Tether Co-Founder: ‘Blockchain Is Not Convenient’

By February 27, 2020DApps
Click here to view original web page at www.forbes.com

William Quigley, the cofounder of Worldwide Asset eXchange (WAX), a blockchain and protocol token designed to make e-commerce transactions faster, easier, and safer, has been in the business of digital items for decades –– long before blockchain. Video game virtual items include things such as customizing your avatar, different types of virtual items that allow you to do more in a game, and so on.

Jonathn Yantis, WAX COO and Quigley’s long-time partner, invented the concept of trading virtual items for fiat back in the late 1990s. Quigley sat on the board of that company, IGE. “I learned a lot about the value of this stuff and why people need fiat onramps to trade, and they need a marketplace because somebody has to be the digital escrow agent and all that,” Quigley told me during World Crypto Con back in October in Las Vegas.

The two entered crypto after Yantis sold IGE, and, for a number of years, tried their hand at various trades, including tokenizing the U.S. Dollar. Quigley is co-founder of Tether, a stablecoin pegged to the U.S. Dollar.

They realized around 2016 that blockchains might be able to improve the trading of virtual items in video games. Ethereum had just launched. Quigley and Yantis had helped launch Mastercoin, an early attempt to create a platform for smart contracts.

“We thought, it's going to be very hard for people to use the current state of blockchains,” said Quigley. “But, if proof of stake, which is a consensus mechanism, can evolve the way we were hoping, we'll be able to allow a lot of people to trade virtual items cheaply and very quickly. Using a blockchain allows you to actually own the thing outright.”

Blockchain could transform the prevailing business model for video games in which video game items are property of the video game––not the player who purchases them. “You are licensing the game, you are licensing the items, you don't own them, and yet people will pay thousands of dollars for these items,” said Quigley. “They're in this unsettling position of owning them, but they can be confiscated at any given time.”

As Quigley and Yantis started to think about how to build a blockchain fitting of their customer’s needs, they devised WAX, launching in late 2017 the first video game virtual items on the beta version of their Ethereum-based platform. They implemented their solution with Delegated Proof of Stake (DPoS), which seeks to implement technology-based democracy, using voting and election process to protect blockchain from centralization and malicious usage. The DPoS consensus algorithm allowed the platform to scale.

“Our thinking was, if we add a purpose-built blockchain that was done with Delegated Proof of Stake, it can move very fast,” said Quigley, claiming they settle transactions in one-half of a second.

WAX chose DPoS, because the team does not believe Proof of Work (POW), the consensus algorithm used in Bitcoin, is practical for many functions. For one, WAX couldn’t enable free transactions on PoW.

“If you want to use the [WAX] blockchain, you have to own a certain amount of tokens and those tokens entitle you to rent system resources from our blockchain,” said Quigley. “And when you're done, and you don't want to use the blockchain anymore, you can take those tokens back and sell them. So, to that extent, you have to tie up some tokens to use the chain, but it doesn't cost anything per transaction.”

There are key differences between DPoS and PoW, the consensus method of not only Bitcoin, but currently of Ethereum, as well (though the latter has plans to change to a proof of stake consensus algorithm).

“If you've ever sent a transaction across those, you've probably never had somebody ask you which blockchain miners you are voting for,” said Quigley. “You don't even care. That's how proof of work does it. It's permissionless. Anyone can set up a mining rig and part of what they're doing is strengthening the network by mining. With a delegated proof of stake, there's a burden [to vote] on the part of the user.”

In WAX, you don't have to vote, but, if nobody voted, the blockchain wouldn't function, because you have to vote in a small number of miner-like validators or block producers. “There's a small number of people who will decide which transactions get processed and you have to vote for [these individuals],” explained Quigley. “If you go on our chain, if you vote, you will be compensated for doing that. You stake some tokens. Now you have a right to use the blockchain, and then you vote, and for voting you get rewarded.”

He adds about mining in proof of work blockchains: “With mining, you don't have to worry about voting for those people, but the networks are slow.”

With DPoS, the networks are faster, but participants have a civic duty for which they get rewarded, if you vote for the block producers you think are best. Rewards are issued in the form of WAX Tokens. But, there's not much incentive to vote if you're only earning a percentage on $5 worth of tokens. WAX, therefore, is working to innovate on DPoS to voting incentives easier and more accessible for token holders.

Tether and WAX Co-founder William Quigley
Tether and WAX Co-founder William Quigley stands before artwork by Carl Myers ("Eduardo in Blue ... [+]

“I would like to see two classes of token holders, we'll call it the infrastructure class and the consumer class,” said Quigley. “And the infrastructure class can have at it with all the Byzantine fault tolerant decentralized systems, voting and staking, and all that stuff. And then there would be another class that strictly wants to use the blockchain to facilitate some transaction in the same way we all know that, when we use a credit card, we understand there's somebody who [has] servers that are doing identity management, fraud management, and connecting APIs to banks. And then, there's you and me using our credit card to buy lunch.”

Quigley wants DPoS to arrange the responsibilities of the various people using the network so that those who want to can have at it with managing it and other users don’t need to worry about it.

“One of the things we realized was blockchains are a pain in the ass to work with,” he said. “I came from a place where consumer convenience and ease of use was a religion –– that's Disney. Somehow God put me in a place where it's the opposite of that. Blockchain is not convenient and easy to use, in particular trying to directly connect to a blockchain, which is why we have these abstractions, like MetaMask.”

There are many things people want to do on a blockchain, particularly dApps. “They're going to want a lot of tools that they're used to having maybe in an app store or they're used to having on the web.”

WAX has built the wax service layer, for this reason, which offers micro services, and has implemented 11 social logins. “The majority of the people are comfortable with that; particularly, if you have two factor [authentication].”

The micro-services layer will also provide trading services. “So, when you want to send somebody a Bitcoin or Ethereum or a WAX, you get into a wallet, a Ledger wallet or My Ether Wallet,” said Quigley. “And, frankly, for the typical consumer, it's intimidating and you hit some buttons, put some long strings, and hopefully the transaction goes through.”

WAX instead created a microservice, whereby users can send transactions just as easily as an email, the same way video gamers are already sending their virtual items based on emails and trade URLs, a term used in gaming for an account-specific link facilitating the exchange of virtual items.

Not only is WAX trying to simplify the transfer of assets, but, also, building out APIs as part of their micro-service offerings. “Instead of having to build all these connections yourself, you just connect into the API,” Quigley said. “The future of blockchain will be service layer based because, like the internet, there's people who directly connect, and they don't use naming conventions. They'll use an IP address and whatnot. Most of us want to type in stuff we understand –– words, like Amazon, Expedia, whatever. That's going to be much more common.”

What’s being built on top of WAX? One particular dApp takes real world consumer products and creates a digital twin thereof, for instance. “People think of tokenizing stuff and things, they often think real estate, stocks, gold, and the like, but they never think of sneakers or they don't think of comic books or trading cards or Star Wars figurines, any consumer product,” said Quigley. “Our view is that a lot of consumer products would benefit the consumer, if there was a digital twin of them to enable the holder of that object to do stuff they couldn't do otherwise.” Many people trade sneakers, for instance, on specialized marketplaces. They never wear sneakers.

“They use the sneakers as a store of value,” said Quigley. “Why not just give them a digital representation of that sneaker and allow them to trade it and have the sneaker escrowed somewhere [where it] can be redeemed when the holder of that token representing the sneaker wants it.”

WAX tokenized a pair of sneakers on their blockchain. It traded 200 times in 24 hours. “On eBay that would have taken about three years,” he said. “Get it, mail it, list it, the guy buys it, you mail it to him, he gets it. In the old days there were stock certificates and people took the stock certificate and then they physically handed it or mailed it. Eventually we got electronic stock certificates. You can still get a stock certificate, but why would you want it? You prefer to have the digital version of it.”

Leave a Reply

All Today's Crypto News In One Place