because we've learned from our mistakes. But the result of this is that there are indeed many projects that have failed because they were too ambitious, poorly managed and often too speculative, meaning that ultimately they were projects designed to enrich a very small number for the benefit of the masses. Those are the reasons. There are also examples of the opposite.

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Sara :Yes, of course, there are definitely successes. Tell us about the tokenization of the real economy, if you allow me, Cédric Nicolas. I remind you that you are CTO and Morocco Country Manager of the EMC2 Group. Which asset classes are actually being transformed, and with what limitations?

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Cedric :So perhaps we should quickly define what tokenization is. It's the digital representation of a real-world asset, so when we talk about a real-world asset, it can be many things, starting with money, which is a real-world asset. But it can be precious stones, it can be gold, it can be energy, it can be raw materials, including agriculture, etc. So it can potentially apply to many areas, and it's true that tokenization is very promising. First, I'm going to talk about the main advantage of tokenization, which allows you to represent an asset and divide it into a very small number of shares, which allows you to broaden the investor base. That is to say, today, if you want to buy a house, you need a minimum amount, but with tokenization, you can bring together many people who will be able to acquire the property with a much lower entry ticket, so that's a real advantage. This allows savings to be democratized in all sorts of assets, but the difficulty is how to guarantee that what I have is tokenized actually exists. You need proof of reserve. If you tokenize gold and you want to buy a gold token, are you sure that the person selling it to you has the corresponding gold? And if you want to resell your token, will they be able to sell the gold and give you your money in exchange? That's the big question. So we can clearly see that it's easier to tokenize money than to tokenize real estate or gold. Even if all these projects exist, potentially we can tokenize almost the entire economy. Today, we see major American players like Blackrock and others tokenizing financial securities, mutual funds, and ETFs, which are these tokenized investment funds. An ETF is a financial product that holds real assets and then divides them into tokenized shares and sells them to people. So potentially it affects a lot of things. What's very interesting is that in the context of emerging countries, the tokenization of natural resources, I see it as extremely promising. If you tokenize agricultural production, for example, it means that you will allow investors to invest in production and future harvests and therefore it will allow farmers to be financed. This is extremely promising. There are already quite a few projects in Africa on this subject. Obviously, for that, crypto assets must already be regulated.

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Sara :Since we haven't talked about it, it could be the legal limits and also the problems of interoperability between blockchains.

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Cedric:Yes, that's exactly it, you're absolutely right. So the first thing is that we do indeed need a legal framework. One of the reasons EMC2Group is here is that we want to deploy services in preparation for the release of this law on cryptoassets, which seems promising and was written with the aim of not blocking innovation, and that's good news. So we need a legal framework that allows these companies to develop these services, and what does that mean? It means that those who will operate this type of service will add value to the Internet; they must comply with specifications. That's the goal of this law: to define a new license for cryptoasset service providers with a fairly broad list of activities: you'll be able to do tokenization, trading, issue stablecoins, make cryptocurrency loans, finance cryptocurrency projects, the list is quite broad, and that's very promising. So we need a framework, otherwise we can't work. Then, indeed, the problem of interoperability is a purely technical problem. Generally, when there is a technical problem, we always end up finding solutions. But you are right in a sense that today the world of Web 3 is quite heterogeneous, and it is even very heterogeneous, and we know that it will become more concentrated. That is to say, in 5 to 10 years, we will have far fewer different blockchains; they will become somewhat specialized; there will be specialized blockchains for payments, specialized blockchains precisely for tokenization, etc. It will be easier to manage.

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Sara :Here, thank you for giving me the opportunity, Cédric Nicolas, by talking about what you are doing with EMC2group. It turns out that you are also working on diploma certification solutions, aren't you, and identity via blockchain. Correct me if I'm wrong.

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Cedric: These are things I've done in the past in Morocco. EMC2 Group focuses on payment management, particularly starting with remittance, which means managing the $12 billion that arrives in Morocco each year.

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Sara :which does not prevent me from asking you the question about how to resolve, out of curiosity, the problem of sovereign identity on an African scale and what protocol we could use

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Cedric:So there you are talking about another subject, you really prepared the show well, I love it! Identity management is a major issue because if we want to have a secure framework to fight against money laundering, terrorist financing and all fraud, it is essential to be able to verify identities. So identity management is a major issue and blockchain can provide solutions. What we will be able to do is decouple the issuance of a digital identity from its consumption. I will give you a very concrete example: you can, in quotes, tokenize a diploma and link it to an identity and that is done on the side of the University that issued the diploma and then you can have a recruiter or a company that will therefore be able to formally verify a diploma and the person who holds it completely independently of the entity that issued this diploma. This is really the idea of ​​decentralized identity, that the user, the person, is in control of their data and they decide what they reveal.

I'll give you another example: if you want to get your driver's license, you just need to prove that you're over 18 or 21; I don't know what the driving age is here. To get your driver's license, you don't necessarily need to provide any other details. So you'll be able to decide for yourself what you reveal. That's really the major contribution of decentralized identity, and blockchain obviously has a role to play because it allows you to secure and certify these elements.

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Sara :NFTs now Cédric Nicolas. The NFT market fell by 95% in volume between 2022 and 2024, but we are seeing the emergence of real, so-called, utility for NFTs: ticketing, intellectual property, traceability. Where is this market heading?

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Cedric:You partly answered your question yourself. It's true that we had a period during Covid, 2021-2022, of hype around NFTs, there was a lot, a lot

speculation with prices that have risen very high and today they are really at rock bottom. We are actually seeing a much more utilitarian use of NFTs and as is often the case when you have emerging technologies like this, there is a mess at the beginning and ultimately what remains is what is really useful. As a reminder, the NFT is a token that is unique unlike Bitcoin for example: one Bitcoin equals Bitcoin, okay, that's called fungibility. An NFT is a non-fungible token, meaning that one NFT is not worth another NFT. So it's a digital certificate and it can be used for many things: certifying works of art, a diploma, a membership card, a concert ticket, etcetera. So it clearly has a use and it's already being used, except that today in fact the services that use it no longer put the word NFT forward because it sells less but they use it well technically. So NFTs continue and it's used and it's very practical, we also see dynamic NFTs coupled with identity.

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Sara :The metaverse which seems to be losing speed according to McKinsey user engagement has fallen by 30% since 2023 yet meta Apple or Epic Games are still investing massively. We can still say what the future for this metaverse, thank you?

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Cedric :There too it depends on the point of view because if I look at my children they are in the metaverse quite often especially through video games, so for me the Metaverse exists and we see these big publishers of games and online content integrating this principle: I am in a virtual world, but in this virtual world I can have connections with the real world that is the idea of ​​the metaverse, I will have a representation of a street or a store I will enter the store and then I will see the objects that are inside and I will be able to buy them and so on and so forth. All that exists except that it is no longer the hype of the day and once again remains what users really appreciate, that is to say fluid interfaces and increasingly also secure environments because there too in this world there have been a lot of scams.

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Sara : So I'm going to ask a few questions before closing this interview. Artificial intelligence and blockchain, is there any synergy there or is it a crossover buzzword? I'd like to get your point of view on that.

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Cedric:It's interesting because this very morning I was listening to a video on this subject. There's more than just synergy, it's completely merging and that's a very important point. Something absolutely major is happening, it's what we call AI agent technology. What is an AI agent? It's a small program that actually has a certain autonomy to carry out operations. I'll give you a very simple example: you're going to talk to your AI agent and you're going to tell it: Book me a trip to Bali with such and such a price level, etc. It will work on its own until it has done all the research, booking, car reservations, hotel reservations, etc. It will do this on its own, so you see the principle, and when it's finished, it will give you the answer.
Well, except that something is missing from these agents, it's being able to pay and that's where the two worlds will come together, because in fact today when you want to pay with your credit card you know that there are between 5 and 10 intermediaries between you and the merchant, namely your bank, the merchant's bank, the card network, the payment service provider, the clearing house, etc. There are lots of intermediaries and that's a problem for the AI ​​agent, it can't work with that because it's not fast, the money doesn't arrive right away. And here we see immediately why the two technologies are getting married, it's that the blockchain allows instant payment with instant settlement at very low costs, so there the AI ​​agent is in a cheese, it works all alone and it's very happy. So that's what's happening is that the blockchain will actually become the payment system between AI agents and so there will be quite a few ecosystems that will disappear and also there are lots of ecosystems that will be created.

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Sara : Are there also concrete cases in DeFi or cybersecurity with this synergy between the two?

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Cedric:You mentioned a new term, DeFi, which means decentralized finance. It was something that emerged in 2015 and 2016, but which also developed a lot during Covid. So, what is decentralized finance? It's the ability to exchange, trade, and carry out a number of operations, such as lending, exchanges, guarantees, and even insurance, etc., based on the blockchain. DeFi is still relatively small in terms of volume compared to the whole of global finance, but we are progressing extremely rapidly since there are very large players in the payment industry, the banking industry, and especially the financial industries, I would say, that are integrating it more and more. Because DeFi automates a number of processes to improve investment returns essentially, but also to provide financial services, for example, such as lending or borrowing, in a decentralized way.

In DeFi there is the term "decentralized" it is very important to remember that. Obviously there is a direct relationship with cybersecurity that you have noted here since this DeFi, it is based on the famous smart contracts which are small programs that work on their own and which will react and make new investments, etc., depending on the events that happen.

So we can imagine that someone taking control of these smart contracts can cause a big mess, and it's happened several times. But this sector is growing because the blockchain remains an extremely secure system, and if we do things correctly, DeFi works very well, and I am convinced that this is an area that the entire financial sector absolutely must study closely, because it is the future of finance.

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Sara :Well, unfortunately we're short on time, but tell me two or three African Web 3 projects or protocols that you think are the most promising today.

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Cedric:You're asking me a trick question. What I see today is that there is a significant gap between French-speaking Africa and English-speaking Africa today. The successes are in countries that are really driving the sector, namely Kenya, Nigeria, South Africa, Ghana and Mauritius because Mauritius had regulations very early on that were very favorable to blockchain, so they are very ahead. There are a number of start-ups like FlutterWave, Yellow Card and others that have raised a lot of money in the blockchain field, but we are at the beginning. I think there are many champions who will emerge. For example, there is no pan-African blockchain yet, and there is a real issue here. It's really a project that would be very interesting to develop because we wouldn't have a global reach, but Africa is very large, and if we were able to develop a pan-African blockchain, it could have many benefits, and Morocco could become a regional hub. Morocco has, in my view, an extraordinary opportunity. If Morocco enacts this famous law on crypto assets that we have been talking about for a long time, but finally it seems to be accelerating. We met with people from the Central Bank who confirmed that it should go faster. Morocco has a real opportunity, because it will be able to serve as a bit of a locomotive for the entire crypto asset sector because it will provide a model with a legislative framework that is under control but favorable to innovation, and as a result, it will probably pull all the other countries in the sub-region, especially since you have champions with banks that have numerous subsidiaries throughout Africa, and these banks can play a very important role in securing all of this. Because at some point, banks have their role to play when we have money stored somewhere, it is still the best way to secure all of this is to call on banks and their core business. They must invest in this sector and not be afraid of it because today I can tell you that there is a little bit of excessive caution.

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Sara :Cédric Nicolas thank you very much for answering all our questions I remind you that you are CTO and Country manager of the EMC2 Group, expert in blockchain, web 3 and crypto assets You have more than 35 years of experience in the web and mobile sectors and you are also the author of the very first book in French on the Java language thank you very much thank you goodbye

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