CEO Of Blockstack PBC Talks Crypto Token Compliance, U.S. Coronavirus Policy

By March 19, 2020bitcoin-ms
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Imagine you are waiting for a presentation about the sexiest technology on the planet from a dynamic entrepreneur. You ponder how your mind will be stimulated as well as your entrepreneurial spirit with how blockchain is a game-changer. You are about to be entertained by Dr. Muneeb Ali, CEO and Co-Founder of Blockstack PBC, and hear about a ‘light’ blockchain design, a ‘Stacks’ token, the smart contracts programming language called ‘Clarity’, and its decentralized cloud storage system called ‘Gaia’. As the presentation begins, this computer scientist from Princeton University starts off with a list of disclaimers.

Picture of Muneeb Ali, the CEO of Blockstack PBC
Muneeb Ali Blockstack PBC

Dr. Muneeb Ali, is also the Co-Founder of Blockstack, the privacy-centric, decentralized computing network pioneering applications that returns online data ownership to developers and consumers. I had a chance to interview Muneeb, who shared how he sees his compliance and transparency with U.S. regulators as equal in importance to his innovate development of blockchain. He also shares how the U.S. response to Coronavirus could benefit from the lens of a Silicon Valley tech entrepreneur who is well-versed in understanding exponential growth curves.

Forbes: You’ve obviously had success with launching the first compliant crypto token six months ago. You have made an ongoing effort to be transparent with the SEC by filing reports. How have you found this to be impactful to your business both positively and negatively?

Muneeb Ali: On the positive side we basically took the approach that the alternative was locking out all the U.S. people, both investors and users, and open our network to only non-U.S. people. But that didn’t feel right given we are a U.S. company, and also some of our early backers and users who are community members are U.S. people and developers. We wanted to open our network to the U.S. market as well. That is much harder to do given the regulations here in the U.S. But we did that hard work up front, working with the regulators, with the SEC, and not only coming up with the legal frameworks but also the accounting frameworks and everything else to have a SEC qualified offering here in the U.S. Even though the securities regulations have been around since 1933, this was the first time that the SEC qualified an asset that was a crypto asset and not traditional equity in a company. It takes a huge amount of work to get there. In general, it’s good because the SEC rightly thinks that in the crypto market people as speculative and hype-driven and the markets are not as mature as those in your traditional equity markets. People just don’t have access to the right kind of information. This is our attempt to disclose all the information that any potential investor should have access to if they are making a decision to buy our Stacks cryptocurrency. This is similar to how a company goes public and discloses all the relevant information to everyone.

I think WeWork was a great example recently, where they tried doing an IPO but when they were doing their disclosures, people discovered all sorts of things about the company that were red flags. And WeWork eventually was not able to do that IPO. These checks and balances are good for the public health of markets, and we don’t see them in crypto. So that’s the reason that we did it.

On the downside, there is a lot of overhead. We are a 30 person company; there’s the company and then there’s the open source project. Blockstack PBC, the company, built some of the core open-source software and protocols. The company had to build internal muscle for legal and accounting and all those things that you wouldn’t traditionally expect from an open source engineering and R&D focused project. I can’t even tweet without getting my lawyers to take a look at it. Our blog posts go through rounds of legal reviews, which is not typical for crypto markets or tech in general.

Forbes: You mentioned WeWork. There’s been a lot in the news about how the WeWork CEO and Founder behaved. You strike me as very much the opposite of that in your attempts to provide transparency. What’s your interest or modus operandi as far as why you are leading this company the way that you are, both in terms of regulation and being careful to be as transparent with the public and investors as possible?

Muneeb Ali: Great question. So, my background before starting Blockstack was more in traditional cloud computing and Internet protocols types of environment, so more traditional tech. I was doing my PhD at Princeton. If you look at traditional tech, imagine engineers that work at Google and Amazon, there is a huge difference between the professionalism level of that crowd and the crypto industry. And the kind of problems we were working on from a purely research perspective were centered on building a better secure, more secure, more scalable user-owned internet. And we discovered blockchains as a very elegant solution to some technical challenges we were solving. However, if you are using blockchains, if you are using crypto assets, it comes with the rest of the industry as well. It is not a very mature industry. There are some outright bad actors, and some unsophisticated players in this industry.

We were able to get some of the top VCs and institutional investors in the world. These are investors who might otherwise be hesitant to invest in the cryptoindustry. Our approach was that we just need to do more work and help mature the crypto industry. Blockchains are fundamental to the design of our decentralized network and we’re willing to put up with the baggage that comes along with this industry. It’s also an opportunity to take a leadership position and try to raise the standards for everybody. This happens a lot in our recruiting. For example, there are computer scientists that we’ve been able to hire who wouldn’t normally consider working in this space. We were able to recruit them and tell them how our team is different or how our approach is different, and the SEC qualification and framework also plays a role there. They can look at our SEC circular, and see that our head of finance used to work at BlackRock as their CFO Canada among other responsibilities. That kind of professional standards are currently not in the crypto industry. I think our team is mostly comprised of people who might be hesitant to work in the crypto industry but they feel comfortable enough in our structure and under our way of doing things.

Muneeb Ali, co-founder and chief executive officer of Blockstack Inc., speaks during the Token

Forbes: One of the interesting things that I noted when looking at your white paper and learning about your company before this interview was what I have often heard about blockchain is that it is compared to the Internet and the World Wide Web. I noticed that you’ve made comparisons to when the first personal computer (PC) was created versus the mainframe. In looking at your structure, including Gaia for decentralized cloud computing, what is it you believe your firm can offer in terms of not just fixing the internet but providing this next breakthrough that maybe is more analogous to the PC mainframe than to the worldwide web?

Muneeb Ali: I think it basically boils down to empowering the users. This is what happened when we shifted from mainframes to personal computers. With mainframes, only a very select group of people had access to computing. And it was very expensive. You were dependent on that room-sized computer. And some of the excitement around when Apple was starting, for example, was all about power to the user. You were giving everyone the ability to own a computer and run whatever they wanted to on their device and use it however they want to use it. There are these pendulum swings in the industry. We went through that revolution of power to the people and then back to having these large tech monopolies. Imagine the entire anti-trust work that is going on, the legislation that is being proposed, along with this growing, strange relationship that we have with the large tech companies. We are very dependent on them. Users don’t trust them anymore- they think, I was having a conversation in the privacy of my home and then I start seeing ads about what I was talking about. People are starting to feel that these companies are not their friends and that they are being exploited by them. But they don’t yet have an alternative. If you start viewing Facebook and Google as a mainframe and you want to run away from it, and you want to empower users again, then that is the kind of movement you are starting. It’s all about user owned software. For example, so many people use an iPhone. However, Apple restricts that device and what you can do on it. It’s not like the good old days of running any software on your personal computer that you want. The work that we are doing is enabling the return to users in control vs big companies.

Forbes: How do you see your Stacks token and blockchain having a competitive advantage where it seems that part of the economics of it is to support developers on your ecosystem? Also, I had read recently about how you had achieved one million users, and there were a few questions about were they were new users or how do you verify it? It seems that you are very much working on how to incentivize the developer community to work on Blockstack, and with the transparency that you offer, how do you prove out something that they want to know, such as whether the platform actually had a million users or whatever the question might be?

Muneeb Ali: The high level picture here is that we believe that a Web 3.0 will emerge on top of Bitcoin. Our Stacks blockchain interconnects with Bitcoin in a way. Instead of asking miners to burn electricity, which is done for the Bitcoin blockchain and some other proof-of-work blockchains out there, we build upon the work that the Bitcoin miners have already done. We have this interesting consensus mechanism that has an interplay between Bitcoin and the Stacks cryptocurrency. We basically reuse the power of Bitcoin and have interconnected blockchains that benefit from the security of Bitcoin. At a high level, we believe that eventually everything will be anchored to Bitcoin rather than happening on smaller disconnected networks i.e., smaller blockchains that areseparate from Bitcoin. That is a very different approach. Everyone is trying to build their own small island, whereas we are trying to benefit from the network effects of Bitcoin. Bitcoin remains the most secure blockchain out there. We are adding the missing features that Bitcoin doesn’t have in a way that has synergy with Bitcoin.

In terms of growth, we are mostly focused on developer traction. For our apps, we went from 20 something at the start of last year to more than 350 by the end of the year.

When we did our original fundraising in 2017, at that time we imposed a couple of self-imposed milestones on ourselves, which was our way of showing discipline. The first one was building out the core technology. We wanted to address the issue that some of these projects raise capital but they effectively do nothing afterwards i.e., they never launch. Within a year after the raise, we were going to develop the core network and push it live. We met that goal. And the second milestone was about going out and introducing our technology to a lot of people. Given the privacy nature of the network, you can’t actually track if anyone is using apps or not using apps- that would just go completely against everything that we stand for; we knew that, even back then. So the way a milestone was structured is that we are only looking at registered usernames on the network which is public information that anyone can see. We did business deals with certain parties e.g., to introduce Blockstack to more users, in addition to the 400+ apps on the network. Such partners can also introduce KYC or other requirements on the users at the partner level. Our intention with this was getting our technology in front of a lot of people through different distribution channels and getting the initial traction on the network.

Forbes: I want to shift for a moment because it would be almost negligent about the current atmosphere with the economy impacted by the Coronavirus. I’m curious how has this impacted your company and what are you doing as the CEO under these circumstances to keep your growth going? You have shown support on Twitter that Balaji Srinivasan should have been appointed by Trump two years ago to better handle this crisis, so I am very curious to know what your thoughts are and what your lawyers said to you before you started tweeting out with concerns about how the U.S. has been handling this?

Muneeb Ali: My lawyers get more concerned when I actually comment on the crypto industry and any regulations involving crypto rather than anything else. Usuallyif I am rambling about things that don’t impact our work they are actually happier. In general, I think we knew pretty early to strongly encourage everyone to work from home. Blockstack PBC has roughly forty percent remote team members. There is Blockstack PBC the company and there is the open-sourceproject. The project has a global community and that is all remote. We do town halls, to which 100 to 200 people generally show up, which in a way is the real Blockstack ecosystem. We have open source contributors. We have more than 5,000 people who participated in our cryptocurrency offerings. We now have 300,000+ owners of the Stacks token through the distributions we had. As far as Blockstack PBC the company, we made the call ten days ago to strongly encourage everyone to work from home. Most people took the option. We are trying to be supportive, giving people time- for example to go out, get supplies, and take care of what they need to take care of without worrying about work. We are fortunate that we already raised capital, we did a $23 million raise about six months ago so and continue to execute against our roadmap. Blockstack is a very ambitious project, and we are going after very hard challenges, but short term situations and financial markets don’t really impact us because Blockstack PBC has enough capital in the bank.

Coming back to Balaji, he’s a friend of the project. He’s been involved since 2014 or so, giving advice and trying out different things. He’s amazing. He has a very deep background in genetics and in computer science and cryptocurrency as well. He’s sold both a biotech company and a crypto company, which is a very unique set of expertise. I think in general he started raising the alarm back in January. We were hosting an event with him in Austin around February 12th. Talking to him in person and going through his reasoning for why he thinks this is going to turn out to be so much of a bigger deal was powerful. You look at the data. You look at the probability. If 10,000 get infected, then the probability of 100,000 people getting it is high. You just run the numbers and see that this is an exponential curve and not a linear curve. Most people don’t think in exponential curves. VCs and entrepreneurs are an interesting category in that they think about exponential curves a lot on a day-to-day basis, so when you see an exponentially-growing problem, you start start raising alarms before other people.

We started expanding to Asia last year. Whenever I would go to the airports or facilities in some of the cities in Asia and then land back in JFK, I would just have this feeling that the U.S. is becoming the old world with crumbling infrastructure and that the policies or regulations here might not be the most efficient way of doing things anymore. For the virus, compare people who are landing back in the U.S., even now, who can just walk into the country without going through any testing at all. Even in countries like India, there are pictures of people in biohazard suits outside standing six feet apart from each other getting tested for temperature and what not. It is very surprising to see how here in the U.S. the response is worse than in other countries.

Forbes: Recently Bill Gates stepped down from Microsoft to focus on philanthropy, and obviously in the life cycle of a CEO leading a company, obviously you are way at the beginning of this, and yet you are looking at what the Coronavirus is doing and perhaps how the U.S. is not taking the best measures. If you could either waive a social philanthropy wand, or could be a leader in ideas for what the U.S. should be doing to try to change the tide at this point, what would be your recommendations?

Muneeb Ali: I think there are some people who are in a better position than me right now for actually being able to make a change. Sam Altman, the President of Y Contributor, is one of them. He started a public spreadsheet of different ideas that he is willing to fund. Within hours, people had 70-80 different startup companies ideas. The number might be much higher right now. He basically scoped it out as capital being this pool of money that can go to ambitious entrepreneurs who are trying to solve a timely problem. I think a lot of the Coronavirus responses checks all of the boxes. There are people who are trying to build ventilators or people who are trying to build better ways of checking temperatures. There are all these sensors available. There are actually categories of startups e.g., if you are in 3-D printing, you could potentially work towards this, you could work towards printing certain materials like these devices. If you are in IoT sensing-type devices, you can potentially work towards this as well. If you are in mechanical engineering or robotics, you could potentially do something. I think people are going to come together very quickly. Sometimes, I can be critical of the U.S., but it remains the land of opportunity. I am animmigrant here. I am a U.S. citizen now, but I came here because I saw a lot of opportunity in coming here. I think there are many other people like that. My reason to be here is the Silicon Valley culture and the entrepreneurship culture and how people not only are ambitious and they want to solve these challenges and problems, but they also have access to capital and resources to actually be able to do that. To imagine that we were able to raise $75 million for an ambitious moonshot idea, i.e., that we are going to build a new internet, is a pretty crazy thing, but it can happen here in this country, and I think similar things can happen around our response to the virus as well.

The disappointing thing is mostly on the government side, where they have been slow so far. They probably don’t have the right kind of advisors or policies in place. That’s why a single person like Balaji can make a huge difference. He can effectively come up with a threat framework or a decision framework that highlights the things that are super important to do at this time. And then you execute against it. If the people at the very top are not fully grasping the problem or they don’t have their thinking straight, it just goes downstream from there. I don’t think we are in a situation right now where there is censorship of information. But that is one area where I think a decentralized network like Blockstack could help the community; peole can self-organize in a decentralized way and share information in a completely free way. We would be happy to help with any opportunity like that.

Forbes: It’s definitely amazing the trajectory that your company is on. With your regulatory success, do you anticipate or would you like to see Blockstack move towards an IPO at some point to become a public company?

Muneeb Ali: That is something that has been on the table because our network needs to open up to miners. We have been discussing would miners operate under a full filing like an IPO. We’ve disclosed in our SEC circular that this is a decentralized network and these tokens have utility and get used in smart contracts or for registering digital assets etc. It’s mostly about the level of decentralization i.e., with increased decentralization everyone can feel comfortable, including us and potentially regulators like the SEC that the network can be opened up as a decentralized utility similar to Bitcoin or Ethereum. These are some of the things that we are looking at i.e., increased decentralization frameworks. Especially the launch of our Stacks 2.0 blockchain, gives us an opportunity to make the company less important for the decentralized network and focus more on the broader ecosystem. Also, this is one of the areas where I need to be careful about how much can I talk about it right now. More details will come from our official communication channels.

Forbes: Any last thoughts?

Muneeb Ali: For crypto industry to reach mass adoption, I think regulators would have to clearly define that these crypto assets are within the legal frameworks and people are not doing anything ‘illegal’. Look at Facebook for example- they are having a hard time getting through the regulators. They are working to enable broad ownership of crypto assets like us. Mainstream adoption cannot happen unless we clearly answer all the regulatory questions. That’s why we do so much work with on the regulations front. Thank you.

Forbes: My pleasure- thanks!

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