Blockstack Co-founder Muneeb Ali recently sat down with the hosts of HashR8, one of the largest podcasts focused on cryptocurrency mining, to discuss the state of Bitcoin’s Proof of Work (PoW) mining. You’ll find links to the audio below as well as the full transcript.
Throughout the show, they touch on Blockstack’s vision for a Web 3.0 anchored to Bitcoin via the recently announced Proof of Transfer (PoX) mining mechanism. Before diving into the details of Blockstack’s decision to anchor to Bitcoin, Muneeb discusses the events that led to the creation of the technology stack undergirding modern internet protocols, highlighting “missing holes” like a universal login system, as well as the dangers that have since arisen as centralized companies move to fill those gaps. He then discusses the ways in which Blockstack is building the public infrastructure necessary to solve these systemic problems.
After a lively back and forth on privacy and the need to create tangible property rights in a digital age, the conversation swings back to the technical, whereby Muneeb describes Proof of Transfer in detail and fields a host of questions related to miner incentives, security guarantees, and even comparisons to Proof of Stake models. The interview concludes with a discussion of how efforts to leverage Bitcoin’s superior hashpower are, in fact, symbiotic in nature, providing reliability and security to these projects while creating exciting new use cases for Bitcoin.
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Transcript
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Whit Gibbs:
Today’s episode of the Hashr8 podcast is brought to you by Luxor Technology, North America’s largest mining pool. Luxury’s goal is to operate enterprise class mining pools with professionalism and an intense customer focus. They provide a top notch user experience and have a great selection of pools for you to mine too, from a variety of notable Altcoins to Big Daddy Bitcoin for which they launched their mining pool in October. So be sure to go and check them out. We are incredibly grateful that Luxor has chosen to sponsor this show going into 2020. We would love it if you as listeners would support the show by supporting them. You can find them online luxor.tech, and give them a follow on Twitter @LuxorTechTeam.
Whit Gibbs:
Hey everyone, thanks for tuning into the Hashr8 podcast, the best crypto mining podcast in the history of the world. Today we have reached episode number 75. It’s a big one. It’s awesome that this gentleman was able to make the time to spend with us, especially considering he is one of the top 100 most influential people in crypto. Big honor here, so I hope you all enjoyed the show, and if you do, please make sure that you leave us a rating and review on your preferred listening platform. Those ratings and reviews do a lot to help us expand the reach of the show and get it to the top of those charts on Spotify and iTunes. So we appreciate your guys’ continued support.
Whit Gibbs:
As always, today’s episode of the Hashr8 podcast is presented to you by Hashr8 OS. Hashr8 OS is a Linux-based operating system designed to help you increase the efficiency of your mining machines and maximize your overall profitability. Now, with ASIC and GPU support, Hashr8 OS provides the best experience in crypto mining, allowing you to manage your facility fully from any mobile device and take complete control of your mining operations. Hashr8 OS is mining as it should be. Be sure to head over and check out the Hashr8 operating system at os.hashr8e.com. Again, that’s os.hashr8.com. All right, without further ado onto the show.
Whit Gibbs:
Hey everyone, welcome to the Hashr8 Podcast. I am the Bitcoin Broski here today with Whale BearMan. We’ve got a big show today, guys. Today’s guest started a little research project while at Princeton in 2013. The project gained the attention of notable investors like Union Square Ventures, Y Combinator and Naval Ravikant. From there, the project has grown into one of the most exciting companies in crypto, and through his leadership, the company achieved the first approved reg A+ plus token offering from the SEC. Today, Blockstack supports independent developers and hosts over 400 decentralized applications. Recently, he was named one of the 100 most important people in crypto.
We’re stoked that he’s made the time to join us for today’s show, so everyone please welcome to the show, the CEO of Blockstack, PBC, Muneeb Ali. Muneeb, welcome.
Muneeb Ali:
Absolutely. Really excited to be here.
Whit Gibbs:
Well, we are excited to have you. I appreciate you making this time to talk with us. We have a lot to discuss, some questions to fire away. This is I think going to be one of the most exciting conversations that we have had on the Hashr8 Podcast because what you guys are doing at Blockstack is very exciting. I think a great place for us to start would be to talk about that project in 2013 and what you were researching and how that has grown into what Blockstack is today.
Muneeb Ali:
Yeah, so that does seem like a long time ago, especially in crypto where time passes so quickly. Basically, Blockstack started at Princeton university. So me and my co-founder who’s also a Princeton engineer, we were actually looking at core internet infrastructure challenges. That’s my background for a decade before even Blockstack or my PhD, I come from the research community that builds internet protocols, computer networks, large scale distributed systems. Actually, most of the early research into internet protocols came from our research community. So, it’s an ongoing research topic in distributed systems, how to improve internet protocols and computer networks. We were specifically looking at the internet infrastructure, how it’s insecure or how it can be improved. Initially, the internet was meant to be a fully decentralized network, and over time, we started depending a lot on large companies like Google and Facebook. So it’s a very hot research topic as well outside of crypto.
Muneeb Ali:
Interestingly, when we started the project, we weren’t looking at blockchains. Blockchains is something, or more specifically, the Bitcoin blockchain that we discovered has a very elegant solution to the kind of problems that we were looking to solve. Sometimes I joke about Blockstack as the project that escaped the research lab. The reality behind that is that there has been a lot of work in kind of like next generation internet, lots of like different designs that people write research papers on or even build prototypes. But those ideas never get commercialized. I think one unique approach that we took was we raised venture capital, effectively to do R&D, we hired some of the best computer scientists we could find. For several years, we were just building the solid foundations for what a new secure or decentralized internet can look like.
Whit Gibbs:
My understanding right now is that there are still components of the internet that are decentralized. It’s just more the top level, if you will, that is not. Am I correct in saying that?
Muneeb Ali:
I think generally yes, a lot more consolidation happened at the application there off the internet. Although some core competence, like even the domain name system, all the websites that people register, it’s like a semi decentralized system, is a federated network. The legacy kind of like DNS system. Think of it this way. Imagine the internet protocol stack and it’s like a technology that was built by humans and those humans are still with us, right? Most of the founding fathers of the internet, they’re fully aware of like the limitations of that technology stack. What happens since let’s say 2000s or so, is that companies like Facebook or Google would come in and fill in the gaps for whatever infrastructure piece was missing.
Muneeb Ali:
Imagine Facebook Connect, for example. It’s like a login mechanism that is useful, but you have to rely on Facebook the company for doing that, and then Facebook and track all of your actions and it can track you in all the websites that you log in using the Facebook Connect. But the internet never had a universal login system. Which is, in our view, it’s a public infrastructure that should exist, and that’s just one example. Same with public key infrastructure, how people get access to private public key pairs. It is infrastructure that should be available to normal internet users without depending on any company and so on. So all these missing holes that were there in internet protocols, we think that they should be built in a public manner on open networks instead of relying on companies.
Whit Gibbs:
And then of course, with each of those gaps that are being filled by Google or Facebook, it comes with it that yes, they’re tracking all of your information, but then they’re also monetizing that information, opening you as an individual up to risk, whether it’s a data breach or the ability to be deplatformed or a number of other things. Those problems that are existing, how are you guys at Blockstack solving those?
Muneeb Ali:
We have done a lot of thinking on this and we’ve actually boiled down most of the problems to the fundamental issue of ownership. I think taking a step out and just looking at things from a high level, the biggest difference between the legacy internet and a kind of like the new internet or Web 3 that a lot of projects want to build, the fundamental difference is ownership, direct ownership of assets. These assets include cryptocurrencies but they also include things like your username, any digital assets, your data. It’s a difference between, imagine like in the physical world, a society that has no concept of property rights and a society that has a concept of property rights that can be enforced.
Muneeb Ali:
I think if you look at history, you’ll notice that prosperity actually goes up when people figure out property rights, and the living standard of those tribes in those societies is meaningfully impacted when we figure out the property rights, and the same thing is kind of like happening on the internet right now where once we figure out property rights and ownership in a clean manner, you’ll start seeing that these users, they start becoming a part of the internet economy instead of only the Googles and the Facebooks of the world who are just making money off the information provided by these these users.
Whit Gibbs:
That actually reminds me of something that, actually Naval said in podcast, that we’re moving towards a system, as it currently stands if we were to keep down this path where you’ve basically got these large hegemonies that run massive corporations and then a lot of little, if you will, small, independent business owners that are trying to get in where they fit in within the current ecosystem. As you guys are building, what I see is that you’re creating a platform that allows people to build without encumbrance and have a level of security that wouldn’t otherwise be available. Is that a correct assessment?
Muneeb Ali:
Yeah, so I think we can broadly classify the work that we’re doing in almost like three categories and they need to be sequenced as well. The first one is just public infrastructure. Think of this as the core internet protocols that exist as public infrastructure, or in real life, think of roads or any other public utility, and that’s the area where we did a lot of R&D work and made sure that these foundations are solid and can actually scale to hundreds of millions of users. And all of that is available as open source to anyone who wants to use. That’s our open network. Then comes like developer tooling. There are so many like software libraries that are available to people now who want to build applications on the cloud or in a more centralized way and we need to support a very healthy developer ecosystem.
Muneeb Ali:
That’s the work we did over the last year, a year and a half, where, as you mentioned, that the number of applications built on the network went from something like 20 something to more than 400 now. I think still a lot more work is required to make it easy for developers to build these applications that respect user privacy that actually enabled new types of functionality that was simply not possible in Web 2. I think then the final frontier is kind of like, what does this look like from a user perspective? What are the new mental models that users would need to learn about? How can we make the UX super easy for users and give them really compelling reasons to eventually kind of like start using applications on Web 3 versus whatever they were used to on the legacy systems.
Whit Gibbs:
I definitely want to talk about attracting users, but first to talk more about the second point that you made, creating that environment for developers, how right now are you attracting developers to build with Blockstack’s tools as opposed to the other tools that are out there?
Muneeb Ali:
Yeah, so I think our general thinking is that the blue ocean of developers right now is outside of crypto. This is something that we’ve noticed even in some of the core engineers that ended up working on the foundational layers. There were people who were kind of have a strong background in distributed systems or applied cryptography or programming languages, but they’re actually a little bit hesitant to work in crypto because of everything else that comes with this industry. We had to really convince these experts to move over and work on these exciting technical challenges and basically convince them that this is much bigger than just like cryptocurrencies. You are impacting the future of internet over here, and the same thing is true for developers.
Muneeb Ali:
I think there are some developers who are curious about cryptocurrencies and they want to experiment, but the vast majority of developers are outside of crypto and they are still building traditional web applications, they’re still building traditional cloud computing applications, and I think that is the market that we tend to focus more on, and we try to have our developer tooling positioned in a way that it can be easily used by that blue ocean of developers.
Whit Gibbs:
From the sound of that, it’s basically right now developers are going to where they think the users are. This is not a Blockstack thing, this is a crypto thing, right? There’s not a ton of attention on this space right now. I think that us in our bubble, we think that it’s the future and we know what it has a potential to be, but outside interest is growing but it’s not quite to a velocity that I think we know it will be in the next couple of years. Is that the feedback that you’re also getting from some of these developers, that they’re just kind of building it where the people already are?
Muneeb Ali:
Kind of. I think sometimes the feedback we get is more about what specific problems are we solving, and that’s actually very valid. Think of a decentralized authentication system. If you’re a developer and you are okay with depending on Facebook and just use Facebook connect or just use Google login, at some fundamental level, you need to be convinced that this is a problem worth solving. Sometimes those discussions turn into, hey, you don’t want to be liable for storing user data on your servers, are your costs for deploying applications go down if you’re not building applications that are very heavy on the server side? So I think there are different reasons, and some developers just might be more of focused on privacy and they actually feel aligned with the values of some of these new projects like Blockstack where we don’t store user data. We heavily lean towards privacy.
Muneeb Ali:
There are different types of developer profiles. I would say that, in general, I think the elephant in the room for crypto is really the fact that so many projects have been around for such a long time. Most of the projects can’t even scale to hundreds of millions of users. Any sophisticated engineer who takes a look at it, they can tell that. It’s not a secret that most of these blockchains are struggling or maybe I’ve been doing R&D for years and years because these are not easy problems to solve, but no serious developer is going to ever build on a platform where you can’t even scale to a million users. This is the reality for a lot of products out there. That’s why we took a deep dive on the foundational layer for several years because that is step number one by far.
Muneeb Ali:
High quality engineers, they’re going to poke around your platform, they’re going to go into the details and they need to feel comfortable that the foundations are solid. That’s what we call phase one and we absolutely have to get that right. Then comes the next phase where it’s about developer tooling, it’s about support, it’s about documentation, it’s about like solving a specific problem, what the developer was looking for and then you start getting more developer traction there.
Whit Gibbs:
As you guys are moving forward, I know that there is a consensus mechanism that you guys are using right now and I’d like to talk more about that. It’s called proof of transfer. Could you give an overview of proof of transfer and then we’ll dive a little bit deeper?
Muneeb Ali:
Absolutely. Even before though, let me give a little bit of context on where we are coming from. First of all, if I think there was a highly scalable blockchain available that we could just use, then we would just go ahead and use it. We actually tried doing that. We tried building on top of Bitcoin and everyone understands what limitations Bitcoin has and for a good reason, like in the sense that, for a Bitcoin to be secure, it has a limited scripting language and you cannot have like a more expressive smart contract language at the Bitcoin layer because it comes with a lot of potential security loopholes.
Muneeb Ali:
Similarly, Bitcoin needs to be durable, which means that Bitcoin doesn’t change that much. There’s a fundamental tension between trying to extend or build on something like Bitcoin, whereas the underlying platform needs to remain stable and it remains to have a very, very limited feature set. Then if you look at some of the other platforms, they’re more in the camp off, we want to build a world computer. You look at Ethereum, even other projects that started off for that and like US or others, they’re all in the camp of trying to build a world computer that is responsible for processing all transactions and computations for all the users. We are just fundamentally not in that camp. We don’t think that that’s a scalable approach.
Muneeb Ali:
The world that we look at looks more like … it’s almost like desktops or user end devices interconnected with each other and there’s no logical big mainframe in the middle. Bitcoin is more, from a technical design perspective, in our camp, but just the fact that you can’t modify Bitcoin, and most of the other products are just completely opposite of what we want to build. With that in mind, we’ve been working on basically some sort of a consensus mechanism that can actually benefit from the security of Bitcoin, but at the same time, enables us to extend the functionality and have more expressive smart contract languages, have new features like the ability to register user names, domain names, storage drives and their pointers and so on.
Muneeb Ali:
Basically, the kinds of things you need for a Web 3. That’s like the high level context of the problem that we are trying to solve and proof of transfer or PoX is our consensus mechanism that gives us that. Basically what it does is it’s an interconnection of two blockchains. Think of Bitcoin has kind of like the reserve cryptocurrency or the blockchain that is extremely secure and we are interconnecting the Stacks 2.0 blockchain to Bitcoin in a way. There are two crypto assets at play as well. The high level idea is that instead of destroying electricity, which is what Bitcoin miners do, we look at the proof of work cryptocurrency, Bitcoin, and use that to mine on the stacks blockchain. These miners, so there are two types of players into consensus algorithm. One is the stacks miners and the other is the stacks holders.
Muneeb Ali:
The miners are basically writing new blocks, they’re processing transactions, they’re processing the clarity, which is our new programming language, the clarity smart contracts and collecting fees. So they’re effectively doing work of a traditional miner, to write blocks and process transactions. They get rewarded in newly-minted stacks or transaction fees that are in stacks. These miners, instead of burning electricity, their cost is in Bitcoin, right? So they’re sending Bitcoin transactions to participate in consensus. On the stacks blockchain side, we have these holders of stacks cryptocurrency who are locking up some of their assets to participate in consensus and they also do some useful work for the network. They’re not involved with processing transactions or writing new blogs, but they’re actually signaling important information on the network for the miners.
Muneeb Ali:
They’re helping the consensus process, and part of helping the consensus process, they aren’t Bitcoin. What that means is, so this is very different from staking. I understand that people might think that this is something like staking, but there are two big differences. One is that you’re not putting up your crypto assets at stake, which is something that we think is very problematic because you can get slashed for not only misbehaving, but also because of honest problems on the network as well. Which could be something very problematic if you lost your crypto assets, because of no real fault of your own, but because you happen to be on a network partition or something.
Muneeb Ali:
The second interesting thing is that you’re actually not earning the same crypto asset, but you’re actually earning something is the reserve crypto currency of the world, which is Bitcoin. I think that leads to a very interesting interplay between two blockchains. They’re kind of interconnected, and also the two crypto assets that now have a very interesting interplay with each other.
Whale BearMan:
How do you guys utilize the proof of work of Bitcoin? This sounds like DPoS in my opinion.
Muneeb Ali:
Yup. Let’s dive into the PoX mining mechanism a little bit more and we can highlight differences that way. Basically, I think our main design goal is to benefit from the security of it, right? The way we do that is that because miners are sending Bitcoin transactions to participate in consensus. So what’s happening is there’s a group of miners and they are participating in consensus to get selected as a leader. There is one leader and there’s a VRF, which is a verifiable random function, which picks a leader amongst all the people who are trying to participate and the leader gets to write the block. But there’s a correlation between their Bitcoin transactions and the block that is written on the Stacks 2.0 chain.
Muneeb Ali:
The Stacks 2.0 chain is a separate blockchain. It’s not a side chain, it’s not a merge mine thing. Visually, imagine it as a separate blockchain, but there’s a correlation between a Bitcoin block and a stacks block. If, let’s say, there’s a miner that’s malicious or this Netbook is under attack, someone wants to attack it, the attacker not only need to mess around with the stacks’ blockchain history, they also need to reorg Bitcoin, which is the critical security element here. It is almost impossible to do deep reorg with Bitcoin history we’re kind of like shielding attacks on the stacks blockchain by getting protection from Bitcoin. That’s what’s really happening. I think that’s a very interesting model because what happens is that people who want to start new blockchains, and let’s say that you are in the camp that proof of stake or some of their system might have disadvantages and you don’t feel comfortable doing that, you end up starting a new proof of work chain.
Muneeb Ali:
But those proof of work chains are usually much smaller. It’s like starting a smaller Island, and they are more easily attackable than Bitcoin. What we’re saying is that we believe in a world where there’s one large extremely secure proof of work network, which is Bitcoin and other blockchains, instead of reinventing the wheel and basically burning electricity and creating a smaller proof of work watching, they can actually benefit from the security of Bitcoin using PoX.
Whit Gibbs:
How are the two correlated? If I’m running a mining firm and I’m mining SHA-256 Bitcoin and I’m getting those block rewards, how does that correlate to the Blockstack blockchain? Is there a deposit mechanism that needs to occur? How are the blocks correlated?
Muneeb Ali:
Yup, that’s a great question. So basically think of it this way. Once Bitcoin is minted, there is some proof of work that went into that, right?
Whit Gibbs:
Yes.
Muneeb Ali:
We completely separate ourselves from that process. There’s no SHA calculations or anything else happening with PoX. Basically, people who want to mine, all they need is Bitcoin. They can get it from anywhere. Maybe they have a holding or they get it from exchanges, whatever. It doesn’t matter to us. But your cost of mining is expressed as Bitcoin. Instead of, let’s say you’re a miner, you have some fixed cost of hardware or ASICs and then you have your monthly cost of electricity and you do a calculation for, does it make sense for you to mine or not based on the profitability of mining? In our system, it’s actually a little bit more dynamic because you don’t need specialized hardware. You are not burning electricity. It’s a normal node running on any laptop and your cost is actually Bitcoin. And you would mine, if through the mining process, the XTX that you are collecting, let’s say there is the newly minted XTX, the coin based ones that the protocol is giving out to miners and then there are transaction fees and then there are clarities [inaudible 00:21:34] contract fees.
Muneeb Ali:
Whatever money’s on the table, you look at the cost in Bitcoin and you would mine if it makes sense for you to spend Bitcoin to collect that XTX.
Whit Gibbs:
So then each block is being, in effect, bid on block by block, is that correct?
Muneeb Ali:
Yes, and then there’s a window, right? So we don’t want miners to literally just be bidding on a single block and then disappear. There’s a window, right now the default size is 10 where there’s an average and we are looking into how exactly to even calculate that average. Imagine like a black box value, [inaudible 00:22:05] a 10 block window and miners are effectively mining consistent blocks and they’re calculating … Interestingly, I think a new type of demographic might get interested in mining this way because traders, typical of cryptocurrency traders, can actually model the mining network as a disconnected exchange. We’re already, on Binance, there’s a Bitcoin XTX exchange pair, even though the US markets are not open yet. Internationally, the legal framework is different and it’s already treating.
Muneeb Ali:
They would look at the XTX BTC trading pair and look at mining as a disconnected exchange where there is some sort of arbitrage opportunity. The more efficient mining becomes, the XTX BTC pair from mining actually moves closer to the trading that is happening on exchanges.
Whit Gibbs:
Go ahead Connor. I see your hand raised.
Whale BearMan:
Yeah, so say you are a large industrial minor and you have a very methodical way of running your business, how does Blockstack plan to integrate to these industrial size miners? Because miners like very easy ways for them to obviously extend their Bitcoins. Have you guys looked at ways to capitalize on my main pools or maybe large size miners to make the transfer of Bitcoin easier?
Muneeb Ali:
Right. Let me get into the details off the VRF, the verifiable random function. The way it’s currently designed is that the probability is random that you get elected as a winner, as a leader. So you need to mine for a while for those probabilities to kick in. But the probabilities are correlated with your committed amount. So if you are willing to bid more Bitcoins, you increase your chances to win. I think pools can definitely form because a bunch of people can get together behind a pool and try to mine that way because they’re increasing their probabilities and reducing their variance and so on. But in general, I think over here, just like with proof of work mining, I think people start to make their software more efficient in terms of calculating caches and other types of optimizations you can do.
Muneeb Ali:
Interestingly, we will release the default PoX mining’s offer, and in this case, our expectation is that people will be trying to optimize a software based on historic data, based on different, almost like trading strategies that what makes sense for them in terms of mining and different algorithms for the commit values, that you basically want to commit the least amount of Bitcoin that will maximize your probability for actually winning, and you want to always keep an eye out on the trading pairs. That’s why I was talking about that arbitrage. I think people, like more sophisticated miners, and I think with us, we are in a little bit of a unique position where anything that has not been announced yet, we have to been very careful about it. But I can say this much, that there are independent miners and companies that are looking into PoX.
Whale BearMan:
One other question, and it might come off as rude, but from an economic and resource perspective to Bitcoin, how are you not just leeching off of Bitcoin?
Muneeb Ali:
Yeah, I think we actually look at this as extending Bitcoin and helping the Bitcoin ecosystem in the sense that, how many times have you heard the sentence Web 3 and Bitcoin used together? People just don’t talk about it because they have accepted at some level that smart contracts and Web 3 is going to happen somewhere else. Whereas imagine that Bitcoin is by far the most secure blockchain. A healthy developer ecosystem around Bitcoin is actually beneficial to the Bitcoin ecosystem. By giving people smart contracts that anchor into the security of Bitcoin or by building Web 3 that anchors into the security of Bitcoin, I would say that it’s not like you’re trying to leech on Bitcoin, you’re actually helping extend and grow the ecosystem around Bitcoin.
Muneeb Ali:
Also, like PoX has a very interesting feature where the Bitcoin being used is also not being destroyed, it is just being circulated to other parties. You’re in a way bringing more people to Bitcoin as well because all of the stacks holders, they are actually owning Bitcoin as a different assets.
Whale BearMan:
Yeah, and something that you said earlier is that in the future there’s going to be one big proof of work chain, and obviously at this point we can say that Bitcoin is going to be that chain. A lot of people do try and reinvent the wheel, like you said. I do see this being something that actually utilizes Bitcoin’s network for what it truly was meant to be, and it’s kind of thinking 10 years in the future, like you’re thinking about it today, which is refreshing. As someone that cares about algorithms and math, maybe you could elaborate on how your algorithm in consensus layer works.
Muneeb Ali:
Basically, the way the consensus works is you can divide the consensus algorithm into different, almost like sub-parts. One very important part is leader election. How do you select a leader and then the leader is kind of like writing blocks and that’s the VRF function and that’s the bidding that’s happening at the Bitcoin layer. Then once you have a leader and the leader is writing new data, then you get into how is the security of the history, stuff that has happened previously in history being secure, like in the sense that you don’t want reorgs in the chain, you want to make sure that there are certain mathematical properties off the data that has been written into the blockchain.
Muneeb Ali:
Think of this as the stacks Blockchain, as I said, is a separate chain as different types of data is being written there, but every lock on the stacks’ chain is like linked to a Bitcoin block, and it benefits from the security of the Bitcoin block because of the transactions that were there.
Whale BearMan:
If I were to look at a block explorer, would I look at Bitcoin’s block explorer or your own block explorer?
Muneeb Ali:
Yeah, you would look at our block explorer. Think of it this way, that we have the concept of like microblocks. Microblocks are faster. A couple of seconds you can start getting initial confirmations. This is to give people additional information, that if you feel comfortable at three confirmations on the microblocks or five confirmations on the microblocks, you can go ahead with what you want to do. But it’s finality that’d linked with Bitcoin. Think of this as, I say security, but what I’m really referring to is finality. I would argue that there’s no better finality than Bitcoin’s finality. Things are actually final when the-
Whale BearMan:
Almost like lightning network in a way.
Muneeb Ali:
Yes, so I think lightning is a great example. I think lightning is a great example for a technology that is helping the Bitcoin ecosystem. They’re helping secure it and they’re helping to extend it because you can even have lightning channels between Bitcoin and a PoX blockchain like stacks. Things like that would become super interesting because our long-term model is, again, going back to Web 3 emerging on top of Bitcoin, the model really becomes that Bitcoin becomes kind of like the reserve cryptocurrency, Bitcoin becomes the security base layer and everything eventually settles on Bitcoin. Think of the mental model as, if it didn’t settle on Bitcoin, it didn’t happen. That’s the world that we want to live in, and I think that’s where consolidation starts to happen as well.
Muneeb Ali:
I think this is a very, very fundamental framework that we are working on because what that also means is that smaller islands and smaller blockchains, unless they also decide to interconnect with Bitcoin and set along Bitcoin, they will become disconnected networks that might not be worth a lot in the future.
Whit Gibbs:
Yeah, as a use case, obviously this is a great product that’s going to drive interest to Bitcoin and then obviously allow Blockstack to leverage that as security. When it comes to the applications that people are building, are these applications being built on the Blockstack Blockchain always? Is each one of them leveraging that blockchain to be built?
Muneeb Ali:
Yes. I think for really understanding the applications, we again have to contrast the two models of these logical mainframes, like Ethereum and like 10 other projects that are in this space, versus this almost like user owned internet. Basically the difference is, I think the analogy would be an actual mainframe where everyone is connecting to the same computer and you’re waiting on other people’s computations. The mainframe can only do a transaction at a time, it’s slow, it doesn’t scale, can’t scan through like a hundred millions users, versus imagine the early internet, which was desktop computers interconnected with each other and they could just grow much faster. They can do things in parallel.
Muneeb Ali:
Our applications are in that model. You are not like doing everything on chain, you’re not sending a transaction if you’re tweeting. One big thing is that our smart contract language clarity, which we can go into if you want to, but at a high level, it’s very predictable and it’s very secure. There are mathematical proofs for what these programs can and cannot do even before you run them. And we believe in a world where a subset and only a small subset of programs need to be smart contracts living at the blockchain layer. Most of the other programs are just on users’ end devices. The smart contract language is not live yet until Stacks 2.0 goes live. The application that we see today are more like decentralized versions of things that we’ve seen on Web 2.0.
Muneeb Ali:
For example, decentralized blogging platforms. There are email services like privacy focused, secure email services built on top of Blockstack, messaging apps, photo sharing apps and so on. These are applications, which if you try using them, most of the computation is happening on your machine. You do register a universal username that hits the blockchain layer, you get almost like a private encrypted personal drive, and the discovery information for that drive lives at the blockchain layer, but the data does. It’s really about reducing the kind of things that have to hit the blockchain layer, and most of the complexity and computations are with the user.
Whit Gibbs:
Fascinating, man. You’re really getting an ecosystem that’s growing, that is mimicking products and projects that we’ve seen on Web 2.0. How are these developers being compensated? I know you guys had a program at one point in time where the top apps were getting paid out on a monthly basis. Is that still occurring?
Muneeb Ali:
Yes. The high-level idea behind app mining is that, just like the protocol is able to give incentives to miners to come in and process blocks and transactions, can we do something similar for developers? When we were starting the program, we realized that this is a big challenge. Even if you look at the initial paper in which we introduced it, because the challenge that we’re trying to solve is can you say interesting things about the quality of an application in a completely automated manner using metrics? It’s a very hard problem. So we work with the game theorist and economic experts from Princeton, NYU and other places to design this almost like game theory dynamic where there are certain that we use, and we iterated over those metrics over the year and a half that the program kind of like ran for. The lesson at the end was that I think the app mining program was really good in bootstrapping new applications.
Muneeb Ali:
People have an incentive to come in, build an app, publish it, participate in the ecosystem, but then where it lacked was in surfacing high quality applications. Because imagine if there is some sort of disconnect between the metric, the automated metric that is being measured and money is like automatically being distributed based on those metrics and actually having a high quality app. People would end up optimizing for the metrics, and those metrics, it’s hard to automate what exactly do you mean by high quality application? We don’t want to be in a position where there’s some application that for example doesn’t align with our values of privacy and decentralization or even, we know that they’re there to just game the system and not really there to actually help grow the system.
Muneeb Ali:
But in a fully automated way you can’t really cast these things. The biggest lesson for us was, it was great for initial bootstrapping. I think it obviously contributed towards getting these initial applications. Moving forward, the app planning 2.0 might have more of a human in the loop type of a process where I think we try to focus more on less applications but more about high-quality applications and how we decide what the application is. There’s more of like humans in the loop and they’re able to make those calls versus trying to automate process.
Whit Gibbs:
What were some of the metrics in one point that you guys were using to determine which apps were the highest-ranked and how, I know human in the loop is somewhat vague, how are you going to incorporate that human in the loop aspect to improve at mining 2.0?
Muneeb Ali:
Basically, the model was that there were different reviewers and those reviewers were incentivize as well to participate in the program and be iterated or several different reviewers and several different like metrics because this was pilot phase. It was really the app mining pilot. Some of the metrics were, for example, we had a score for UX. There are some automated testing services like user testing where you can submit an app, they would have go to real users, they would collect real feedback, videos of people trying to use the application. We’ll compile those scores and send them back to the developers, which we felt was a very useful thing for the developers. Hey look, here are 10 or 20 people who actually tried using your app. This is the score that they gave the UX of the app.
Muneeb Ali:
Reviewers were basically looking at how “centralized” this app is, because some apps were, as I said, trying to game the system and not be true to the values of privacy focus, decentralized network. So we’ll try to catch things like that and give them a score on it. Then there are things around … I think this is where things become a little bit more gray area where if people are posting their app on Product Hunt or some of their sort of a community site, trying to see the reaction of that group of early users, I think we know that it’s a very hard problem to solve where if you post something on Reddit and ask 100, 200 friends to come in and try to upload that, people can try to game those metrics that way.
Muneeb Ali:
These are kind of like the examples of some of the metrics, and what I mean human in the loop is more like, there are models like Y Combinator where they get whatever 1,000, 2,000 applications, they pick a handful of them and they try to support them not just with capital but also with guidance and trying to help them solve the real problem for users, and I think obviously you can’t scale that to thousands of applications. You have to limit it. But in general, we are letting the community have a big say in how this evolves, because another big thing happening with the project is yes, our company built the initial version of the software, built the blockchain, did this SEC qualified offering, but the real path forward is a fully decentralized network, so we’re letting the community kind of like drive the process for app 2.0 and there are actually multiple proposals for how to improve it.
Muneeb Ali:
There are working groups and people are working on it, and Blockstack PBC is effectively saying, we are not going to run this program. Here is the allocated stacks for this program and let’s figure out entities, let’s figure out frameworks and let’s take the lessons that we’ve learned and try to work on improving [inaudible 00:36:36].
Whale BearMan:
Awesome. Yeah, I had dug through the website a little bit and reserved my Whale BearMan identity, so one could take it away from me. But I do have one question on what you think about RSK because I remember it has similar properties. I want to know your thoughts on that.
Muneeb Ali:
Yeah, I think it’s a great project. I definitely read their intentions are similar. The same reasons why they have a separate blockchain is similar to why I kind of like Stacks 2.0 is different. I think where some of the differences come in is, so they’re really positioning themselves as this is how you can do smart contracts or BIFI just with Bitcoin. Looking at the same types of limitations that you can’t extend Bitcoin, you can’t put a lot of data at the Bitcoin layer. They have a separate blockchain that has merge mine with Bitcoin. I think it’s around like 40% of Bitcoin miners already merge mined it, which is a good number, but I’ll go into why we didn’t go for a merge mine approach. I think one thing that sets them apart a little bit, A, they’re focusing more on just smart contracts, not Web 3. Right now, all the 400 applications on our platform, they’re kind of like really Web 3 applications while we are introducing the new smart contract language.
Muneeb Ali:
I think that’s one big difference. Where are you? Are you focused more on BIFI or are you focused more on Web 3? I think we’re definitely more in the camp of Web 3 with adding the functionality for automated smart contracts. The second thing is I think they went out of their way to not have their own crypto asset. I understand the reason because, especially in the Bitcoin community, I think there’s a lot of skepticism for new types of crypto assets, and it’s understandable. There are a lot of malicious bad actors in the ecosystem, and every time someone starts a new crypto asset, there’s skepticism there. I think healthy skepticism is good, but you also cannot just blanket reject the need for crypto assets, period.
Muneeb Ali:
If you think of a crypto assets as almost like, just like it’s hard to have a company without equity without incentivizing people to work towards it and getting all sorts of different parties together. Similarly, it might be very hard to have very ambitious moonshot like projects without having some sort of a crypto asset that can align incentives for everyone who’s working in that ecosystem. We do have a separate crypto asset stacks that has an interesting interplay with Bitcoin. RSK doesn’t have that. I think it has its own kind of like sets of advantages and disadvantages. The reason why we didn’t go for a merge mining, this is actually in my PhD pieces as well. We ended up writing a paper where, at least we saw a bunch of security issues with merge mine Blockchain is like Namecoin.
Muneeb Ali:
Basically, the fundamental issue is that if there’s a miner with 25%, 30% hash power on Bitcoin and only 30%, 40% of the coin miners are participating in the merge mine chain, that means that that minor actually has more than 50%, or sometimes significantly more mining power on the merge mine chain. The problem really boils down to always trying to convince 100% or very close to 100% of the Bitcoin miners to also mine the merge mine chain, and I think it’s a social problem. Like, why would they bother? So far we haven’t seen good examples of that working out. A bunch of products tried doing marge mining and ended up in such problems. I really like the RSK project and I think they’ve done a great job so far, but those were some of the reasons why we stayed away from merge mining.
Whale BearMan:
That makes sense. I do agree with that. One thing that really stands out to me with your project is, it’s almost like tokenizing hash rate and the power of Bitcoin in a way.
Muneeb Ali:
I think it’s very interesting. I think it’s a very interesting concept. I didn’t think of it that way, but I think your direction [inaudible 00:39:58], right? Basically, it’s like saying that once you have Bitcoin, it actually represents the proof of work that went into creating that Bitcoin. The Bitcoin is also valuable because now you can reuse all the work that happened to create it by using it in consensus of other blockchains and almost imagined that, like if PoX, by the way, can be used by other blockchains as well. It’s not just for stacks. There are other high quality teams who face similar challenges that they really don’t want to start another proof of work chain because it will be a smaller network or they believe in Bitcoin and want to align themselves better with Bitcoin.
Muneeb Ali:
They can absolutely go ahead and use the PoX concept to, in a way, like tokenize the hash rate. As you probably write more about this, but the picture in my mind is really like interconnected network with a very strong base layer and everyone is able to benefit from the base layer and you’re like growing the ecosystem together, which is something that people who understand it, they get very excited about it. Even Bitcoiners, like we have talked to a lot of people in the Bitcoin community and I think most of the time the reaction is yes, they want to see more innovation in the Bitcoin ecosystem. Yes, They want to see more developers working in this. Yes, they want to see intellectually curious people do come to the Bitcoin ecosystem instead of going somewhere else, and I think that aligns as well with what we are trying to do.
Whit Gibbs:
It just expands on the Bitcoin blockchain. There are definitely limitations to what can be done right now on Bitcoin, and you guys are adding that protocol that can allow for another use case of Bitcoin and give developers the ability to build what they want to build and not have to worry about the scaling issues that are currently present with Bitcoin. I think it’s phenomenal. Clearly, the developer community is responding in kind. What’s the step from here to more adoption for the Blockstack applications?
Muneeb Ali:
One thing about our project, it’s something that I’m very proud of actually, is I think our core team tends to be independent thinkers. They would look at a problem and try to look at it from first principles instead of like just falling trends. I think Ethereum deserves a lot of credit for being early and throwing these ideas of like smart contracts or other concepts out there. Even for scaling, that kind of system, Vitalik came up with sharding ideas, and imagine how many blockchains there are now that are trying to do sharding in one form or the other. What people don’t realize, that they’re all in roughly the same camp. They’re all trying to build some sort of a world computer. Whereas, thinking from first principles is a little bit like, okay, what problem are we trying to solve?
Muneeb Ali:
Okay. The problem really is that we want hundreds of millions or even billions of people to be realistically using these applications, and here’s a design that is drastically different from sharding or mainframe type blockchains and this is how it works. We did the same thing with legal frameworks as well, that instead of basically falling whatever was going on in the industry, you just again go back to first principles, actually study securities regulations, try to figure it out how you can do a compliant offering and try to go and see what the regulators say, if you are willing to talk to them and you’re willing to figure out a path forward. Again, we were very proud of the fact that we were able to do a first qualified offering in the US because we want this to be an open network.
Muneeb Ali:
We want anyone to be able to participate. We don’t want to limit it to just accredited investors and large funds. Now, the work that we are doing is almost the other half of the picture. The first half was how do you raise the initial capital in a compliant way? Phase two is, how do you then go to a fully decentralized open network where anyone can participate and it’s clear to everybody that this is not a security and it is actually an open decentralize. I think again, due to regulations, I can’t comment too much about it, but that’s the work we’re looking at. I think Stacks 2.0 launches basically, probably the biggest thing we have done as a project in the last five plus years. Super excited about, so much R&D work went into this.
Muneeb Ali:
Inventing a new programming language is not something that we would take lightly. We looked at again, what is the precise problem that we’re trying to solve? Is there a programming language that can do it for us? If there is, we can just use it, and we did a lot of work in defining a new programming language that are very precise. It can really help developers avoid a lot of mistakes that people currently make and end up losing funds and whatnot. So we are giving them better tools and that goes live with the Stacks 2.0 as well. Obviously, this innovation around PoX where we are giving everyone this framework for don’t reinvent the wheel, don’t try to start small islands and stay disconnected. As an industry, we can actually try to collaborate in a way and just accept the fact that Bitcoin is a cryptocurrency or even the reserve currency of the world in the future and figure out how we can benefit from that, how we can interplay with Bitcoin and basically try to build Web 3 on top of a very, very strong foundation like this.
Whale BearMan:
The biggest rule in cryptography is re-rolling. Obviously, you’re not pulling an iota, right?
Muneeb Ali:
No, absolutely. For example, in some ways like PoX mining is a new type of consensus, but look at how much we are reusing. In the sense that, all the transactions that happen on the Bitcoin layer are perfectly valid Bitcoin transactions and we just benefited from all the infrastructure, all the security that is already there, all the tooling that is already there because miners just need to sign a Bitcoin transaction and send it out. Similarly, with even consensus algorithms, like there’s a trend in the industry where people come up with new types of fancy algorithms. We’re going again, back to the basics, how leader election happens is very simple. It again builds on research that already exists for decades.
Muneeb Ali:
We want to optimize for being able to easily analyze the algorithm instead of making it overly complicated. Similarly, when it comes to the rest of the stack, we didn’t get to talk about storage and other things. The main model there is repurposing a lot of cloud storage or this space people have available and using it in a private encrypted manner on Web 3. We’re not trying to launch new types of peer-to-peer storage networks, even though they can be compatible with what we’re doing. I think there’s a general trend for let’s try to stand on the shoulder of giants and only extend new functionality where it’s absolutely needed and not lose ourselves in needless complexity and basically just trying to do everything from scratch.
Whit Gibbs:
I think that that is a great place for us to wrap up. This was an enlightening conversation. I appreciate you making the time to join us today. Thank you for coming on.
Muneeb Ali:
Absolutely. It was great and I think it’s a very relevant conversation given your focus, like our mining goes live in, I would say like … it’s always hard to give concrete timelines, but right now we’re looking at end of Q2, the June or so and the test net launches in roughly a month, so anyone who’s interested in mining on this PoX new mechanism or just even testing it out, I think they can go to our testnet and start playing on with their optimizations for how they [inaudible 00:46:59].
Whit Gibbs:
Awesome. I’m excited to check it out. This is great, and for anyone who is interested, we will also include some links to Blockstack in the shows notes, so if you can head over and check out what Muneeb and his team are working on. For the listeners, we appreciate you guys so much for continuing to tune in. We’ll talk to you all again very soon.
Whit Gibbs:
Thanks for tuning into the Hashr8 Podcast. We appreciate your continued support. Please do us a favor and leave us a rating and review on your preferred listening platform and head over to Twitter and give us a follow @Hashr8, that’s @h4shr8.
Important disclaimer
Blockstack PBC is not registered, licensed, or supervised as a broker dealer or investment adviser by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), or any other financial regulatory authority or licensed to provide any financial advice or services.
Forward-looking statements
This communication contains forward-looking statements that are based on our beliefs and assumptions and on information currently available to us. In some cases, you can identify forward-looking statements by the following words: “will,” “expect,” “would,” “intend,” “believe,” or other comparable terminology. Forward-looking statements in this document include, but are not limited to, statements about our plans for developing the platform and potential mining operations. These statements involve risks, uncertainties, assumptions, and other factors that may cause actual results or performance to be materially different. We cannot assure you that the forward-looking statements will prove to be accurate. These forward-looking statements speak only as of the date hereof. We disclaim any obligation to update these forward-looking statements.