Arthur Breitman on tokenizing the 'red hot' Uranium market
33:34 Share

Ladies and gentlemen, thanks so much for tuning into The Scoop. I'm your host, Frank Chaparro, and I'm very excited for this episode of the program. Joining us on the other side of the mic is Arthur Brightman, and we're going to be digging into uranium.io and maybe other esoteric assets. We shall see. Sir, thanks for taking the time. Thanks for having me.

Uranium.io, an entirely new marketplace for trading uranium and powered by Tezos technology, is live. As global energy demand rises and nuclear power becomes a key player in decarbonization, demand for U-308 is increasing.

But up until now, its access to retail investors has been limited. Unlike other precious metals like gold or silver, the traditional uranium market has high barriers with minimum lot sizes of tens of thousands of pounds. That's limited retail participation.

Tokenized uranium breaks these barriers, enabling anyone to own physical uranium with accessible pricing and no need for complex storage. Investing in uranium is now widely accessible, and you can learn more at www.uranium.io.

For crypto and DeFi professionals looking to contribute to a team committed to innovation in digital assets, Fidelity Investments is now hiring. Why Fidelity? For starters, they've been exploring Bitcoin and blockchain since 2014. They were the first traditional asset manager to launch a native crypto business and among the first to launch a Bitcoin exchange traded product.

Innovation is in their DNA. Fidelity invests in their talents by supporting and developing associates through continued education opportunities, casual crypto-focused discussion groups, and on-the-job experience of working with new technologies. If you want to work on cutting-edge products and explore the new frontier of DeFi and blockchain, Fidelity is for you. Their products continue to improve and evolve, staying ahead of this rapidly changing digital asset landscape.

So go ahead, explore Fidelity Crypto Careers today by going to crypto.fidelitycareers.com to learn more. That's crypto.fidelitycareers.com. Fidelity is an equal opportunity employer. So walk us through the journey. How did we get here? When you look at an asset like uranium, obviously it powers a lot of core asset in terms of energy, but its market isn't necessarily...

as robust or as transparent or as liquid per se as others, but what made you guys focus in on this asset as a core opportunity?

I mean, I've been interested in it a few years ago. And a few years ago, I tried to, I wanted to buy uranium. I wanted to be long uranium in my personal portfolio. And I realized that there were just not many good options. You could buy physical uranium, but it was a minimum like around $4 million. So that's a bit expensive.

And there were some exchange-traded products for it, but they were not really tracking the price of uranium. You know, they could trade it at a huge discount to uranium for long periods of time. It's more like a fund than an actual way to trade physical uranium. And I got fascinated by that because I saw that, you know, you say...

uh esoteric asset but actually pretty much everyone's heard of uranium it's a super important asset for for energy i also think that there's a bit of a nuclear rebirth and so i wanted to be able to ride that wave that makes a lot of sense uh walk us through i guess the market structure then you talked about how it was difficult uh to purchase something in a smaller size i'm sure even if you want to go along with a four million dollar position it's probably a herculean task

to access that market. What does it look like today? Yeah, so typically the way it's traded is that, so when we say uranium, we're talking about uranium oxide, right? So uranium oxide is an ore that you get out of the ground, sometimes called U-308, because it's three atoms of uranium, eight atoms of oxygen, and that's before it's refined. It's like gold, rusty looking kind of. Yeah, it's called yellow cake.

Yeah. Oh yeah, it's yellow looking. And they are basically like three big places in the world where they store it. One is Cameco in Canada. There's one location in France and I think there's one location in Kazakhstan, which has like huge mining industry for uranium.

So the uranium from Uranium.io is with Cameco in Canada. And the way it's usually traded is that you have an account with Cameco and I have an account with Cameco, and then we enter a trade and then they do a book entry where what was assigned to you, to me, is now assigned to you or vice versa. And that typically happens in clips of like 4 million.

So that's the old way. And what we're trying to do is to make it so that we can do it in increments of a dollar or even less. So are there no derivative products on uranium? If you think about other assets that are coming out of the ground or difficult to store, like oil, right? You have futures and ETFs.

Yeah. So there are some ETFs for uranium, but there's no creation redemption. So you can't go and say, hey, I have a bunch of uranium deposited here, create some shares for me, or vice versa, saying like, here's some share of the ETF, you know, credit my account at Cateco. Like normally that's the heart of the ETF business. Like the reason that ETFs I think are a great product is when you can do this creation redemption, because fundamentally it anchors them to the underlying value.

as opposed to some extension products, there's no creation redemption. All you can do is essentially say, hope that the manager is going to buy back shares when it trades at the discount or issue more shares and buy more supply when it trades at the premium, which doesn't typically happen with the few funds which are around uranium. So you have one by Sprott,

and you have one in the UK here called Yellow Cake. And these typically have big discounts and high fees. They are derivatives, so the CME has a uranium future, but there's not a lot of activity. There's almost no activity on it. Why do you think there's no activity on it? Does that have to do with sort of the underlying market or just interest in trading the asset? I think you need a robust spot market before you can have a derivative market.

That makes sense. Okay, there's I have a ton of questions about uranium specifically, and the product, but I want to maybe just think on a high level, your journey in crypto and thinking about the power or the unlock that blockchain brings to financial markets, right? So you've been in crypto for a long time. How do you like,

When we think about the transparency or liquidity that like blockchain brings to different assets, a lot of people's minds go to stocks or they go to bonds. Obviously, the RWA meta is having a bit of a moment with tokenized treasuries and those types of assets that there's a clear product market fit.

You know, when I think about five years ago or even seven years ago when I first started covering crypto as a reporter, you know, there were a wide range of firms trying to tokenize real estate to bring more liquidity to that market, fractionalize ownership and bring more efficiency to privates and more liquid, unliquid markets. What do you think about that evolution? What markets, what assets are prime for crypto?

tokenization, which ones aren't, and just walk us through your journey of thinking through where crypto and blockchain can have the most impact. So you're right that we saw that, you know, it's now rebranded as RWAs. They were called security tokens back in 2019. And RWAs are a bit of a word as well because not every asset is a security. So for example, uranium is a commodity, clearly. And I think

There were several impetus for people to exist, but a big impetus for tokenization at the time was people wanting a distribution channel to investor. So they were saying, look, I have this project and there's a lot of people who just made a lot of money on blockchains. And surely, you know, like all these newly millionaires, the first thing that they want is to diversify away from what they have and like buy these, you know, other assets.

And that wasn't really the case because there was an impedance mismatch in a sense, like the type of investor gets excited about, you know, holding cryptocurrencies. They're not necessarily the one who's going to get excited by a REIT or, you know, some, some really set product. So there was not really a match with the investor base. Yeah. And also,

those investors had access to these products outside. They don't have to stay on-chain to do it. Maybe it's a little convenient to stay on-chain, but they could go to a brokerage and have access to these assets. So that's number one. Number two is it's true that there were some efficiencies. As an issuer, you have lower cost of issuance if you do it on a blockchain. The gains are real. They're not massive. It's not a completely transformative

It's nice. I think people should do it. So you gain a little bit, but not that much. And you have to contend with the fact that, oh, it's a little weird. And, you know, maybe your investor base may be less comfortable with tokenized product. So it goes a little bit both ways. And finally, there's a piece you mentioned, which is liquidity. And of course, liquidity doesn't come automatically because you're on-chain.

It can help in a sense of it comes built in with Marketplace if you want. But people didn't really do that. People didn't really use on-chain primitives to build order books. You didn't have a way to trade those tokens on-chain. People were trying to build exchanges. So potentially, by being on-chain, you have this compatibility with different venues, with different custodians.

But it takes a lot for this to really come into place. And also, you're not going to get a lot of liquidity because if you're tokenizing very non-fungible assets, and if you tokenize one real estate product as one thing and then another one and then another one, you're basically diluting, in some sense, the asset because you have all these different assets. So you're diluting the liquidity between different assets. Whereas where you've seen success has been in big asset classes like the US dollar or

treasuries, to a lesser extent gold. Those are really big asset classes which can potentially come in with a lot of liquidity. So I think you want to start with that and not with the long tail assets if you want to get some exposure. What's incredible with uranium is that it's big assets that's strategically relevant for the entire world that everyone has heard about and yet doesn't really have enough liquidity.

Yeah, so there's kind of two boxes that you need to check for a product to be successful. The first of which being the buyers out there actually need to be interested or have a desire to purchase something on chain, which wasn't necessarily the case with like real estate, real estate buyers, investors.

weren't really interested in entering that market at the time. So you kind of had folks entering a market without a real customer base, right? You could have thousands of people keen to tokenize their apartment complex or dorm complex or commercial real estate project. But if you don't have buyers on the other side, it's kind of pointless. And then the other aspect is

is it going to bring efficiencies that are order of magnitude superior to the existing marketplace? And so with something like maybe a college dorm in South Carolina, you don't have those two aspects, but with uranium and of course a whole bunch of assets, tokenized bonds, you do, right? Because with tokenized bonds, you're kind of meeting

The crypto market, crypto millionaires, to use your word, they want to access treasuries, especially in a high yield market. And they want to access treasuries in a way that's composable with their stable coins or their Solana or whatever coins they might have. It's a bit surprising, though, if you think about it, like the success of the treasuries. So I think a lot of the treasuries and stable coin for people...

There's of course a payment use case, but I think in a lot of cases, it's people wanting to be flat. They want to lever into the market or out of the market. And so the treasury is a way to be flat, which at least pay you something, whereas a stablecoin might not pay you that much.

However, you have much higher yield available in DeFi than you have with treasuries, including now. And what we saw even in 2022 is that DeFi was extremely resilient. Like some DeFi, like the one that's actually built correctly and not the Ponzi schemes. But some DeFi was actually really resilient to that. And so in some sense, I get people who don't want to touch blockchain ecosystems. And they say, like, I don't want to touch that. Okay, sure. Here's a treasury for you.

But as long as you know, if you're willing to touch the blockchain, say the deal with like the custody and all of that, why not do DeFi? You know, why, why treasuries? That's a, I find that a little puzzling. At the end of the day, what a lot of this enables is you're like, if I think about you as the individual investor looking for uranium exposure, if you have it in a tokenized form, it can engage or be leveraged.

across DeFi ecosystems in a way that it couldn't be if you just had an account with the, you know, premier go-to uranium broker. That's just going to sit there. You can't really, you know, let's say borrow against it on a DeFi protocol or, you know,

you know, even have it so that it can almost be used as payments or something. It's just far less useful in that respect. Yeah, and I think that's a bit that's been missing with a lot of organization projects is that we haven't seen the

composability being put in place. So in uranium.io, for example, you can use an on-chain smart contract in order to trade it, to buy and sell it. And the goal also is to enable at some point also ability to borrow against it. So you want all these primitives to be available.

But that's not something that's typically come with these tokenizations. In the worst case, tokenization looks like a transfer agent sitting in an office. And then when someone wants to move their tokens, they go in and then they put a hash or they send some message to the Sparkle track and that happens. And you just have a bit of a religious on-chain, but not much happening.

you won't tap into like what actually, you know, brings value to the systems. And that's, you're right, the composability and all the different extensions that you can build around the assets. - So what is the biggest challenge in sort of, you know, if you're thinking about picking a specific asset to tokenize on the commodity side of things, what makes an asset maybe primed for that tokenization?

outside of the things that we've talked about, right? So you guys obviously are kind of playing in commodities. Why start with uranium versus maybe something else? - Yeah, so there's a couple boxes you need to tick. You need some form of fungibility and that can take the form of the grade, but also the location.

So even if you look at oil, for example, crude oil and Brent are two different commodities because they're not delivered at the same point. One is delivered in Europe and the other one is delivered in the US. And because you can't do a perfect arbitrage, it takes money to ship one from one place to another, they trade differently.

So you're going to need some fungibility. And for uranium, it kind of works because there's not that many places that store uranium in the world, right? So you have like, Cameco is a very big one. And that's like,

Very, very clear point. And it's also done that many grades. If you look at copper, for example, you're going to have lots more grades of copper if you look at different metals. So there's standardization happening and that standardization happens because it helps trading. But the more standardized the asset can be, the easier it is. And then also you probably want low storage costs. As soon as you have storage costs, it complicates matters a little bit. So for metals, typically not that expensive.

But for other commodities, like if you're looking at oil, for example, or if you're looking at natural gas, storage costs can be huge. And so that creates all this complicated calendar structure. And also, you don't want to have too many alternatives. So a lot of people have tokenized gold on blockchains. And it can be interesting if you're already on a chain, if you want the composability of that. But gold is something you can get anywhere.

Right. You can buy physical gold. You can buy gold ETFs. You can buy gold futures. It's just a zillion different ways to get exposure to gold. And, you know, before uranium, there were very, very few ways to get exposure to uranium. Yeah. So it's kind of like you have to have like an asset that's kind of standardized in a way. Yeah. There has to be some like.

a lack of fragmentation, I guess you could say, in the market. Yeah, exactly. Yeah, exactly. You want the market as unified as possible. Is there something about uranium now that's making it a red-hot opportunity? I would say, like, uranium is red-hot right now, which is, like, not in the world of crypto, but in general. There's a couple trends happening. One is that

Opposition to nuclear power. Is waning? Is waning. Because I know that Germany kind of, I don't know if they shut down their last nuclear power plant. Yeah. They were paid by Russia to do that, though.

Literally, it was like Russian-founded. Well, given the sort of ongoing conflict, you would think that countries... There's been a lot of weird, not weird, unfortunate and chaotic geopolitics that could maybe serve as a tailwind for uranium markets. Even here, right, in North America, our sort of kerfuffles with Canada...

could, you know, could, could raise some questions about where we want to put our, you know, our emphasize energy, uh,

Yeah. Well, the thing is, uranium is the... So let me answer a few things in order. So yes, I think Germany has been at countercurrent, but right now, a lot of people are building new power... They're building a lot of nuclear power plants in China. They're building new ones in the US. And then you have private companies like Amazon building their death centers next to nuclear power plants.

I think Three Mile Island is being reopened by Microsoft. So there's a tremendous appetite for power due to the demands from alternative AI. The cost in energy is quite high.

So there's a lot of demand for it. There's a lot of new capacity being built. And also, I would say the opposition is very generational. New generation is a lot less concerned with the risk of nuclear accidents and much more concerned with carbon impact. So as a result, if you look at public opinion on nuclear power, it's massively shifted. And if you look in the US in particular, historically,

Democrats were more opposed to nuclear power. And again, if you break this down generationally, that's largely gone. So I think we're going to see a lot more nuclear power plants being built. The other thing is that

uranium is a tiny input, right? One of the biggest issues with a nuclear power plant, there's many benefits, but the biggest issue with that, it's very expensive to build. So now they're building smaller, more modular reactors, which are cheaper, but it's still a huge capital investment. And if you have this huge capital investment, you're going to be buying uranium at any price, right? Because it's such a small input, like...

your cost is a depreciation of the massive structure that you've built. The fuel is like a tiny component as a part of that. So that makes essentially the demand for uranium is very inelastic. Mm-hmm.

So is the story more about that growing demand for nuclear energy? Is there also like a supply aspect here as well, where there's a crunch in supply? There's less of a supply story. There's a little bit because I think at the same time, like Russia said, like, let's ban nuclear, you know, let's ban exports of uranium to the U.S. And then the U.S. says, let's ban imports of uranium for Russia.

So that affects the supplies a little bit, but for me, it's way more demand-driven than supply-driven. And it takes time to build new power plants, but it also takes time to create new mines and to find new resources of uranium. That makes sense. And you mentioned sort of the key players being Kazakhstan, Canada, I guess Russia as well.

How do you think that this growing demand for uranium could shape the geopolitical landscape and even the uranium trade?

I think we're going to be at the end. We're reaching the end of my expertise here. We should have Nick from Curzon, who's been our partner on this and helping us in the journey. And they know a hundred times more about the uranium market than I do. But look, what I can say, generally speaking, in terms of commodities is that

The prices are done by elasticity and elasticity is very time independent. So given enough time, right? If uranium were like super expensive for a very, very, very long period of time, people would end up shutting down the power plants and building something else. And likewise, if uranium is very expensive for a while, people will start new mines and do a bunch of things. So the price is really determined by how quickly supply rises and versus how quickly

demand rises more than anything. It's a bit different for stuff like gold, where a lot of it has already been mined out. But for something like uranium, I think definitely as the price rises, you'll see more deposits being found, but that takes time. So what are some of the... You enter this market just because you were keen on going long. What sort of

weird things have you come across or have you seen happen in this market? Right. So it's not just because I was king, but it's a good way to, you know, I think it's when an advisor, Paul Graham, gives this like, build something you want, because if you want it, you know, there may be other people who want it. It's a good start. And a lot of the stuff that people have built in crypto is the stuff that no one wants, right? It's been a curse of the space. So at least, you know, I know that we had like one valued user here.

Sorry, but you were saying like, what have we made along the way? Yeah, what have been some of the learnings or just weird idiosyncrasies? No, I would say it took some time. Like a lot of the work has been like regulatory and legal work in the structure and finding the right partner and launching it. It's like that...

The singing through the regulatory and legal part of it took the most time. What were some of the hurdles there? Like a lot of bad models. So there's a lot of ways to do it in which you end up with a fund. You don't want to have a fund. Like a fund is not a good structure for doing this. So like finding a way to give, you know, direct beneficial ownership of your NMB as a token, that took quite a bit of thinking around. That makes sense.

So when you think through the next six, 12 months, what are some of your priorities to further grow the product, grow the platform?

That's it. So I think, you know, get more users, get more volume, get more uranium tokenized on a platform. There's several billion dollars which are currently in ETFs, which have high fees, which don't really track the product. And so getting, you know, even a fraction of that market will be huge. And then potentially launching more assets. And that's the sort of goal here, right? It's just looking at like, what are the opaque and illiquid markets that we can tackle? Exactly. Exactly.

And interesting markets as well, I think. It's like you want to have a bit of a thesis around the market. Like some form of constructive view of where the asset's going. Exactly. But in general, I'm pretty bullish on commodities because... Are we entering a commodity super cycle? This is not financial advice or anything like that. But here's how I think about it. Right? So

a lot more tasks are being automated. AI is becoming more and more powerful. It's going to automate more and more intellectual tasks. And so if you look at doing stuff in the world, it takes two things. It takes some capital and resources, and then it takes a smarts to do something with it. If you look at a startup, typically it doesn't have that much capital. It may be able to raise capital, but its main asset is just a good idea or some smart people doing something together.

Imagine that smart just becomes a commodity, right? That you can just throw a program at the question and it'll do great. Then the next thing that's going to constrain everything that you do is stuff. And that stuff might be stuff to build Zing Louise or it might be stuff for energy. So in general, I think that's bullish for commodities. Maybe it all fizzles out. But

For now, I would say that's going to be, and that's what we're seeing. Like the demand for nuclear power plant is coming precisely from the demand for all of these data centers. Because AI just takes and requires a requisite of so much energy. And it scales as well. That's the thing. It can create its own demand. Because the more you use it, the more you find out stuff to do with it.

The more stuff you're doing with this, the more commodities you're consuming. Yeah, I think that makes a lot of sense. And this is a super scalable energy source. Yeah, I mean, I think every energy source ultimately will be dapped. This is not to say like solar is, solar can be scaled a lot. There's still a lot of places on Earth which are not completely covered with solar panel.

Hopefully we're not moving to a world which is like 100% covered in solar panels. That's also a possibility. It's not a very pleasant one. Our outfits will have solar panels on them. Yeah, but I think everything will ultimately be dapped. What else in crypto is exciting you outside of crypto?

for the tokenization of commodities? I mean, it doesn't have to be just commodities. I think commodities are in a good sweet spot if you want to have composability and from like a regulatory point of view, they're very well suited. But I also like, you know, the tokenization of securities. I think that's great. But outside of tokenization, I love the art and culture segment. I think that, you know, Tezos is a blockchain that's home to a lot of artists. We had a bit of like

So if you replay 2021 and the NFT boom of 2021 and you replay it now, a lot of what was happening in 2021 is the same thing that you see with MemeCoin, which is basically like, hey, here's something you can get in quickly and do a quick flip. And it's kind of like a casino game. Yeah. At the time.

there was a pretense of like, "Oh, but you're really buying into a brand and you're like part owner of a brand and then this is going to be licensed this way and that way." And now the pretense has been completely dropped. And it's just a casino game. So I think some people might conclude that, "Oh, well, there was never any there there." I don't think that's necessarily true. I think there's this there there. It was very, very much overhyped and very much overblown.

but it doesn't mean that it's not there. This whole aspect of creating communities, of having digital collectibles, that's something that I'm still excited about, even if it's not at the valuations that people saw in 2021 around it. Well, it comes down to a question of how do you create sticking power outside of the price of something going up?

How do you sort of remove the speculative fervor from, or ensure that the speculative fervor isn't the sole driver of interest in a community? Yeah. And I think that the way you do it is like you do it over time. Because at some point, you know, people realize that, hey, you know, like, you know, putting money in the newest, like rising meme coin or like PFE collection isn't guaranteed to make you money.

So people stopped doing it. And as people stopped doing it, essentially, you can actually have the same shine on your knees. And I would say the same thing with gaming. A lot of the Web3 gaming was overhyped, but it doesn't mean that people can't launch a good game. And it doesn't mean that there's not something meaningful to be done at the intersection of game and this, because a lot of games are naturally trading games, and it makes sense to have trading mechanics in it. The thing is, if you can launch a project and make

hundreds of millions without actually shipping a game just by promising something, putting it and taking the money, people are going to keep doing that. And that's the main thing that you're going to see for a while. What changes that, though? I think once retail stops pouring money into this, then it changes. Yeah.

No one was buying the bag, holding the bag, the proverbial bag. Yeah, I think that's one is to, I think once that changes, you can actually have like a little bit of a signal rising over the noise. That makes sense. Where can folks learn more if they're interested or if they want to get involved or chat with the team? So your name at IO is a great way to get involved.

to disaster, you can go check out the website. It's also on Twitter. So on Twitter, you can follow at Tezos or there's also a Uranium.io handle that you can find. Sorry, it's the network formerly known as Twitter. So it's at Uranium underscore IO. Amazing. Thanks so much for taking the time. Thank you, Frank.