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Blockstack PBC CEO Discusses Cryptocurrency Token Compliance and U.S. COVID-19 Policies

Read this article in 26 Minutes

Short-term price movements and financial markets do not truly affect us, as Blockstack PBC has sufficient capital in the bank.

Original Author: Jason Brett

Original Source: Forbes

Translation: Blockstack

Imagine you are waiting for an energetic entrepreneur to introduce the most exciting technology on the planet. You will think about how blockchain is changing the game, how it activates your mind and entrepreneurial spirit. Now you are about to hear a speech by Dr. Muneeb Ali, CEO and Co-founder of Blockstack PBC, as he introduces "Light" blockchain design, "Stacks" token, "Clarity" smart contract programming language, and a decentralized cloud storage system named "Gaia". Before the formal content of the speech begins, this computer scientist from Princeton University will first present a series of disclaimers.

Dr. Muneeb Ali is a co-founder of Blockstack—Blockstack is a privacy-focused decentralized computing network exploring applications, returning online data ownership to developers and users. In my interview with Muneeb, he believes that the project's compliance and transparency in the U.S. are as important as innovative developments in blockchain technology. He also shared insights from a tech entrepreneur in Silicon Valley who is proficient in exponential growth curves and how this view inspired America's response to the coronavirus.

Jason Brett: Six months ago, you successfully launched the first compliant crypto token. You have been working hard to maintain Blockstack's transparency with the U.S. Securities and Exchange Commission (SEC) through filings. What do you think are the positive and negative impacts of this on your project?

Muneeb Ali: On the positive side, we did not choose to exclude U.S. residents (including investors and users) and only open our network to non-U.S. users. As a U.S. company, and because some of our early supporters and community members were U.S. users and developers, that would have been the wrong thing to do. We wanted to open our network to the U.S. market. However, due to U.S. regulatory requirements, this was very challenging. But we worked with regulatory agencies, particularly the U.S. Securities and Exchange Commission (SEC), and not only proposed a legal framework but also proposed an accounting framework and other related work, thereby obtaining SEC approval for the token sale in the U.S. Despite the securities laws established in 1933, this was the first time the SEC certified eligibility for crypto assets rather than traditional corporate equity. Blockstack has done a lot of work to succeed. Overall, this is good because the SEC believes that people in the crypto market are driven by speculation and hype, unlike the mature traditional stock market. In fact, people just can't get the right information. We try to provide all the information for any potential investor to decide to buy our Stacks cryptocurrency. This is similar to how companies go public and disclose all relevant information to the public.

I think the recent WeWork (shared workspace startup) is a good example. They tried to IPO, but when they disclosed information, people found all the red flags about the company, and WeWork eventually failed to complete the IPO. These checks and balances are beneficial to the market health, but we don't see this kind of practice in the crypto market. This is why we do what we do.

The negative impact of doing this is that it is expensive. We are a 30-person company consisting of a corporate entity and an open-source project. Blockstack PBC company builds part of the core open-source software and protocol. The company must establish legal and accounting departments, which cannot be seen in traditional open-source and R&D-focused projects. I even have to get the lawyers to review my tweets in advance. Our blog posts have to go through several rounds of legal review, which is not common in the crypto market or general tech companies.

Jason Brett: There have been many news reports about the behavior of WeWork's CEO and founder. You emphasized a starkly different approach from WeWork in maintaining transparency. Why do you lead the company in its regulatory response in the way you do now and cautiously be as transparent as possible to the public and investors?

Muneeb Ali: That's a good question. Before founding Blockstack, my background was more in traditional tech industries such as cloud computing and internet protocols. At that time, I was pursuing a doctoral degree at Princeton University. The gap between traditional tech industry professionals and the crypto industry is huge. The set of problems we dealt with from a pure research perspective focused on building a more secure, more scalable user-controlled internet. We found that blockchain is a very elegant solution to some of the technical challenges we faced. However, you are faced with the entire crypto industry when you use blockchain and crypto assets. It is not yet a very mature industry, with some truly malicious actors and immature participants in this industry.

We were able to attract the attention of some top-tier venture capitalists and institutional investors. These investors may not have wanted to invest in the crypto industry before. Our approach is to make more efforts to mature the crypto industry. Blockchain forms the basis of decentralized network design, and we are willing to bear the burden that comes with this industry. This is also an opportunity to become an industry leader and raise industry entry standards. This often happens in our recruitment. For example, we hired computer scientists, some of whom would not have considered working in this field before. We can recruit them, tell them what is different about our team, what is different about our approach, and the SEC's certification and framework also played a role. They can view our SEC notices, and see that our CFO used to be the CFO of Blackstone Group Canada. This level of professionalism is not possessed by current peers in the crypto industry. I think most of our team members may not want to work in the crypto industry, but they are willing to work in our system, in our way.

Jason Brett: I read the Blockstack whitepaper and learned about your company before the interview, and noticed an interesting thing. I often hear people analogize blockchain to the internet and the World Wide Web. I noticed that you analogize the birth of blockchain to the birth of the first personal computer in the large computer era. In the Blockstack system, including Gaia for decentralized cloud computing, what functionalities do you believe can not only address the shortcomings of the internet but also bring a breakthrough more akin to a PC host rather than the World Wide Web?

Muneeb Ali: I think our breakthrough can basically be attributed to empowering users. It was the case when we transitioned from large mainframes to personal computers. At that time, only specific individuals could use the large computer, and it was very expensive. You had to rely on that room-sized computer. The selling point of Apple's personal computer when it first appeared was to empower users, allowing everyone to own a computer and run any program they wanted, using it as they pleased. However, the pendulum effect in the industry made us, after undergoing a revolution of empowering users, turn back and produce large technological monopolies. Imagine the current antitrust work being done, the legislation being proposed, and this strange growing relationship we have with large tech companies. We are very dependent on these companies, but we start to no longer trust them. When people chat at home, they see advertisements about the content of the chat. People start to feel that these companies are not their friends, they are being used by these companies. But there are currently no alternative options. If you look at Facebook and Google as large mainframes, and you want to get rid of them, you want to empower users again, then this is the breakthrough you bring. It's all about giving users control. For example, many people use an iPhone. However, Apple limits the device and what you can do with it. In the past, you could run any software on a personal computer. What we are doing is to shift the control from big companies back to the users.

Jason Brett: The competitive advantage of Stacks token and blockchain seems to come from its incentive mechanism that appears to support developers in the ecosystem. How do you view this? Additionally, I recently read about how you initially acquired a million users, and I wanted to ask, are they new users? How do you verify this? You seem dedicated to researching how to incentivize the developer community to work on Blockstack. With the transparency you provide, how do you prove what they want to know, such as whether the platform truly has a million users or any other questions?

Muneeb Ali: From a higher level perspective, we believe that Web3.0 will emerge on top of the Bitcoin network. Our Stacks blockchain is somehow intertwined with Bitcoin. We do not require miners to spend electricity as in the Bitcoin blockchain and some other proof-of-work blockchains; we build the system on top of the work already done by Bitcoin miners. We have an interesting consensus mechanism that interacts between the Bitcoin and Stacks cryptocurrencies, reusing Bitcoin's computational power and benefiting from Bitcoin's security. We believe that ultimately everything will be anchored in Bitcoin, not happening on smaller isolated networks, i.e., small blockchains independent of Bitcoin. Our approach is different. Everyone is trying to build their own islands, while we are trying to benefit from the network effect of Bitcoin. Bitcoin remains the most secure blockchain. We synergistically add features that Bitcoin lacks in a collaborative manner.

In terms of development, we are mainly focused on attracting developers. Our applications increased from 20 in early last year to over 350 by the end of the year.

When we did our initial fundraising in 2017, we set several goals as a way of self-restraint. The first one was to build the core technology. We wanted to avoid fundraising like some projects but never launched or went live. Within a year after the fundraising, we planned to develop and launch the core network. We achieved that goal. The second milestone was about reaching out and introducing our technology to the world. Due to the privacy nature of the Blockstack network, we cannot practically track app usage because it completely violates our values. We knew that at the time, so we only looked at registered usernames on the network, which is public information accessible to anyone. We conducted some business partnerships with certain project teams, such as Blockchain.com, who introduced Blockstack and the 400+ apps on the network to more users. Such partners can also introduce KYC or other requirements to users at the partner level. Our aim is to present our technology to many people through different channels and make the Blockstack network gain initial traction.

Jason Brett: I'd like to switch to a different topic and discuss the current economic environment affected by the coronavirus. I am curious about how the current environment is impacting your company, and as a CEO in this situation, how do you keep the company moving forward? You mentioned on Twitter that Balaji Srinivasan should have been appointed by Trump two years ago to handle this crisis better, so I'm very curious about your thoughts on this. What did your lawyers say to you before you tweeted about America's crisis response measures?

Muneeb Ali: Usually when I comment on the crypto industry or any regulation involving the crypto industry, my lawyers are very concerned. They are more relaxed when I casually talk about things that will not affect our work. Overall, we realized early on that encouraging everyone to work from home was key. Blockstack PBC has about 40% remote team members. The Blockstack open-source project has a global community, all working remotely. Our in-person conferences usually have 100 to 200 attendees, who to some extent form a real Blockstack ecosystem. We have open-source contributors, and over 5,000 people participated in our token sale. Now, we have over 300,000 Stacks token holders through the token issuance. As for the Blockstack PBC company, we strongly encouraged everyone to work from home about ten days ago. Most people chose to work from home. We are working hard to provide support, giving people time to go out and buy essentials, take care of things they have to handle, and not worry about work. Fortunately, we raised $23 million about six months ago and continue to execute our roadmap. Blockstack is a very ambitious project, and we are facing very challenging times, but short-term market conditions and financial markets have not truly affected us because Blockstack PBC has enough capital in banks.

Talking about Balaji, he is a friend of Blockstack. He has been involved in the project since around 2014, providing advice and trying different roles. He's amazing, with a deep background in genetics, computer science, and cryptocurrency. He sold a biotech company and a crypto company, accumulating very unique expertise. He started issuing warnings around January. Around February 12, we held an event in Austin together. I personally talked to him and listened to why he believed this crisis would have a significant impact. Data and probability indicate that if 10,000 people are infected, the likelihood of 100,000 people being infected is very high. This is an exponential growth curve, not a linear curve. Most people don't think about problems in terms of exponential curves. Venture capitalists and entrepreneurs are an interesting group because they think about exponential curves in large numbers every day, so when they see exponential growth issues, they start to sound the alarm ahead of others.

We started expanding to Asia last year. Every time I go to airports or facilities in some cities in Asia, and then return to Kennedy Airport, I get a feeling that the U.S. is becoming an old-world infrastructure collapsing, and the policies or regulations here may not be the most effective way of doing things. Regarding the virus, even now, people returning from overseas to the U.S. do not require any testing to enter the U.S. Even in countries like India, people are wearing protective suits, staying six feet apart, and getting temperature checks. It's surprising that the U.S.'s response measures are worse than those of other countries.

Jason Brett: Recently, Bill Gates resigned from Microsoft, focusing on charity work, clearly he is at the end of the CEO lifecycle, and it is evident that you are at an early stage, however, you are studying the situation with the coronavirus, researching why the U.S. did not take the best measures. If you could dedicate yourself to social charity, or lead thoughts to change the current form of the U.S., what are your suggestions? What did you want to know before tweeting about America's response measures, considering the crisis?

Muneeb Ali: I think some people are doing better than I am right now and can bring about actual change. Sam Altman, the President of Y Contributor, is one of them. He created an open spreadsheet documenting ideas he is willing to fund. Within a few hours, he collected 70-80 different startup company ideas. This number is probably higher now. He basically used this as a pool of funds to support ambitious entrepreneurs in solving pressing problems. I think many of the coronavirus response measures are scattershot. Some people want to make ventilators, or some are trying to measure body temperature in a better way. But actual startups are categorized differently; for example, if it's a 3D printing company, it can focus on printing materials for epidemic prevention equipment. If it's an IoT sensor company, it can also strive for this. Mechanical engineering or robotics companies can also do some useful things. I think people will unite soon. Sometimes, I might criticize the U.S., but it is still a land of opportunity. I am an immigrant here and now a U.S. citizen. I came here because I saw a lot of opportunities here. I think there are many people like me. The Silicon Valley culture and entrepreneurial culture attracted me here, where people are not only ambitious, wanting to solve problems, but they can also get capital and resources to achieve their goals. Imagine that we were able to raise $75 million to realize a bold and ambitious idea—building the next generation of the internet, which is quite crazy, but it can be achieved in this country, so I think we can also cope with the virus.

Disappointingly, the government has been slow to act so far. They may not have found the right advisors or formulated the right policies. That's why Balaji can make huge changes by himself. He can effectively propose a threat response framework or decision-making framework, highlighting the most critical issues at the moment, and then execute according to the framework. If the top leaders do not fully understand the issue or think about it correctly, the situation will only get worse. I don't think there is a situation of information censorship so far. However, I believe that decentralized networks like Blockstack can help communities. People can self-organize in a decentralized manner, share information freely, and provide opportunities completely freely. We are happy to help people have such opportunities.

Jason Brett: The trajectory of your company's development is absolutely amazing. With success in regulatory compliance, do you hope to see Blockstack go public at some point, becoming a listed company?

Muneeb Ali: This is already in the plans because our network needs to be open to miners. We have been discussing whether miners will work under a fully disclosed IPO. We disclosed in the SEC notice that Blockstack is a decentralized network, the Stacks token has utility, which can be used for smart contracts or registering digital assets, etc. This is mainly related to the degree of decentralization, in that as the degree of decentralization increases, everyone including us and potential regulatory bodies such as the SEC would be satisfied that the Blockstack network can be opened as a decentralized utility similar to Bitcoin or Ethereum. We are exploring an upgraded version of the decentralized framework. Especially with the launch of our Stacks 2.0 blockchain, we have the opportunity to reduce the importance of the corporate entity in the decentralized network and focus more on the wider ecosystem. I need to be cautious about this. We will release more details through official channels.

Jason Brett: Is there anything else you would like to share with everyone?

Muneeb Ali: In order to achieve mass adoption of the crypto industry, I believe regulatory agencies must clearly define that crypto assets are within the legal framework, and people are not doing anything "illegal" with crypto assets. Take Facebook for example, they are putting a lot of effort into obtaining regulatory approval. They are working hard to achieve widespread ownership of crypto assets. Mainstream adoption cannot be achieved unless we answer all regulatory questions definitively. That's why we have done so much work in compliance. Thank you.