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“Our HSM solution makes Crypto Exchanges hack-proof” says Securosys CEO, Robert Rogenmoser

crypto-hackproof

We at CryptoTapas strive to bring people who have expertise in the real business world. Not people who cooked up a colorful whitepaper overnight. We have time and again proved this to be the case with experts we brought onto the stage to share insights about HSM solution that only come from working in the space, not thinking about it.

HSM solution

Today’s interview is no different.

Securosys has been in the business for many years before they picked the Security Token Offering (STO) route to raise additional capital to expand their business.

Robert Rogenmoser talks about HSM solutionIt was not as successful as was hoped for. Probably because Securosys did not engage infancy (read deceiving) sales pitches. They are now going back to traditional VC funding to raise the rest of the capital goals.

The not so spectacular STO has resulted in many working lessons for the rest of us.

Robert Rogenmoser, CEO of Securosys is unabashed in sharing these lessons with us so more and more people can think about these aspects before choosing the Security Tokens or Initial Coin Offerings route to raise capital.

Real world company solving real-world issues

In the blockchain world, what happens if your CEO or CFO has the private keys to the company’s capital? How can you ensure that the funds will be there, whether or not the executive stays with the company? This is a real-world issue that plagues many companies in the blockchain business where Crypto is used in place of Fiat.
Highlight and Share any textSecurosys helps companies to use the HSMs and Digital Signatures in concert.

You can even add rules based on the threshold, for instance, 100 thousand transaction needs a certain level of authentication while a million-dollar transaction will need additional steps to process. You can even implement the paper-based multi-signature model to a digital signature in Blockchain.

“You can pretty much set your own rules and bring the benefits of digital multi-signature and physical possession of keys, for ultimate security,” Robert says talking about the impenetrable nature of their HSMs.

Our HSM solution helps prevent crypto exchange hack

Talking about recent MapleChange hack, Robert said: “implementing our HSM solution would have prevented such hacks.”

Robert has a point: When you store private keys on unsecured devices or entrust a lot of money with few individuals, that’s just setting yourself up for tragedy.

Robert’s company has been helping big brand businesses that conduct billions of dollars in transactions each day! So, they know what they are talking about when it comes to the security aspect.


I wouldn’t recommend STO route, not just yet

Talking about the challenges of raising money using STO route, Robert said: “I wouldn’t recommend the STO model to raise the money, most VCs are not ready to invest because their bylaws do not allow them such investments.”

Talking about how crypto winter affected Securosys’s STO, Robert said: “we are a running business and without external funding we can easily grow 10 to 20% per year, but even with such an established business, we couldn’t raise the money we wanted, because of crypto winter.”

For the companies that are thinking to go the route of Security Token Offerings to raise the money, Robert says “it takes a lot of preparation, speak to lawyers who did it before, and be ready to set your expectations low.”

Blockchain and Security Token Offerings are here to stay

Talking about the future of Blockchain and Security Token Offerings, Robert said: “not every business that pitches an idea for ICO or STO needs a blockchain.”

Exchanges globally are trying to convert the shares to tokens and this trend is only going to accelerate.

“If you think about it, shares are a digital concept”, Robert said: “tokenizing shares is going to be a reality in next couple of years.”

Cryptptapas Interview Securosys about HSM solutionTranscript (edited) of the Interview with Robert Rogenmoser

Cryptotapas: Thank you for taking time for this call.

Robert Rogenmoser: Thank you for reaching out.

Cryptotapas: I think you were one of the few who actually has gone through the Security Token Offerings (STO) Process for an existing business. So, we wanted to talk to you and learn what you learned along the way. And, the interview itself is fluid, Robert, if you want to add something or if you want to change something, we can do that. But I do have some questions just to get us started.  

Robert Rogenmoser: Yes, that works

Cryptotapas: Tell us a little bit about yourself, your company Securosys and what made you think about the STO model to raise the capital?

Robert-Securosys with HSM solutionRobert Rogenmoser: My background is I went to school at Eidgenössische Technische Hochschule (ETH) in Zurich, Switzerland, did electrical engineering. And in the end, I did a Ph D. When I was done, I got an offer to work at Intel in Santa Clara, California. Spent a few years at Intel. After 1999, we came to the dotcom boom and joined a company there.  I stayed for about 17 years in Silicon Valley at small companies, big companies, startups and so on. Because I got involved more and more in fundraising efforts, I turned from an engineer into an executive. I realized even though my title was head of Engineering, in reality, I was a Sales Executive. About five years ago, I came back to Switzerland and started the company here with my friend, Andreas Curiger. We have known each other since we were 18. And, that’s how we started Securosys.

CryptoTapas: Tell us a little bit about the concept of Securosys and how it secures the digital assets, throw some light on the concept of Securosys.

Robert Rogenmoser: We started doing encryption devices, hardware devices, that is. Soon after we started the company we got a request from the Swiss National bank, the Central bank of Switzerland. They asked us if we can build an HSM solution, Hardware Security Module, after a long deliberation of about two milliseconds, we said yes.

And then we built an HSM solution. That HSM is now used in the Swiss payment in the Swiss Banking System. We protect transactions for a hundred billion Swiss Francs every day. Then we started adding more features to the HSM and one of the areas that we were looking at is the digital signature.

Digital signature really has to be the same for the corporate world as it is with paper-based signatures. Corporate entities don’t authorize one person to sign, it is usually two people, and we implemented a system like that.  About two years ago, when people reached out to us about the blockchain crypto assets, we realized that what we built for the digital signature scheme by adding a multi-signature scheme in our HSMs could also be applied to crypto assets.

We had our initial customer, Crypto Storage AG, which is part of the crypto Finance AG company. They offer a customized solution that’s based on our HSM multi-signature solution, so the multi-signature rules are verified by our HSMs.

That’s a very important feature in Cryptos, as you may know, it’s not just about keeping the key safe and not losing it, but it’s also controlling who can access the key. If only a single person can access the key, they can also initiate a transaction and that would be really bad.

If you are a bank and you offer a custody solution, you really want to have a system that reflects how you operate in an enterprise. If a transaction has to be signed by two people, such as the trader and the supervisor, you want to have that implemented digitally and verified in hardware. This you can do with our system.   

If you want to add more rules to it, you can add that to our system, to the actual key that’s signing the blockchain. You can add additional rules that say if a transaction is over a 100K or over a million, you want to actually have somebody from the compliance officer group sign on that transaction tool. If it’s over 10 million, you probably want to have the CEO to sign it.

Or you want to actually add a rule that says that transaction must be delayed by two hours so that you can actually have real-world processes invoked. For example,  somebody calls up to the customer and asks them, do you really want to do that transaction? You know, since it is 10 million it may be worth doing an additional check before we send it to some address on the blockchain. And so, you can add these rules and have them verified in the HSM solution.  This offers so much more security to your transactions, your system, you get the security of having your keys safely stored in our HSMs, and that’s Securosys.

Cryptotapas: Awesome. I know for a fact that one of the companies here, which is big into crypto payments, struggles with this idea of how do we make sure the wallets are not being authorized by let’s say CEO or like you said, because the CEO has private keys, how do you make sure that the money will stay there to meet a future obligation? So That’s interesting that you actually address a real-world issue.

Robert Rogenmoser: Look at things that are going on including recent MapleChange hack. First, you don’t keep keys in only one laptop and never keep keys in just one location.  Our model includes keeping HSMs in different locations, so you have redundancy and availability. Then on top of that, you must have, if you are really a real custodian, proper business rules and processes, so that single person cannot actually do a transaction.


Cryptotapas: Absolutely. Is it too farfetched to say that if they had used something like your HSM product, this hack, this whole issue with the Canadian exchange could have been prevented?

Robert Rogenmoser: Definitely, if you implement a custodian solution with our HSMs all of these problems would not have existed at all.

Cryptotapas: That’s awesome. Very intriguing. You said you lived through the internet boom, how does that compare with the recent crypto boom and crash?

Robert Rogenmoser: It’s actually very similar but different.

For the Internet boom, you had to be in Silicon Valley. I think that’s the only place where it really happened and the rest of the world was watching, but the crypto boom is much more distributed and many more places are actually involved in it. You don’t have to be in a single place. It seems like Switzerland is quite a nice place to do a lot of crypto stuff because our legislation and our politicians are actually quite supportive and building a system that works in that respect. I’m actually quite happy to be here right now for Securosys.

Cryptotapas: What made you and your partner go for STO instead of the traditional funding models? And the second layer to that question is, were you able to raise all the 16 million francs?

Robert Rogenmoser: We decided we want to do a growth financing; our company is a well-running business and we already have many customers. We got into this new market of blockchain and crypto assets, however, at the same time we’re competing against the really big companies that are buying each other for $5 billion. Compared to that we are like a small fish.

So to realize growth, we have to go after markets that are new and where nobody’s established. And that’s exactly what crypto and blockchain are.  Therefore, to actually get a name in this market we decided that maybe we can either do a big marketing outreach or we can do an STO/ICO.

The main purposes of doing an STO, besides raising money, was actually getting to be better known in the market.

As people know about Securosys and know that we have very good solutions to help them, not just in crypto assets but also managing the regular blockchain systems.

Because in the end, everybody needs some form of key management. It’s all about private keys, you have to secure them.

The other thing we wanted to raise money to fund our international expansion. We’re established in Switzerland, we have probably the best HSMs in the world but we don’t want to sell it just in Switzerland. I really think we have the best HSMs in the world and so we should actually sell them all over the world. And for that, we need to open up offices all over the world. We need to market them are all over the world. And for that, we need a substantial amount of money.

So that was the main reason to actually raise the money, to do a growth financing. We wanted to combine those things and do an ICO and discussed a with the lawyers. We tried to figure out a form of token that actually made sense to us and in the end, only a security token made sense to us. The security token is the right solution. We came up with this solution that the security token actually should represent company securities. Our tokens have dividends rights and can be converted into company shares. A company shares reserve has been approved by the general assembly for our security token.

In the end, you get as many dividends as if you would own shares.  You cannot just issue some coin, you have to consider what’s your long-term plan. This way, we actually have already allocated a part of our shares for these tokens. If there is an exit event for us, if we get acquired, for example, we know how much our liability is for those tokens. That’s why we set up this STO, as a security token.

Cryptotapas: Awesome. The second part of the question was were you able to raise the 16 million that you were looking to raise?

Robert Rogenmoser: We didn’t raise 16 million. 

Technically you’re never going to raise that number anyway because you give discounts for the bigger investors and so on. But then the other reason was really we were hit by what people call the crypto winter. Initially, quite a lot of people were interested in investing in us, but in the end, very few actually got converted.

We started a couple of days before the Bitcoin Cash war started, which then resulted in a further crash to $3,000. At that point, nobody wanted to spend their bitcoin. Right now, we’re talking to regular VC’s to fund our growth.

Cryptotapas: It was an unfortunate time frame, I guess for the last one and a half year.

Robert Rogenmoser: Yeah. I see it is still not too good. I think so I’m not hearing anybody saying that they successfully raised a lot of money.

Cryptotapas: You are such a big brand name, you work with brand names like Swiss National Bank. How was this idea of STO perceived within your brand name customers?

Robert Rogenmoser: They were actually quite supportive. They said it’s a good idea, you should go for it. Even at the Swiss National Bank said we should go for it.  We did everything according to Swiss law. You know, that’s what our lawyers made sure. It wasn’t like we did something fishy.

Cryptotapas: You followed the legal procedures, so what does it take for someone, maybe someone who is reading this article, who is thinking to go for an STO in Switzerland, what kind of challenges they need to be prepared for before they can issue STO?

Robert Rogenmoser: Quite a bit of preparation, go to the lawyer who has done it before.

We can recommend our guys of course, but it takes more time than you think and it’s more effort. I think just doing a VC funding is probably easier in that sense. And the VCs are not really quite ready yet to buy tokens. I think that’s the other problem. We’ve talked to a few funds that said from their bylaws they’re actually not allowed to buy tokens, they must buy shares of the company.

Cryptotapas: What exchanges are you currently trading on the tokens? Are They available on an exchange?

Robert Rogenmoser: We are not on an exchange because there are a lot of exchanges that claim to have a security license but when we actually dig into it, they don’t really have a security license. We are looking at the Lykke exchange because they are in Switzerland. They should get the right license very soon.

Cryptotapas: What were the two big lessons that you learned going through the whole STO process that you did not know before going in, what would those two lessons be?

Robert Rogenmoser: I’m actually very hesitant to recommend anybody to go through an STO right now. That’s probably lesson number one.

I think the retail investors are really not ready to go for it and the established investors really do not want to buy tokens. I think it’s very difficult. Look at our company, we’re actually pretty much an established business. We are not huge, but we’re an established business.

We generate income, we make profits and we could grow 10 to 20% per year without external funding. Even for us, we didn’t really raise a lot of money. We still need to go to regular investors.

If a company doesn’t have anything except a white paper or an idea, I think it’d be very hard to get people to buy their token. Kind of the same thing as well, how it’s difficult for a new company to get seed investors to invest in them.

I don’t see the market right now. That’s, pretty much it.


Cryptotapas: That makes sense. Given what you just said, Robert, do you really think STO has a big future ahead of it or is it just a buzzword?

Robert Rogenmoser: It’s the new word at the moment. So, I give you that too.

Robert-Securosys Media HSM solutionI think in the long run this actually is going to be very attractive because, my belief is that, all shares, which is already a virtual concept, are going to be all tokenized. That’s probably already happening, or going to happen in the next couple of years. There are exchanges really working on it to do just that.  I also think this will be a method for a smaller company to raise money and for retail investors to get shares in smaller companies.

Cryptotapas: I think companies like you, for example, if you were to offer your STO after the market had matured and settled down, I think people would have gone crazy for your offer because what you have to offer and the clients that you have.

Robert Rogenmoser: That’s pretty much the case. By the way, we are still selling tokens if you are interested in buying tokens and get a piece of Securosys.

Cryptotapas: Are you seeing that a lot of companies are now showing interest, and are ready to implement blockchain in their businesses or are we still far away from a blockchain future?

Robert Rogenmoser: A lot of companies are working on it. We work with quite a few companies but we are under NDA. So, I cannot give you the cool names. There is quite a bit of stuff going on.

Cryptotapas: In your opinion, obviously there’s no right answer to this, what can people and companies do to reduce the resistance to blockchain adoption, or put in another way, to accelerate the blockchain movement?

Robert Rogenmoser: Not all companies that pitch for blockchain actually need a blockchain solution. However, that is not to say there is not a use case for Blockchain.  Blockchain has many advantages. I talked about tokenizing shares, big exchanges trying to convert the traditional shares to tokens, recently the Australian exchange is trying to do that. These are real changes and in the next couple of years, a lot of exchanges will move to Blockchain.  Make the use cases of Blockchain know and adoption will follow.

Cryptotapas: Robert, do you have anything to share in terms of a very cool or very weird experience going through this whole STO, that our readers might find interesting?

Robert Rogenmoser: It was a very exciting and very tense time.  For the last year doing all this prepping for giving speeches, explaining things, for me it was kind of interesting, you saw my picture, I’m a 50-year-old but I felt like I was the same age as those guys until I went to the bathroom and looked in the mirror.

I’m white-haired and everybody looks so much younger there. I felt I’m still young but compared to those people I was like a grandpa. There is so much energy that goes into the project that you forget that you are not that young anymore.

Cryptotapas: If you were to ask me just from your energy, you don’t sound a bit older than 30. I mean a lot of people lose all the enthusiasm before they’re 50.

Robert Rogenmoser: Yeah, that’s not going to happen.

Cryptotapas: Talk to us a little bit about your personal life. How do you find work-life balance, how do you spend time with your family?

Robert Rogenmoser: Last year I didn’t have much personal life, just pushing, pushing this forward. At the same time, I had to manage Securosys. I tried to really keep most of my team from STO so they could run the business and working with our customers, helping to deliver the products.

We have to look after everything so it works. You have to find your time to work out, to sleep enough. The good thing for me is my kids are now 20 and 21, and they’re getting independent, which is nice.

Sports is still a thing and I work out regularly. That’s what helps a lot. Skiing in Switzerland is a big thing. I’m doing a cross country skiing quite a bit. very often I sit in a chair on the deck and would start to write the blog. I have a series on Medium that I had copied over to LinkedIn.

Cryptotapas: How do you stay away from digital noise to find that quiet moment?

Robert Rogenmoser: Best way to stay away from all that is by actually working out. I decided to leave my phone in the locker room while working out. I work out, go to the pool and relax, so that gives my brain a needed break. Pretty much at all of the other time, I have the phone with me and now the phone actually tells me how much time I spend with it.

Cryptotapas: Thank you so much, Robert, for sharing your real-world experiences in running an STO for Securosys.

Interview 01

Thank you for reading this article.

Cover Image Source: “Secure Bitcoins locked with padlock and chain”by QuoteInspector.com is licensed under CC BY-ND 2.0

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About the author

RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.

RK Reddy is an ardent fan of Blockchain and Cryptocurrencies. You can see the excitement about this new technology in every article on Cryptotapas.com. Sometimes this excitement leads to an overly optimistic view. Guilty as charged. RK Reddy says what may seem like an ‘overly optimistic expectation’ today may become an everyday norm in 5-10 years; look at the history of cars or airplanes, Blockchain and Cryptocurrencies belong to a similar frame of reference.”  Of course, that is just his opinion.


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