Welcome to part two of the Surviving Crypto Winter series (part one is here), where I profile companies and projects that have a shot at surviving the winds of crypto winter and thriving when dreams of spring comes again. This time I profile one of the biggest and best companies in the space, Blockstack.
History is a pendulum.
It swings back and forth, from closed to open, complex to simple, centralized to decentralized, and then back again, an endless cycle.
Everything in the world exists in a never-ending state of radical transformation. Whether it’s the relentless quantum fluctuations of particles locked in a dance of infinite probabilities, or the surge of biological systems from single celled amoeba to intelligent life, or the swell of great civilizations as they rise and fall, life is always on the move.
The only constant is change.
If you can see that deeper pattern of coming together and falling apart, then you know where we are and where we are going. If you want to see the future, you only have to look to the past.
Pinpoint where we stand in the cycle and you have a map through the storm of chaos.
You won’t know the exact form the future will take but you’ll know its abstract characteristics.
Some short-sighted folks, like the ever-cranky Dr. Doom, think blockchains, dApp platforms and cryptocurrencies will fail but that’s only because they don’t see the eternal cycle. Those doomsayers will end up as footnotes in history, forgotten even though they shook their fists in furious rage while alive, all of them sound and fury, signifying nothing.
Many of the biggest companies of tomorrow will come from three spaces, artificial intelligence, 3D printing and cryptography driven platforms. Here we’ll focus only on the cryptography-centered future, where decentralized apps have replaced centralized ones and the cloud is pushed out to the fog.
Every industry endures winters, where hopes are dashed and the dreams of spring seem like delusions.
AI went through two winters and it took 50 years for anyone to reap rewards like self-driving cars. The Internet looked like a joke for the first twenty years. 3D printing is still in a winter, after early hopes of a printer in every house failed to materialize without the reason to have one yet.
And of course, the crypto market suffered a spectacular crash in 2018, as the markets lost 80% or more of their value over a long slow slide to despair. The winds of crypto winter are blowing furiously and the storm is taking many victims already.
In this series, I cover who stands the best chance of rising from the freezing cold and thriving when spring comes again.
Blockstack is one of those companies building a decentralized future and they’ve got a leg up on many of the other projects in the space. They’ve got the funding, the smarts, and most importantly working code, something many projects with millions of dollars in the bank still can’t say.
But maybe you’re wondering why anyone needs a decentralized application? Aren’t the centralized ones good enough?
To understand why you only need to look closely at where the Internet once was and where it is today.
The Internet and Back Again
The Internet started as a wild and open wonderland of unlimited possibilities.
Early adherents to the net saw so much potential, from working remotely, to buying everything from books to electronics online, to shared spaces of free communication.
All of that happened and more. From Twitter, to telecommuting, to Amazon, we got what we wanted from the net. It took longer than anyone expected but in only 25 years the Internet became something nobody could live without.
Today, it’s hard to imagine landing in a foreign country and not whipping out Google Maps or TripAdvisor instantly. You need to find your way to food fast. And when you find that perfect place to eat, you’re probably going to call Uber. As long as the local government hasn’t intervened to cripple it and rolled back the clock to the age of bad taxi service, you’ll have a ride experience that’s the same in that strange land as it is in Los Angeles.
But something happened on the way to paradise.
We went from a wildly open, world-spanning network of freedom and possibilities, to an ad-driven cyberpunk wasteland controlled by a few companies.
I used to use a meta-search to pull results from dozens of search engines. Now I just use Google like everyone else because the other engines faded into oblivion.
Google may do search better, which is why they slayed the competition, but now they’re the only game in town. If they get it wrong we don’t really know what’s hidden from us. Google frames our view of the world and what we see and don’t see.
I used to spend hours roving the net looking for odd little sites. Now I spend my time on a dozen or so major sites like everyone else, usually on my closed-source phone, instead of my computer.
Mega-corporations vacuum up our data and build vast, private pools that predict what we want, when we want it, so they can sell us more stuff we don’t need. Our data is the new oil and the new gold.
Four of the top five companies in the world are tech and Internet companies, including Apple at number one and Google at number two. Facebook was laughed at after its stock crashed 50% almost as soon as it IPOed, and now it sits as number seven in the world. 2.27 billion people used the site in 2018, almost a quarter of the population of the entire planet, which stands at 7 billion.
It wasn’t always that way though. I’m old enough to remember the early days of the Internet when dotcoms were plucky little upstarts that most traditional companies thought were a joke, just like many people think cryptocurrencies and decentralized platforms are today.
In 1999, I was working at a dotcom called Uproar, a game company. They grew so fast one year that they went from one floor in the old New York City garment district to five. We couldn’t hire people fast enough or buy enough servers to meet demand.
As the dotcom era boomed, parties got more and more lavish and elaborate. I remember one where a giant ad company rented out a mega-club for a winter wonderland party in New York City and filled it with go-go girls and ice sculpture bars. They had people dressed as Oompa Loompas handing out candy as dry ice machines filled the club with ethereal mist.
And then it was all over.
The dotcom bubble burst and companies couldn’t fire people fast enough.
For months and months at Uproar, me and the rest of the tech support team came into work and did whatever we wanted because all my bosses were gone and there was nobody manning the rudderless ship.
When there was a fire sale for equipment a few months later, after everyone got laid off, the boxes of network cables were stacked to the ceiling.
Out came the naysayers. They’re a part of the eternal cycle too, there at every turn to laugh at the failed experiments and ridicule anyone who dared to dream of change. They laughed at the Internet and dotcoms and buying books online and telecommuting.
Nobody is laughing now.
Those giant tech companies swept aside the old economy and now they control the pipes that all our digital lives flow through.
Google sees roughly 40% of Internet traffic on any given day. They can silence voices or make them stars. They can cut us off and make it as if we never existed.
The Internet was designed as a decentralized, amorphous system, but it’s become something else entirely.
It’s primary protocol, TCP/IP, was created to survive nuclear strikes and disasters. If one big node went down, the traffic could still flow by routing to other nodes.
Today, all our traffic flows through mega-pipes. Two decades after the dot com crash the NSA has black boxes at major American Internet providers to vacuum up data because those big net providers act as centralized choke points that nearly every single bit on the net flows through.
But we didn’t need to governments of the world to turn the Internet into a surveillance state, because the companies we entrusted with our data happily did that for them. Stalin and other old world propaganda masters would be jealous of how easily people have willingly given over their private information to the machine.
There’s a great episode of Person of Interest, where the brilliant computer scientist working for the government was desperate to find a way to get everyone’s data secretly but he couldn’t do it. So he builds a thinly designed stand-in for Facebook and “everyone just gave it to me for free.”
They didn’t need to take our data with guns, we walked right up and handed it over happily.
The Internet today is a honey trap. All the services on it are free but we should have known nothing is free in this world. There is always a price. And the price is a few monster corporations that know everything about us.
Surveillance is the business model of the Internet.
It’s official. The turning is complete. The decentralized web is dead.
The King is Dead, Long Live the King
Decentralized is dead, but long live decentralization.
The move to centralization is complete and now the pendulum will swing back in the other direction. Everywhere the signs are evident of the coming change.
A slew of new startups is rising to re-decentralize the web and take us back to the wild and open early days of the net and its infinite possibilities.
The realization that the web has grown more and more centralized isn’t new, but it’s only in the last few years that we’ve seen a surge of money get behind the concept of re-working the web.
Sir Tim Berners Lee, one of the godfathers of the net, spent the last few years working on a decentralization project at MIT called Solid, and now he has the funding to unleash it on the world. In 2016, he held the first decentralized Internet conference with the goal of “locking in open forever.”
Blockstack is one of those companies looking to re-weave the web, but they were ahead of even the great luminaries like Lee. They launched in 2013, three years before Lee held his Decentralized Web conference. They’re helmed by distributed systems specialist, Doctor Muneeb Ali, who I just interviewed on my podcast. They raised early seed capital after graduating from the Y Combinator program and later from Union Square Ventures, along with investor and Twitter sage Naval Ravikant.
Out of this new crop of contender companies will come the Google of tomorrow.
And that brings us back to why does anyone need a decentralized application?
Why does grandma need a dApp? Aren’t Facebook and Google good enough? Do we really need a decentralized Instagram?
The answer may surprise you.
Centralization is not bad by itself. There’s nothing truly wrong with it. A balanced system has both centralized and decentralized components. A great tree has a powerful trunk and its branches are distributed. Each plays its part in the whole.
But we don’t have a balanced Internet now. What we have is an extremely centralized Internet.
And extreme centralization is bad.
The cycle of history is not here to root out centralization. It’s here to root out extremes.
There’s an old proverb in China:
“Things will develop in the opposite direction when they become extreme.”
Life seeks balance. Centralization and decentralization each have their strengths and weaknesses. And the antidote to one extreme system is a healthy dose of the system’s opposite.
An overly centralized system is a sick system. It’s stagnant. It crushes innovation and creativity. It’s inflexible and it can’t grow or change easily. Worst of all, it allows problems to fester, with no way of solving them.
The easiest way to illustrate why is Equifax.
Equifax is one of three mega-processors of our sensitive personal information. They managed to lose half of the data of the entire United States, leaking our social security numbers, and birthdays, and credit card numbers to hackers all over the world.
But did they suffer for their terrible security? Did they go out of business? Did they get replaced by a better company?
In fact, they probably made money. They own companies that monitor credit data and people everywhere started paying for those services after the leak.
Even worse, they’re still trusted with processing and storing our information.
They’re so rooted in power that we can’t rip them out even when they fail us on an epic scale.
This is centralization to the max. We can see the errors and we can’t do a damn thing about them with the current system.
To fix it, we need to distribute the infrastructure, and the governance, and the very applications themselves so that no corrupted node can live on in the system, even though they’ve failed us all.
But it’s not just Equifax. Everywhere we look we have more and more centralization taking root.
The Rise of the Cloud
When I was a kid, I built my own servers and hosted them in local data centers. IT admins starting up today will never rack and stack a server. They just use the cloud.
But what is the cloud? It’s just someone else’s servers.
And today’s public clouds are the ultimate in centralization.
We have three massive players, Amazon, Google and Microsoft, running billions of server nodes. They are an amazing technological marvel, but they’re also a major problem if you’re building an application, because you’re locked in to one company’s control.
Amazon Web Services is the biggest cloud provider by far. They run an incredible and ever-evolving platform. Tens of thousands of the biggest companies in the world depend on it now to run all the services you know and love, like Netflix.
But what if they went out of business?
Think they’re too big to fail?
What if there was another financial crisis?
In 2007, Bear Stearns had $395 billion assets and they were bankrupt in months. Amazon had $220 billion in assets last year. If they went down, they wouldn’t just bring down the bank accounts of millions of investors, they’d bring down tens of thousands of companies with them, whose IT infrastructures are dependent on Amazon’s very expensive and costly to maintain data centers. Of course, it’s not a perfect apples to apples comparison because Bear Stearns was levered 35 to 1 and Amazon has real and thriving business, but that doesn’t mean there’s no way Amazon could go down in flames.
Nothing is too big to fail. Not Amazon. Not Google. Not anyone.
Those mega-cloud data centers are not something you replicate overnight. If it went down it would be a nightmare that made the financial crisis of 2008 look like child’s play.
And a failure of one of the clouds would have a domino effect, bringing down all those little dependent companies as they scrambled to redeploy somewhere else in record time. Most would fail right along with Amazon.
The answer is to distribute that power across multiple clouds and end points and nodes.
We have to push power back to the edges.
We can surf across the top of existing clouds but we need to treat them like dumb compute layers that we don’t trust and don’t become dependent on. We need a meta-layer on top of the cloud, that stretches across the world so everything keeps running if one cloud falls flat on its face.
A truly decentralized Internet will need to transcend single points of failure. Throwing your eggs in one basket is a terrible idea. Throwing your eggs in one cloud is even worse.
Blockstack’s platform pulls the power out of the cloud and distributes it across tens of thousands of agnostic nodes, replicating their state to each other.
Their whitepaper goes into significant technical detail on how it works, but it’s better understood through some of their short summaries, like this particularly useful discussion covering the differences between Ethereum and Blockstack or this write up below that comes from their Blockstack Core Github, which outlines their node architecture.
“Blockstack Core implements BNS and
Atlas, the storage routing system for Gaia. Blockstack Core nodes form the backbone of the Blockstack network. Each node indexes the Bitcoin blockchain and maintains a full replica of all names, public keys, and storage routing information. This makes the Blockstack network particularly resilient to node failure — -applications only need to talk to a single Blockstack Core node to work, and a new or recovering node can quickly reconstruct all of its missing state from its peers.”
But simply distributing infrastructures across multiple clouds isn’t enough. There’s a lot more needed to make it a reality.
And how do we really build an agnostic layer that floats across the top of the existing Internet and pulls power away from the big centralized entities that control it?
Abstract up the stack.
That’s part of the great movement of history as well. Automation and abstraction lead to new innovations, and it’s on the backs of those innovations that the next generation of the Internet will stand.
Let’s dive in and look at why, by understanding why a hammer and nail beats mud huts.
From Mud Huts to Hammer and Nails
We move back and forth through various cycles but we’re also constantly moving upwards, our society and civilization growing more and more complex with each passing epoch.
And the engine of that progress is automation and abstraction.
The one thing that’s made humans so special is that we can think and reason abstractly. If we’re cut by a sharp stone, we don’t need to see twenty other sharp things to know they’re dangerous. We abstract the understanding of the concept “sharpness” and “pain” and “danger” and apply them to other things in our environment. Now when we see a knife, we know it will cut us too.
We can also abstract to automate solutions to previous problems that no longer need to be solved again.
Take something like mud huts.
For thousands and thousands of years, humans built mud huts to shelter from storms and wild animals. Each mud hut was unique. Each one had to be built by hand. The process took huge amounts of labor and coordination from a tribal team of people. Gather wood and lay it in the proper configuration and stick it all together with mud. Eventually that process was fairly uniform, but it didn’t scale.
Those huts were all limited by their solution. It was impossible to built multistory mud huts or palaces like the Taj Mahal with such primitive tools as sticks and dirt.
The hammer and nail represented a giant leap forward for human beings. The hammer and nail were solutions to the abstract problem of keeping parts of a structure together. Mud was the best previous solution but it only scaled so far. With the invention of hammers and nails we could now build more complex structures. We abstracted and automated part of the old process of building things.
And because of that, we can move “up the stack.”
With uniform boards, hammers and nails, our imagination moved on to more complex problems. Now we could dream of multi-story structures and temples that stretched to the sky to worship the gods.
Notice how when we solve one problem at a lower level, we can now worry about more complex solutions built on the back of the previous solution?
The same movement is happening now with the Internet.
The baseline protocols of the Internet abstracted communication and transfer of information. It doesn’t matter if that communication is text, encrypted text, images, sound, or movies. All of it can flow over TCP/IP.
On the back of that magical protocol, Internet companies built powerful empires.
But there’s a problem.
All the companies using the Internet are wasting time building the exact same types of backend to manage the work of their world facing application. Take a company like Uber. Not only do they need to build a website, they also have to build a mobile application, an identity system, a payment system, a storage system and more.
When Lyft comes along to compete with them, they have to build their own versions of the exact same components. Each company rolls their own identity system or payment infrastructure.
All of this is a waste of resources.
What Blockstack and other decentralized companies are doing is abstracting the types of building blocks that we need to build modern applications. They started with automating DNS with the Blockstack Naming System or BNS. DNS uses centralized companies called registrars that take your money and publish your domain names. When you go to Medium.com, Medium had to register that name with a centralized company.
Blockchains give us the ability to abstract that naming system so that we no longer need companies as intermediaries.
Every application needs an ID system and a way to login. Every app needs storage.
What every company doesn’t need is to roll their own versions of these stacks.
Tomorrow’s companies won’t need to worry about building their own ID system. We’ll have a universal profile or a few of them that we can share. When decentralized Uber takes the world by storm they will just use a universal ID and storage stack. When the Lyft of tomorrow comes along to compete with them, they’ll compete by incentivizing people to send their profile to their ride service as well. In seconds you’ll be using Uber’s rival, without creating a new password and username that you can’t remember.
Of course, centralized companies will benefit from these decentralized platforms as well. They’ll plug in with their classical web servers and utilize the same universal ID stack as everyone else.
Wait, What is Decentralization Again and Why Does It Matter?
If you’re paying close attention, you’ll realize that I didn’t answer the question of why the apps themselves need to be decentralized?
Can’t we just automate these lower level functions but keep it all centralized?
If you’re a true believer in crypto, you might just accept decentralization as a default good but that’s not good enough. We have to know why we need decentralization now more than ever.
In fact, you may start wondering what exactly does decentralization mean in the first place?
It’s a term that’s tossed around a lot and most folks don’t seem to have a good handle on it. For that you want to turn to this brilliant write up by Vitalik Buterin of Ethereum fame, where he breaks it down for everything from political decentralization to fault tolerant systems architecture.
I won’t rehash his arguments here because that’s another article entirely, but it’s worth reviewing every single line of that amazing piece.
At the end, you’ll start to ask yourself hard questions about whether anyone is truly achieving decentralization and if it’s really even possible for every bit of a platform, or if we have to accept some strong compromise?
For instance, if every node in the system is based on the same code and that code has a bug, then all the nodes go down and it’s not really decentralized. If one group makes all the decisions for an ecosystem, that’s not truly decentralized either.
All of the platforms of tomorrow will need to go through a long and painful evolution to federate power across their platforms. Nobody is fully there yet, not Blockstack or Ethereum or anyone else, but they are all working hard towards it.
As these platforms develop, pay close attention. Watch their evolution. Hold them accountable.
Ask them at every step whether they’re living up to the promise of true decentralization and push them to go further if you’re a part of their community of users and developers.
I don’t know what a truly decentralized system will look like when it finally manifest in all its glory but I know the most important reason we need it. For me, the biggest reason we need decentralized apps and data and servers is this:
Centralized platforms can’t keep all our data safe.
We’ve made hackers’ jobs easy for them. We put all the data in one place.
It’s like the old joke, why did the bank robber rob the bank? Because that’s where they keep the money. The hackers know right where to go. That’s why there is not a single giant company or government entity that has not fallen prey to some kind of data breach over the past years.
There’s only two ways to fix the problem. The first is not to keep the data at all. That’s an approach that Everest ID is taking when they work with governments on their decentralized ID. They check the data but they won’t store it for more than 24 hours and their preference is not to store it at all.
The second way is to keep the data but push it out to the edges. Let everyone store their own IDs and keep the data. Then the hackers have to hit each and ever leaf node to steal it.
The Internet was insecure by design.
Tomorrow’s Internet will be secure by default.
The Great Cycle Continues
If you’ve watched technology develop over the last thirty years you’ve seen this evolution over and over.
We move from closed to open and back again. We surge from wildly distributed to totally centralized.
It’s a fractal. It happens at the macro level and the micro level.
We started with big centralized mainframes and then moved out to personal computers. Personal computers were easy to take apart and rebuild. They were open hardware with universal components. All the power lived at the edges, taking it back from the mainframes that lived in giant air conditioned buildings, tended by teams of IT folks.
Lots of small data centers used to fill the far reaches of the planet. Today, a few giant cloud empires rule the world. The great consolidation continues as more and more companies look to ditch their private data centers and move to the cloud.
The old saying in computers was “nobody ever got fired for buying IBM.” Today nobody ever got fired for buying Amazon Web Services.
And that works great. Right up until it doesn’t.
In five years, companies will realize they’ve locked themselves in and they can’t get out. They’re horribly dependent on proprietary infrastructures that they should have paid much closer attention to when they leapt in head first.
The cloud is like the mob, easy to get into, hard to get out.
Today the smartphone dominates the web. We turned away from open architectures to closed architectures as the smart phones moved into everyone’s pockets and purses. Now all the intelligence lives on the servers in the cloud and the apps are just slim interfaces to the mega-power of those central machines.
But the fractal of history and evolution never stops surging forward. There is always further and further to go.
Now the digital world is changing once more.
We’re building a distributed layer that surfs across the centralized cloud that makes it more resilient and gives power back to the people once more.
The pendulum swings back and forth forever and ever.
And the more things change the more they stay the same.
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