The 311 Podcast

The 311 Podcast, hosted by Paul Bellows, is dedicated to exploring and sharing stories of the people behind digital transformation and organizational change management in Public Service organizations.

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The 311 Podcast

S3 E2 - The Missing Internet Trust Layer with Timo Hotti

May 13, 2026 • The 311 Podcast • Season 3 • Episode 2

0:00 | 58:07

The future of trust in the digital economy

For a long time, I struggled to articulate exactly what bothered me about crypto. It wasn’t just the reports of grift, fraud, or dark-market economic activity. More fundamentally, crypto has never quite felt like the internet at its best — open, connective, trust-building, and generative in the ways transformative technologies should be. Then I read the new Internet Trust Layer white paper from Finnish technologist and financial thought leader Timo Hotti.

Aside from being a fellow hockey fan, Timo is an early web technology adopter whose work has focused on data, transactions, and decentralization. He leads transaction decentralization initiatives at a major Finnish bank and was one of the core contributors to the Findynet open-source project — a decentralized national identity and transaction platform developed between 2019 and 2024 that continues to seek contributors today.

In his white paper, Timo does more than critique the limitations of crypto as a foundation for the future digital economy. He lays out a compelling alternative: a path toward active digital money and a payment infrastructure built on repeated acts of trust rather than speculation.

I was genuinely excited to have this conversation with Timo, and I think you’ll find it as thought-provoking as I did.

Here’s our conversation on the future of trust in the digital economy.

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Guest Information

Timo Hotti, Principal Technology Strategist at OP Pohjola | LinkedIn

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Important Resources for Stuff We Talked About:

Internet Trust Layer (ITL) white paper by Timo Hotti | Substack

The Findynet open source project | Github

The Next Big Thing | Substack
Following our discussion in April, Timo was inspired to attempt to describe "where's the transformation, if there's any." He shared the link with us as an additional resource for the discussion in the episode.

On this episode of The 311 Podcast, Paul and Timo discuss:

Introduction and Economics Crash Course
Active Money Explained
Crypto as Barter
Trust Formula X counts as Y in C
Four Body Problem B2B
Active Money Without Crypto
Credit and Real Contracts
Automating X Counts As Y
Decentralizing the Root
Agent Keys and Trust
Verifying Agents Safely
Cocktail Party Protocol
Trust Layers Beat Mining
AI Meets Agentic Trust
Findynet Status and Wrap Up

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Recorded in April 2026.

This is a show about the people that make digital public service work. If you'd like to find out more, visit the311podcast.com

We're going to keep having conversations like this. If you've got ideas of guests we should speak to, send us an email to info@the311podcast.com

Welcome to Season Three Episode Two

Paul Bellows 0:31

This is the 3 1 1 podcast and I'm your host, Paul Bellows. This is a show about the people that make digital work for the public service. If you'd like to find out more, visit the 3 1 1 podcast.com. This is the second episode of season three of the 3 1 1 Podcast. In this season, we're continuing to focus on emerging technologies and how they impact the way government works and what could be possible if we get it right or wrong. Before we jump into this lesson, I regret that I need to provide a quick and likely oversimplified lesson on economics and the finance system. My apologies in advance for the content and possibly for some egregious oversimplifications. I think it'll set some context for our conversation. A current financial system, at least in the rules-based International Order, runs back roughly 80 years to the Bretton Woods Conference of 1944, where like-minded countries agreed to share a financial rule book. But you could also trace our current era back, another 600 plus years to the 12 hundreds and the Italian merchant bankers who developed a double entry bookkeeping system. That's become the heart of how we manage our modern economy. I sell you something and record the sale in my ledger. You buy that object or service and record the purchase in your ledger There's a liability on one side and an asset on the other, a debit and a credit, an expense and income. Both parties can audit it and be audited. Both sides remain independent. Credit can now exist to represent the space and time between the two ledger entries. Credit creates new money in the system, which causes the total size of the economy to grow when it's well managed. As the International Order was introduced at the end of World War II through the International Monetary Fund in the World Bank, and as countries introduced central banks, the rules-based international ordered entered an unprecedented area of growth. Central banks manage currency, regulate the volume of currency in the market and act as a counterweight for major economic swings, essentially becoming the thermostat for national economies with the World Bank being the thermostat of thermostats. The rise of digital communication in internet-based transactions has changed most global industries from media to supply chain to service delivery to trade. But the basics of exchanging currency between parties is still operating like some kind of digital duct tape on top of a legacy banking system. To make an international transaction of any significant size, most parties still rely on the SWIFT system, which is a secure messaging layer for banks. Like a commercial WhatsApp, over 40 million messages per day travel over the Swift network at an estimated total annual transaction cost of over$200 billion on transactions in 2026. A estimated total over one quadrillion US dollars. SWIFT transactions take days to clear locking billions of dollars of working capital up while banks on either side wait for confirmation that a transaction is valid. We trade and transact at the speed of the internet, but we pay at the speed of carrier pigeons. That's a problem. As we entered Web3.0 in the 20 teens, a new economic entity emerged. The blockchain and the cryptocurrencies built on top of it, or similar technologies. Crypto promises a new financial order, an independent single ledger shared by all parties. Financial transactions at the speed of the internet, full transparency and a secure global infrastructure for payments. Banks have often adopted crypto to bypass SWIFT, moving money from local currency up into crypto across to a new region, and then back down into the local currency. Payments are starting to move at the speed of trade again, but something about crypto bothers me. A lot about crypto, actually. And it's not just because of the reports of grift, and fraud and, dark market economic activity, crypto just doesn't feel like the internet when the internet is working like it should. I couldn't really put the problem I had with crypto into a cogent argument until I read the new Internet Trust Layer white paper from Finnish technologist and financial thought leader Timo Hotti. Aside from being a fellow hockey fan, Temo is also an early web technology adopter. He's focused on data, transactions and decentralization. He works at a major Finnish bank leading their transaction decentralization practice, and he's one of the core contributors to the Findynet open source project, a decentralized national identity and transaction platform that was under development from 2019 to 2024. It still exists and it's still looking for contributors. In his white paper, Timo has effectively articulated not just the limitations of crypto for the future of our digital economy; but it charted a course for how we might actually move our global payment infrastructure forward to a world of active digital money and an infrastructure based on repeated acts of trust. I was really excited to have this conversation with Timo, and I hope you enjoy it as well. Here's your conversation on the future of trust in the digital economy. Temo, welcome to the conversation here on the 3 1 1. I'm excited to have you here. This is gonna be a fun conversation, something I'm really passionate about, which is thinking about currency, and crypto has bothered me for years. I've had just an itch about it and I've had trouble explaining why, and I know that's not really what we're here to talk about, but I think it's what's in the water. It's what people are understanding. It's the current mental model of what digital currency is. And you, in your soon to be released, or recently released white paper, depending on when someone's listening to this, just have a, what I believe is a better model, a bottle that that better fits the economy. But first I'd love maybe just a quick introduction. Who are you and how did you get to this point? And a little bit about what you do in Finland, where you are right now.

Timo 6:38

Yeah. Yeah, thanks for inviting me. Yeah, who am I? I'm thinking of that, a lot myself. Yeah, Timo, Timo Hotti is the name and I'm working as a Principal Technology Strategist in a Finnish Bank, or pankkiala. Disclaimer here, whatever I say here is semi personal view. Nothing to do with the bank directly. What I'm nowadays interested is how do banks connect to the outside world how should they connect to the outside world because there seems to be some work to be done there. And so that's what my main interest has been for quite a long time. A little bit about about my background. There are basically three decades that I separate. The first decade being decade of decentralization. Starting from year ninety-five when joined a database company whose product was a embeddable database that you could put anywhere and my job ended up there to be the architect of the data synchronization or data distribution solution for that database. That decade proved to be when centralization happened. It wasn't a success, but I learned a few things about decentralization way back then when it was on nobody elses radar. One of the things that I learned there was patenting, we patented that solution pretty well. So I learned to write patents and that was my next ten years, I worked on software patenting and IPR[Intellectual Property Rights] with all kinds of companies mostly with FinTech companies, but that of course was also a decade when software patents became obsolete. So yet another d-decade of being in an interesting place, but completely at the wrong time. And then around year, 2015, then Bitcoin happened and the word decentralization came back to my radar, and I started thinking, hey, I have spent a decade on decentralization and I have worked on innovations with Fintechs, and I should have something to contribute here. So I applied for a job basically my current job and got the big boss convinced that know something about decentralization and money and how banks works and so on. So I working on decentralized digital trust with a bank. And now, this has now been job for ten years. And when I now look at this decade, this looks like I'm working on the digital trust in a time when trust-lessness is trying to happen. And and okay, but I'm not giving up This time is different

Paul Bellows 9:28

Yeah. Famous words. Yeah.

Timo 9:30

My timing for a change will be right.

Paul Bellows 9:32

Yeah.

Timo 9:33

Anyway, that's the background. So ten years of working with all things money, trust, banking, decentralization, and basically the white paper that's now it's the my journal of learning. It's on the version three right now. It basically tells what I have learned. And also gives some hints where there might be some additional work to be done. But anyway, I start to be fairly happy about where I stand with it.

Paul Bellows 10:03

Well, I think it's really exciting, there's a French philosopher, Pierre Bourgou, he is actually a sociologist. He was not one of the cool philosophers at the College of France, but he was on the Sociology department and he wrote in the era where Foucault and Kristeva and all sort of the famous French philosophers are writing, he wrote this very practical book about how change actually happens in society. His key phrase is critical lucidity. And he sort of said, so sometimes you're in a position where just you turn your head for a moment, you get a glance, you just sort of see something, and it's something that's just different. You get a true context, he called it critical lucidity. I do think that the, one of the interesting points of clarity that you unpack in the paper is coming down to that concept of decentralization and the core promise of crypto, cryptocurrency, seems to be decentralization. And ironically, they're all saying, and we should be the central ledger, we should be the centralization point. So every currency says, make me the centralization point of decentralization. But it's not decentralization, that like the very concept itself of decentralization is what's broken about crypto. So it's sort of the theme we're gonna talk about today is what does true decentralization look like? Which is a scary concept if you haven't started to look at how the internet actually operates, how trust actually operates and how we trust each other in society and in the world, which is what I love.'cause that's really where you've come from is a very philosophical position on what does trust look like? But I actually wanna start at the end of your paper for a minute, because this is what's exciting about cryptocurrency. You know, I'm not a digital currency antagonist here. I think we do need digitization of currency and of how currency works.

Timo 11:51

Absolutely.

Active Money Explained

Paul Bellows 11:52

The way things work today is not good enough to run the global economy. We're using ancient tools, but I also don't think crypto gets us where we wanna go. And you've helped me really see a different way forward. Can you talk to me just for a minute about what active money looks like? Like on the other side of a transformation? What would active money allow us to do?

Timo 12:12

Yeah. I fully agree that the next big thing that must happen is that we have digitalized lots of things, but money isn't one of them. It's today in, digital databases and you can access it through the web, but it's not digital in a way that it should be. The concept that I'm promoting is active money or what I call also commercial bank, digital currency. It's basically money that is represented by an agent. So you have money in your account. Your bank already has an API through which you can basically instruct payment, account transfers, from your account to somewhere else. So you have money on your account, you have a API to access it. We need an agent that connects to this account through the API in a way that agent who now has access to your money can participate in the transactions where settlement service is needed. So basically, if I buy something from you in a digital transaction, the active money is basically a bank agent that the bank owns that accesses your money, that I can invite to the same transaction where we do this purchase transaction. And I instruct that agent that when we complete this transaction, you go and make the account transfer. That's simply it. So it's basically agent that participates in the business transactions where we do something.

Crypto as Barter

Paul Bellows 13:47

So we have agentic transactions, API to API, conversations. These are all things that I understand that sort of exist in the world, and I love that we're starting here,'cause, you know, anyone who's rational who spent time on the internet would be terrified by that idea,'cause they would say, I'm gonna trust an agent to go make transactions on my behalf? I barely trust agents to compose my email still, they're getting better, but, how do we trust these tools? So active money is money that can respond to a contract or respond to automation, can go move money around on my behalf, API to API, things move in an instant versus how things work today, which is I sign some sort of contract, some sort of digital signature service. Maybe I log into a tool, I initiate a wire transfer or a swift transfer on the Swift network, or I send a PayPal payment. You know, lots of manual steps are involved today, but I'm the agent in control of that at all times. I'm usually the person logging into a system, initiating the payment instruction, moving money around, then often waiting for, I had to send a wire transfer to someone the other day, five to eight days later, I found out it was the wrong name on the account, it was rejected. 10 days later, the money came back to my account. I resent the wire transfer with the right information. Fortunately, it didn't actually go to the wrong person, that could have happened, and then I would've been out a substantial amount of money with no real way to recover it. So that's the current state of the world, right? It doesn't really serve the needs of business. What I want talk with just for a minute is, you introduce a concept, that I think is the most essential reason why crypto is problematic, and that's double ledger accounting. You're not introducing double ledger accounting, but you're calling it out as the missing piece. And what I love is you talk about crypto as barter technology, it's stone age in its economic model. Can you just explain that for me a little bit, of how crypto works and why it's not actually connected to the way the economy works today and the way business and relationships work today in the economy?

Timo 15:51

Yeah, the crypto, first of all, Bitcoin is really what kind of got me into this, where we, where I am today.

Paul Bellows 15:59

Yeah.

Timo 16:01

So there's some amount of respect on Bitcoin and the idea that, they questions quite a bit at how trust works and how you can move values in a way that doesn't have any intermediaries and so on. As an innovation, Bitcoin was quite a big one. Bitcoin essentially is digital gold in a sense that, in a Bitcoin network, you can create a new asset which doesn't have any value on the liability side. So, it's something that if you have it and there's nobody else out there who has the liability side, which is like gold. If you have a gold coin, you have it. That's it. It's an asset without liability. Is fine if you need asset without liability, but the real economy doesn't work that way.

Paul Bellows 16:55

Yeah.

Timo 16:55

And that's like a seven hundred year innovation. The double entry bookkeeping is seven hundred year in-innovation that actually enabled modern trade. And the double entry accounting says that for every asset there is a liability. So whenever a transaction happens in the economy, The transaction creates an entry somewhere as an asset, somewhere as a liability. And that's how you actually document how value is created. The value is in the fact that something happened that created some value to somebody else, and a liability to somebody else. Now the problem with crypto is that they tried to take the Bitcoin idea that there are only assets. They tried to take that in Ethereum and in every other smart contract network. They tried to take this idea to the real economy so that we tokenize everything and once we have tokenized everything, then we have a fully digital system. But you can't tokenize liabilities. That's because, liabilities are something that for instance, any credit contract is a liability to somebody, and it doesn't require that you need to be able to go back to the counterparty some later day okay, now I want the money that I've, lent to you, now I want it back. And you can't create that kind of systems with blockchains where you don't have the liability side. And that's what makes it a barter. So every single transaction is a swap of two things. So I might get a token from you and you might get a stablecoin from me. And that's fine for barter. But real economy operates on credit where liabilities are always in place and trying to make real economy work without credit, it's a doomed effort. That saying-- that's still ongoing attempt. And that's basically the problem with crypto, that they are trying to use a model for real economy that doesn't work or it works only if you don't need the liability side, So everything in the system is a swap, but credit is never just a swap. And world operates on credit.

Paul Bellows 19:19

Yes. And having been in business for 30 years myself, I mean, I understand that, you know, I maintain from my business, I maintained a ledger. I have documents that say, financially what's happening in my business annually, an accounting firm will audit that. We'll walk through and see where are we at? The most important lesson that I think that I learned as a business person in the earliest years was my financial position as the company at the end of the year and the amount of cash in my bank were not the same thing. That was just a shock to me. I say, well, what do you mean if I made that much money, where is it? And it's like, oh, well it's, you know, these receivables and it's over these other places.

Timo 19:53

Yep.

Paul Bellows 19:54

And you know, there is no point, you know, even in a small business, in a restaurant, in a shoe repair shop, but certainly as business get more sophisticated, there is no point where your paper braille and your bank account are one-to-one. Right. That would be a surprising accident. There might be a moment in time where that occurs, but the way we represent money, represent finances, and you move it into like, nation to nation trading, corporation to corporation trading. And really, we work on this double ledger system where, every organization maintains their narrative of what's happening. And it really isn't related to the actual past. You could withdraw from the bank account at any given time. Add to that, the fact that we've moved on from the gold standard, we don't really say any nation's amount of money that they have in circulation is equivalent to the amount of gold sitting in their Fort Knox or their version of Fort Knox. We're gone from that now we say, nations create money. They've actually delegated to banks in most western economies, say banks can, loan money, can create multiples of their value. They can extend, we trust banks and we delegate the growth of economy to banks. Mostly, that's the tool that we use to grow the economy. They can lend money, they can create money, they have mechanisms, and we say we trust banks to make decisions about who is trustworthy. And we also give them a lot of the risk, to say, you own the risk, but we give you the opportunity to grow the economy and to create new money. That's, that's a vast oversimplification about the economy works, but it's sort of a simplified model.

Timo 21:24

Yep.

Trust Formula X counts as Y in C

Paul Bellows 21:25

If we say we're going back to this gold standard or this crypto thing, say, we're actually going back to this moment where, we're back to Fort Knox, where you know you're gonna have a coin and it's gonna live in a vault, and that's how much money you have. And if you don't have that coin, you can't have more money than that. We can't grow the economy. Really, when you look at it through that lens, crypto really takes us backwards to a moment that we've grown past. It isn't how the economy actually works anymore. And I hadn't seen that until I read your paper and, that was the lightning bolt that I saw that was really helpful. Seeing that, okay, so there is a problem and I think that a crypto advocate would say, we treat it like gold. Like, if we rebuild the world as it is and pretend crypto is like gold and say we can still have this sort of structure, but you know, there's this crypto, we haven't really changed or improved banking. We haven't actually got to digital currency. We've just replayed what we already have. But we're saying instead of gold, it's this crypto thing. It's bitcoin, it's this digital gold coin, or gold brick that sort of exists somewhere. We haven't actually fixed anything, but this is where you introduced me to a philosopher I should have known years ago. John Searle, an American philosopher. I love his thinking. He's got this wonderful model as we start to look at what might active money look like and what would the foundations be so we can go back to that agentic transaction and have a context to trust. I need you to introduce and to replay because I'm new to this, so I won't do it. But the X counts as Y in C is just this wonderful philosophical model for how relationships and trust and transactions actually work in society, how we actually do this as a can you walk me through this and kind of how you came across this and, and how it helped you to clarify your thinking.

Timo 23:05

Yeah, it's actually something that I found only recently. I first, figured out that the model made sense to me, but I realized I didn't understand how, why it makes sense. But then then I found this John Searle's, Searle's, principle that really says X- counts as Y in C, where X is what he calls a brute fact. And for instance, an example about brute fact, a piece of paper with some ink on it is a brute fact. Y is something called institutional fact. And C is context. The context is very important word here. So what we have here is that this piece of paper counts as money when you use it for payment in Europe. So that's an example of Searle's model that we agree that something has a certain function in a certain context. And really you can model pretty much everything in the economy using that principle. And if we go map this to what the white paper as the internet trust, layer X is a fact. The facts in this world are what are known in the self-sovereign identity, terminology as, verifiable credentials. So you hold a credential about something, it can be a fact about you, or it can be a receipt of a purchase, or it can be a fact that you own some money in the bank, for instance. These are all facts that you can hold. And the Y in this model, in this internet trust layer or ITL model is a state change that the fact can cause or, initiate. And then the C is a context which is actually a software agent where a transaction happens. C is for instance, a purchase transaction. So I can prove if I'm buying alcohol in a purchase transaction it means that I need to prove that I'm over eighteen. So I present that kind of fact to the context. I also present another fact to the context saying that I have enough money in my bank account to buy this and so on. These facts together enable the context to change its state from, pending to completed purchase transaction. So that's basically what the, John Searle’s model in its all simplicity is and how it's mapped to the trust model that I have.

Skates Transaction Walkthrough

Paul Bellows 25:55

So I love this. So X counts as, Y in C is the structural formula for transactions in society. This is how we do this. So I wanna walk this through because I think this is a really essential concept. Here's a very fictional concept, I was at a used sporting goods store and I was buying my kid new skates. Kids grow out of skates fast, hockey skates. For some reason I was asking, about adult skates and I said, there's no used hockey skates, hockey players skate until their skates fall apart. I was like, that's true. I've always worn out any pair of skates I've had. There's no such thing as used skates for hockey players. So that's why this is the fictional transaction. But let's pretend that I, Paul, am selling you Timo used hockey skates. You're in Finland, I'm in Canada. So I'm gonna sell them for 10 Canadian dollars to you. That would have an amount in your currency. So what's, what's the object in this transaction? Would that be the dollar amount that we're gonna transact? Or would that be the object I'm selling you?

Timo 26:44

So you are selling me skates?

Paul Bellows 26:46

Yeah.

Timo 26:47

So basically that means that me and you, we are entering a transaction or context, which is able to perform a purchase transaction. You bring to that context some fact that proves that you have those skates. Some fact it can be your purchase receipt of those skates, from way back or some other fact. I bring to the transaction, basically my contact information to where you can send those skates when when we make the deal. I also invite my banker to the transaction for the event if we now agree inside this context. Okay let's, let's finalize this, I will buy those skates from you. So i'll invite my banker to the transaction and authorize the banker saying that if this transaction now finalizes you do this transfer of money from my account to your account upon the, signed instruction of the context. So the context, when it, finalizes, it sends instructions or kind of facts, output facts to all the participants. So I get a kind of delivery confirmation of the skates. You promise that you will send them, it's a legally binding commitment from you. You’ll get, receipt from the bank saying that Timo paid this this amount of money to you. And the bank, of course, gets the instructions from the context that made it do the account transfer. That's basically how this kind of basic transaction in the economy happens. All the participants come to the transaction agent or the context agent with their inputs. Then the context agent runs a, basically, finite state machine logic checking that all the facts are that are required for the finalization are there. And when they are, then the context agent creates the transaction, sends the signed output instructions to all the participants, and they are all legally binding.

Paul Bellows 28:59

You call this in the paper, the Four Body Problem, right?

Timo 29:03

Yeah, the Four Body Problem it's come to be the B2B example of this.

Paul Bellows 29:08

Yeah. Yeah.

Timo 29:09

If I represent a company, and you represent a company and your company sells something to me, so basically from my company's side my agent is coming to the transaction and the company's agent is coming to the transaction. And from your side, you come to the transaction and your company, agent comes to the transaction and we do the negotiation and the signing. So my signature basically says that I'll buy these skates and I buy it for my company. So when the transaction finalizes the skates are moving from your company to my company upon signatures between us, made by you and me. So you promised to send them on behalf of your company and I promised to pay the bill on behalf of my company. So that's the work, of the B2B challenge that is largely unsolved there where in a digital transaction, we need to have natural persons playing a role, and we need to have the legal persons in place because the actual binding liabilities and the assets, they go to the legal persons.

Active Money Without Crypto

Credit and Real Contracts

Paul Bellows 30:33

I love this. This is getting to the heart of why I think this model is so much more sophisticated. So in this world, we're two businesses. The hockey skates are some asset that has value. It's a contract, it's a software license, it's a piece of equipment, it's some intellectual property. It's a, business, it doesn't really matter. But there's some object of value we wanna exchange. And so in this, with this Four Body, what could be more, like you think about the context of trust, what could be more trustworthy than you and I come into a meeting, into some sort of meeting space? Both of our bankers come, and I've been in meetings where I'm engaging in a transaction that both sides have a lawyer or a representative. We're all in the room. They're the agents of the transaction, the people making the deal. There are the representatives of them, the people who sort of watching assets move back and forth, managing contracts. That's a common business structure. This is how important transactions occur. The very safest, most trustworthy transactions occur with both agents, with, observers in a context. So we come to a meeting, our bankers are there. We both agree. We've exchanging an object of value. The skate's moved from my hands to your hands. You verify you've received them. Our bankers look each other in the eye and move money back and forth. They figure out the currency in the transaction. They do what bankers do to say Canadian dollars and Finish dollars, you know, euros here's the current exchange rates today, and we agree to that. Now is the time we're gonna do this. They move the money across. We all leave the meeting room, the best possible transaction has occurred. This is the most trustworthy state. This is what active money looks like. But if you replay that and you sort of try and inject crypto into that, why do we need crypto when we've done that, right? In this sense, crypto is just a representation of the money, of the value that would be moving here. Just like gold would be, so we were in that room, having that transaction currency for my account moves into your account directly. There's no intermediary, there's no rep. It's just the real money has moved across. The real object has been handed across. If I sort of had to bring a gold brick into that room and leave it on the desk to say, by the way, the money in my account is real,'cause look at this gold brick, that's just silly. You know, it's like, what? Why did you bring a brick of gold? You know that's not the money. The money is the actual digital ledger you have over here moving into my software based ledger on my bank account. The transactions occurred, we're done. We don't need this brick of gold. If you delete gold and you bring crypto into the room, crypto becomes completely unimportant in this sense. We've, we've actually just moved the money. This is how the economy works. I have your$10. I don't need you.

Timo 33:08

Yeah, and if you in-introduce the concept of credit into the transaction, so that, okay, we now agree I will manufacture you a pair of skates and I will send them to you in thirty days. And you will send the money back to me in 60 days.

Paul Bellows 33:24

Yeah,

Timo 33:25

That's how the real economy functions and crypto has no chance of getting anything done there, because it's all about asset swaps.

Paul Bellows 33:33

Yep.

Timo 33:34

There's no time aspect on anything, or there's no credit aspect on anything in the crypto version.

Paul Bellows 33:41

Yep.

Timo 33:41

When you deal natively with contracts, everything that is happening in the real economy becomes possible also in the digital economy. So one very important thing to understand in this world is that, and this is my kind of the mantra that I came up early on and then have tested it, that everything in the economy is a contractual relationship, it's a mu-mutual acknowledgement of obligation between identified parties within a go-governed context.

Paul Bellows 34:13

Yep.

Timo 34:13

If we can digitalize that, and I think we can, then we actually have the building blocks in place for digitalizing anything in the economy. Because if you can digitalize a contract, which as we already know, is m-most typically a multi-party contract, it's you, me, and my bank, at the minimum. There can be much more, parties in a contract once we have this building block in place, basically multi-party contract, which is legally binding. If we can do that digitally, we can do anything digitally.

Decentralizing the Root

Paul Bellows 34:47

I love this. So we've got to the point where we have X counts as Y in C, which is my hockey skates count as 10 euros in the transaction where you would like skates and I would like to sell them. That's sort of our contractual context. I'm giving you these skates, you're handing me 10 euros. The money's moved across, but I've described something that it, you know, so crypto is useless in this transaction. But that's also an unbelievably expensive transaction where I have to get my banker to leave their office and come to a meeting room. I have to get to Finland to get 10 euros. That transaction is sort of infeasible in the economy. And yet, that's what we're trying to automate, rather than creating something that is this extra layer of a token, a ledger or something in addition, that becomes overhead. So what we're talking about now is how do we automate that transaction? How do we make that piece that that X counts as Y in C piece work properly? We don't need crypto in this to make that work, but also we don't have the building blocks of that today. So far in our conversation, we haven't described what that automation layer looks like. That's what I wanna get to next. But first, I think there's something really still that sticks in the crypto model, which is that idea of a root ledger, a root system. And that's where we get into the decentralization versus not. So, far we can, describe this hockey scape transaction. We've got it working. There is some missing software and automation that we're talking about. What actually is that? If it's not crypto, what is it? But how do I know? What is that root? And I think that's one of the, the models that's been most broken in today's internet, which is we've absorbed the idea of platforms, decentralization, if we really believe what, what crypto is telling us that we should be decentralized. It does mean there is no root to this one global route. And I think anyone in security also says, oh yeah, one single point of failure is not a good architecture. Anytime you have that, that's problematic. You want everything to be plural, in the world, multiple points of failure, layers of failure, possible layers of protection. That's actually how we'd like the internet to work. Can you talk just for a second about this, the concept of root and why root itself is problematic in an economic model?

Timo 37:04

Yeah. The typical crypto models, they all kind of start from the ass-assumption that somewhere there's a root iden-identity or root key which holds, kind of holds the trust of the system. So if the root key compromises, then everything is gone. So we just hope, hope that the root key never compromises but, that makes every s-such system essentially centralized. whoever holds the root key owns the system. And so when we start to create a fully decentralized network, or a decentralized anything, any network, we actually need to decentralize the root as well. And in the model that we have developed this is okay, give credit to my colleague who actually has written quite a lot of open source code about this model. Basically every agent that you create in this kind of network, this whole network is a network of agents, representing either persons or places where the person can be. So every single agent that's created, has its root key, cryptographic root of trust. Of its own. And that root of that key is stored in a secure vault that is bound to the authenticator, that authenticates the person who created the agent. So that way we can make sure that every single agent that is out there is reliably mapped to a real-world person. And the root key of that connection is in secure place. And when every single agent has been created that way, then we actually have fully decentralized root of trust. Every single agent has their root key in their own secure vault. And what really is the root of trust here is the process that creates those connections. So when you create an agent, that process has to be trustworthy. You need to be sure that when that agent was created, it was at-attached to the right person. And once you have that solved, and I think we have it solved code level then we have solved the problem of decentralized trust. We trust that every single agent is connected to something that it claims to be connected.

Paul Bellows 39:43

To come back to our, we're in a room selling skates metaphor. You show up in a room, you are really there, I'm really there. I can see you're in the room because you're there. So we're just saying, the technology comes down to the agent layer, the one owning the transaction. And we trust that that exists because it's cryptographically signed. This is really you, you're in the room, but digitally, and so we're actually reducing the risk because if everything rolls back to one route, that's our single point of failure. Whereas if we just say cryptographic trust is part of the fabric of how these transactions occur, that's, part of the structure of this piece here. That's where we're putting the trust. I think now that, that's scary because it sounds to someone like, oh, well, but who tells me this is safe? Who actually for me as an agent, now it's you and I in a digital meeting room and we've got this trust layer. How do I know I can trust the agentic layer, this one-to-one layer of cryptographic trust? When I've spent sort of a decade or two thinking about SSL certificates and domain name registries, and all of these global, root sources of trust. You know, we've learned to trust this ecosystem. It fails us all the time. This is what phishing attacks are, people gaming the system. But why do I trust the agentic layer of encryption more than I trust a root layer of encryption? Why is that better for me?

Timo 41:10

Yeah it really boils down to the question, do I trust that this agent has been created properly?

Paul Bellows 41:18

Yeah.

Verifying Agents Safely

Timo 41:19

Is the creation process, the context where this agent was created? Is it something that I can verify? Is it something, created by somebody using a pro-process that I can both verify. So for instance, my bank can be the creator of the customer's agent, for instance. So if the bank runs a verifiable process that creates a agent for me that bank actually, trusts that agent that it created so much that they can come to the same transactions with me, complete the transaction, then it's pretty sure that agent can be trusted because the party that created it was in the same transaction, to move money. So that's how you need to think here. The question is always, always the same. How can I trust this agent? And then you go back to these things who created it, which process was created, which process was used to create it. And even better if you can show that, okay, the creator of this agent actually have interacted with the agent in, transactions that move money, then you can be pretty sure that created agent was legitimate. And when every agent can be verified this way, then you have a network where you can trust that that things are going well, and of course we need to always be prepared that something goes wrong. And if something goes wrong in this design where everything is decentralized, radius is the smallest possible.

Paul Bellows 42:54

Absolutely.

Timo 42:55

So if something goes wrong, the damage is min-minimal. and so the chance that something goes wrong is very very small. Because first of all, all the private keys are in secure enclave. they're hardware protected. Whereas today they are not.

Paul Bellows 43:10

Yes.

Timo 43:11

So on and so on. So the trust has these small building blocks that together makes the network trustworthy. And really the key concept everywhere is that you, if you can verify the things that you want to verify, to trust the transaction, then you're good to go.

The Cocktail Party Protocol

Paul Bellows 43:31

I'm selling you skates for 10 euros, that's a low risk transaction. You know, I trust you're Timo, you trust that I'm Paul. We've got an intermediary, some sort of agent that's brokering this deal. It's not really a meeting room, our bankers aren't really there, just, there figuratively. But now I'm buying a software license from you for a hundred thousand dollars. I need to know that you're you. I've launched a lot of new web platforms for organizations. The cutover moment, going from one legacy system to a future system. That's a scary moment,'cause everything breaks a little for a period of time. You know? So the idea, if we go from an old model to a new model, those transition points, there's a lot of damage that can be done. Launching a new ERP system, launching any new system, is a terrifying moment. Crypto asks us to say we want to cut over from an old system to a new system. But in your model we don't actually have a cutover point. It's more of an accretion point of we start to build trust in layers. Such to the point that when I get to this a hundred thousand dollars software deal, I'm dealing with an organization at a level where trust has been built up in layers over time, and I have much more certainty. Can you talk a little bit about cocktail party protocol, both as a discovery, but as also that that accretion of trust, those layers, that the buildup of trust over time and how that works.

Timo 44:46

Yeah, the Cocktail-Party protocol is basically my proposal for solving the discovery problem of the network because. In the current internet, if there's one thing that is not decentralized at all, it's the discovery.

Paul Bellows 45:00

Yes.

Timo 45:01

You search using Google, and Google decides what you see. I-if we want to have a fully decentralized network, al-also its, discovery model has to be fully decentralized. What are the building blocks of this? What do we have in the network? We have agents there. we have some agents representing legal persons natural persons who have interacted with each other in context. And if you think how people make make themselves disco-discoverable in the real life, you actually rely on other people quite a lot in in the discovery process. My proposal is that the similar kind of approach should also apply in this digital world. basically I have interacted with somebody, if I have bought skates from you, I can ask from you that can I leave a fact with you about this transaction that Okay. I, bought skates. I have interacted with Paul and bought skates in a transaction that actually finalizes. And I can leave that fact, about me with your agent as a a verifiable claim. So I can leave traces and ways to find me in all those places where I have been. That should take care of quite a lot of the discovery challenge in the trust networks. Because the problem there is that how do I find agents that can participate in the transactions where I need them? And that's how I think it could be done. This is an area of work, this is new part of the thinking. I think there's uh, quite bit of more work needed there. But the basic principle of making every agent capable of participating in the discovery process is the key. Because if we don't want to we can't have centralized directories in there. And if we can't have those, then what's left? We have the other agents in the system and, we need to create this protocol the wh-where we can help other agents to be discovered in the network.

Paul Bellows 47:19

So whereas say Bitcoin today, their promise for security says, we're gonna run 10% of the world's data centers and burn 10% of the world's energy running these constant math formulas that are so big and so massive, no one could possibly hack it. You would need to take over half the internet to sort of hack it and beat our essentially p pragmatically cryptographic layer, just through brute force, we're gonna own this, but that comes at an enormous cost. You know, there's a massive cost to this just to have this infrastructure existing. You know, we got sort of proof of stake models sort of saying, Hey, we're gonna have these digital letters, we're gonna build trust. What you're saying is we're gonna organically build trust around cryptographic structures that that layer and build so that you and I will have had dozens of transactions as individuals over time, but a bank will have had tens of millions of transactions built around their key structure, built around the structure. So that's actually how we create that trust framework is volume of transactions. Trust begets trust. We build layers of trust. We sort of create these planetary organizations and, and those, you know, through sort of these cryptographic structures. Which isn't fully, fully solved yet. There are some decisions to be made, some structures to be built, but that as a way to build a trust-based framework for the web becomes much more sustainable, much more less energy dependent, and much more like the real economy and how the real economy works today. You know, we're really building around the real economy. Yeah,

Timo 48:51

That's the key goal that if we can mimic the way how the real economy has always functioned,

Paul Bellows 48:58

Yeah

Timo 48:58

Then, we should have the digitalization of everything should be pretty, pretty straightforward. Because if we don't need to change how the real world functions

Paul Bellows 49:07

Exactly.

Timo 49:08

then, digitalization is much easier. So we don't need to the idea of contracts, for instance,

Paul Bellows 49:15

Yeah.

Timo 49:16

Paul Bellows 49:17

Yeah.

Timo 49:18

Then the digitalization gets way easier. And that's my goal and kind of the non-negotiable principle that as long as I can match the real world functionality with the digital functionality, I'm happy.

Paul Bellows 49:35

Once you walk through the process and get to the side, it just feels like, of course that's what we would wanna do, rather than bringing this entire framework of these massive compute infrastructures, outsourcing currency to private corporations. We really haven't gained anything by moving to crypto in terms of how we wanna move with the economy. But, this idea of agentic trust, agent-based cryptography, the digital meeting the X counts as Y in C, these transactions, going back to the very beginning of what is active money, which is, I just want the money to move from me to you directly. The money I have in Canadian currency, in my Canadian bank account, moving to you in euros in your Finnish bank account, I want that to happen. We make an agreement. I'm mailing you skates. You get the skates, 10 euros comes across to you. That's how the economy works together and in this framework that's possible. And what I love is as we bring AI and agentic tools, we're talking agentic, we're, we're probably talking some sort of an AI, in this model where we have these mountains of trust that get built around banks and institutions and the things we've already come to trust with our money, with our mortgages, with our credit cards, with nation to nation trading central banks that work remarkably well. When they are trusted, when they're autonomous, they work remarkably well. We've built a thriving global economy based on these concepts. This works and, and leverages everything that we've built and invested in over the last a hundred years. And as you see 700 years around, moving to double ledger and, the modern economy of credit and finance and the way the world works, this leans into those structures rather than demanding, we break this all down and go back to this gold ledger. Now as we bring AI and sort of automation of this, of the discovery of automating things, of machine-based decision. Now we're working in a way where, and you talk about pre-conciliation rather than reconciliation, rather than I send you money in this wire transfer and I hope it got where I wanted it to go, and 10 days later I find out. All of the context, all of the C that, what is the context here, the why, what is the, the deal we're making here, and the actual object, the value I'm moving across, all of that is determined in advance. That's an environment which we can start to trust AI to do these deals on our behalf.'cause I can create rules and say if someone meets this level of threshold of trust, you may proceed on my behalf. You know, we can start to automate procurement enterprise activities, you know, EERP to ERP systems if I'm buying a roll of paper towels from my office. Yeah, I'll generally trust that the grocery store down the street is the grocery store down the street and I'll let my agent purchase those. And, Staples can sell me a ream of paper. That's fine. If I'm sending you a hundred thousand dollars for a software contract, let's make sure it's our banks talking to each other. They've got those layers of trust build up. Those mountains of trust are larger. We get to preset all of our rules and it gives us a framework in which we can actually start to automate things and see that millisecond level transactions starting to move. We get rid of the swift system. We get rid of those hundreds of billions of dollars each year that are just the auditing, the reconciliation, the holding money in escrow money living in both accounts until we all agree, having to have this sort of extra layer on top of the economy. We create these global efficiencies in this world and we've actually truly digitized money. This is amazing.

Timo 52:53

Yeah, it's that's pretty much a conclusion. How come to, talk about the, A-AI in this picture? Agentic AI is now the, big topic everywhere, I, for one believe that it is the next big thing. And not necessarily because of the AI part of it, although that is important, but because of the agentic part. Because when you think how the agentic transactions happen, they don't follow anymore this typical web services model or client-server model. But they actually communicate differently. So in the agentic world, it is all about peer-to-peer trusted communication. I have been fairly pleased to realize that, this agentic trust model that we've been developing, it actually matches pretty well with the agentic AI how it's envisioned to function that we haven't found each other yet. So we haven't found yet somebody who vibe codes, the integration with what we have to the AI world. maybe next week somebody knows. These worlds are so close to each other. So the agentic world wants to know how to create dependable transactions with AI and so do I.

Paul Bellows 54:11

Absolutely. Now, because this isn't science fiction like we're sort of talking about there are still some gaps to close and some decisions to be made, as with all technology, exactly how we do this is yet, but, you're well down the road on this. This is not theory and hypothesis. You've actually built most of this, if I'm understanding correctly, the Findy platform that is available in open source

Timo 54:34

Yeah,

Paul Bellows 54:34

does most of this already?

Timo 54:37

Yeah, there's open source project, which is right now on pause. For resource allocation reasons. But my estimate is that we have about seventy percent of the code needed for proving whether this model works or not. With the current productivity level of the development tools, I would say it's about one man year of work. And I don't know, maybe in half a year somebody will have coaxed that over the weekend, but we'll see. Yeah, that's basically the status of things that it doesn't take too much work to prove that I'm wrong or right. If I'm right, then I'm happy. If I'm wrong, then I'm wrong. This has happened sometime before, so I can handle that.

Paul Bellows 55:17

Well, you know, at a code level we can be wrong, but a philosophical level, at a structure level, at a systems level, I think you're right. I think that the way most of the economy is sort of looking at crypto as digital, you've called out some really key failure points. It doesn't mean we have to abandon digital currency. It doesn't mean that, anti transaction. It doesn't mean we're anti AI. We're actually pro all of those things in this model, but this just gives us a path forward that gets us where we want to go without having to also reinvent society, and the economy, and commerce along the way.

Timo 55:47

We just need to digitalize Yeah. That's the cool thing.

Paul Bellows 55:49

Absolutely digitize what's working.

Timo 55:51

Whatever functions today, just digitalize it.

Paul Bellows 55:53

Yeah. Timo, I, I love this. In our show notes, we'll share links to the white paper. It's about a 60 page read. If this was interesting for anyone listening, it is well worth your investment. It is a consumable, plain language, well thought out narrative of how this new world could work. And then also to the, Findy platform, the actual 70% done code base that actually operationalizes this and is functional and ready to go. Really grateful, you know, again, you and I connected over the Olympics with the silver and bronze hockey teams. So, a great empathy between Canada and Finland as great hockey nations and one of one of us is getting the gold next time. I'm convinced of it. We deserve it the way our team's played, so yeah. Wonderful. Well, thanks for being on the podcast, my friend. Great to, great to have this conversation.

Timo 56:41

Thanks.

Paul Bellows 56:45

Thanks for listening today. Government has an ongoing and essential role in ensuring the stability, reliability, and growth of our global economy. Government also has a role in protecting citizens in the financial transactions we engage in. I believe deeply that Timo's new white paper, which you can find a link to in our show notes, charts a sustainable and achievable path towards a decentralized transaction framework that works at internet scale and meets the needs of individuals, companies, banks, and governments. We don't have to get rid of crypto, but I think we do need to look at other solutions. With all the noise and momentum around crypto and AI, now is the time for governments to chart the most responsible course forward. I'm grateful to Timo for spending the time to document his vision for a better future state. You can follow him on Substack and LinkedIn for more of his thought leadership. We're gonna keep having conversations like this. Thanks for tuning in. If you've got ideas for guests we should speak to, send us an email to info at the 3 1 1 podcast.com. I'd like to thank my producer Kathy Watton and our audio and graphics lead, Frederick Bremmer. The public service is about all of us, and when it's done right, digital can be a key ingredient for better world. This has been the 3 1 1 podcast and I'm your host, Paul Bellows.