The man who helped turn Deloitte’s global blockchain practice into a $50 million operation has left the company. After growing the Big Four accounting firm’s blockchain team from three people in 2012 to 1,200 people today, global blockchain lead Eric Piscini is striking out on his own, though he’s not exactly starting from scratch.
After being approached by multiple Deloitte clients, Piscini earlier this year hitched his wagon to early-stage startup Citizens Reserve, which is currently raising $150 million to move the world’s fragmented supply chain networks to a blockchain.
At the top of a number of unusual technological innovations being undertaken by the Los Gatos, California-based LLC is a software bridge that connects the public Ethereum blockchain to a permissioned blockchain called Quorum originally designed by JPMorgan Chase & Co.
It is this combination of the public blockchain infrastructure that powers the $66 billion Ethereum cryptocurrency, with a private solution designed to help JPMorgan and others comply with regulatory restrictions that Piscini thinks is primed to make supply chain the next big industry to be disrupted by the technology.
“We are building the Ethereum of supply chain,” said Piscini, who has helped grow the company from eight employees when he was brought on board earlier this year to 18 employees today.
At its core, Citizens Reserve is a shared database designed to be used by every level of a supply chain including suppliers, manufacturers, distributors and retailers. A cryptocurrency called zerv created by tweaking the ERC20 Ethereum token standard will be used by members of a consortium currently being developed to gain access to the blockchain, and enable nearly instant, borderless transactions.
This is where the fact that the platform is built in part on the public Ethereum blockchain comes into play. While so-called “smart contracts” comprising immutable self-executing code could be implemented using any number of private blockchain solutions, those agreements would be limited by the lengthy times it takes for international transactions to close as well as by foreign exchange rate considerations. However, with a cryptocurrency, transactions can be conducted cross-border in near real time.
In addition to providing users access to the platform (a function that makes zerv a so-called “utility token”) and functioning as a means to exchange goods and services (giving it some properties of a currency), the tokens consist of a third component that distinguishes it from most other ERC20 tokens: It will be backed by assets.
These reserve assets, from which the company takes its name, will be independently audited and are designed to give the token “a guaranteed value” of $0.01, according to an unpublished early draft of the company’s white paper currently under review by legal firm Perkins Coie. With a total of 50 billion tokens expected to be issued, that would give the network an estimated value of $500 million.
Traditionally, companies would sell these ERC20 tokens to investors in an initial coin offering (ICO) for a wide range of purposes, including simple access to the product and full-fledged securities tokens that give actual ownership of the company and voting rights. To date, a total of $12.8 billion has been raised using this process, according to CoinDesk data. But the way these tokens are structured is increasingly believed to be an important factor as to whether the U.S. Securities and Exchange Commission (SEC) deems them unregistered securities or not.
So, in an effort to comply with regulatory considerations while still capitalizing on the benefits of being able to raise money on a blockchain, Citizens Reserve’s $150 million fundraising effort is being broken up into three parts that blur the lines between a traditional fundraising round, an initial public offering (IPO) and an ICO.
The first part is a $2.3 million friends-and-family round in the form of convertible notes that were reported to the SEC last August. These notes, and all the money raised, can be converted to tokens when they are issued later this year. The second, and ongoing phase, includes other venture capital investors, bringing the total raised so far to $42 million, according to investor documents provided to Forbes.