The upcoming launch of Stacks 2.0, the major protocol release that will allow blockchain developers and miners to participate in the deployment of an innovative new consensus mechanism, dubbed Proof of Transfer (PoX), is arguably the biggest milestone so far for the New York-based Blockstack.
The company has been working on a decentralized internet implementation for the past seven years, with the original vision seemingly undergoing substantial transformation along the way: today the Blockstack team is fully convinced that the future of Web 3.0 is closely aligned with Bitcoin. Blockstack is also known as the first company in the crypto-space to have conducted a U.S. SEC-qualified token sale under Reg A+ compliance rules, raising hefty $23 mln. This was quite the opposite of what happened to the Telegram Open Network (TON), who lost the legal battle with the Commission over the unregistered sale of securities and now has to repay $1.2 billion to the investors.
In an exclusive interview with ForkLog, Blockstack co-founder and CEO Dr. Muneeb Ali discusses Telegram’s failure and the importance of regulation for the crypto-industry, shares his vision of the future digital society, and shed some light on what the Blockstack decentralized browser is actually about
FL: What’s your take on the recent developments with the SEC effectively killing the Telegram Open Network project after deeming its tokensale an unregistered securities offering? What would be your course of action had the same happened to Blockstack?
Dr. Muneeb Ali: I sympathize with the Telegram team for the hurdles they’ve faced, but they took a completely different path from us and we were never in a position where we believed the SEC would move to take legal action against us. We pursued an SEC-qualified offering from the very beginning and proactively built a relationship with the SEC. We deliberately chose a conservative approach to avoid a similar action possibly being taken against us, and we were successful when the SEC qualified our token offering late last year.
In a broader sense, it has become clear to the crypto-industry that regulations and compliance are important. Just like the industry innovates on the technology side, the challenges around regulations can also be resolved and new paths forged.
It is hard to say if it is a setback for the crypto-space, as many in the space anticipated this type of action. Some newer projects are already learning from earlier projects when structuring their offerings. For example, it’s fairly common now to exclude U.S. persons from token offerings. It is important to continue to work with the SEC on decentralization frameworks and safe harbors that can help move the industry forward.
FL: Where do you stand in your relationship with the SEC at the moment?
Dr. Muneeb Ali: To be clear, Blockstack PBC is not and has never been engaged in any legal battle with the SEC. Quite the opposite, in July 2019, we successfully became the first-ever SEC-qualified token offering in U.S. history which came after months of diligent compliance work and steady communication with the SEC. We continue to prioritize establishing a model for compliance and recently filed our first annual report with the SEC.
The Stacks (STX) token is believed to be the first and only crypto-asset for which regular disclosures are filed with the SEC, reflecting an unparalleled level of transparency in the crypto-industry. As various other projects in our industry do face regulatory battles, we will continue toward our goal of setting a precedent for projects increasing their transparency and working with regulatory bodies.
FL: According to Blockstack’s recent SEC filing, the company has been to a great extent relying on the use of Stacks tokens when paying its employees, contractors, and partners. In light of the ongoing coronavirus crisis, are you still in a comfortable position to continue your activities, and how much recent developments affected your business model?
Dr. Muneeb Ali: We were fortunate to have raised $23 million in funding less than a year ago to continue executing on our roadmap, and while Blockstack is a very ambitious project, short term situations and financial markets are not significantly impacting us or our work at this time.
Paying employees and others in STX is also by design. This creates a shared set of goals and allows everyone to participate in the value created by the network as we work toward our mission of a user-owned internet. Holding STX quite literally makes you an owner in the ecosystem, so we work to get them (compliantly, of course) to as many people that want to join the community and contribute. We hope to do even more of this in the future as the network continues to decentralize and our regulatory standing evolves.
On the community front, we’re also fortunate. We’ve always worked together remotely via Discord, our forum, and through virtual town halls and smaller working group meetings. I’ve been proud of the way our community has risen to the occasion. A few folks have started privacy-first efforts to aid in various aspects of coronavirus response and recovery. I think in times like these when everyone is remote and physically disconnected from one another, it is even more important to maintain a sense of togetherness and we have been able to maintain that in these times.
FL: A while ago you mentioned filing for an IPO as a possible way to issue new tokens for general miners. Do you still consider this route?
Dr. Muneeb Ali: It is one possibility we have considered to open U.S. markets with a legal framework. However, we are currently focused on moving the ecosystem toward decentralization, especially ahead of our Stacks 2.0 launch.
FL: How did the idea behind Blockstack come about?
Dr. Muneeb Ali: My background is in computer science—I did a Ph.D. in distributed systems at Princeton University, and that’s where the Blockstack project started. We ended up taking a unique route where we raised venture capital effectively to do R&D into how to effectively build a better internet. We didn’t start off in the crypto-industry, but we happened to discover blockchain when we were trying to solve infrastructure problems. This was back in 2013.
FL: Blockstack as it is today, what is it about? To be honest, Blockstack Browser sounds somewhat misleading when you find out that a recommended option for most users is not exactly a browser like Google Chrome or Brave, but rather, at least what it looks like at first glance, a directory of various projects.
Dr. Muneeb Ali: It’s fair to think of “Blockstack Browser” as a bit of a misnomer, but it’s much more than a directory of projects. The “browser” is really more of a self-contained and owned identity that allows a person to seamlessly access any app on the Blockstack network with a single username. It offers basic wallet functionality and holds keys for various apps and encrypted storage one may use on the network. In our early days, we found the name “browser” useful for grasping the concept of browsing a “new internet” and interacting with decentralized applications. However, that verbiage has changed as we’ve continued to iterate and learn what UI/UX patterns work best.
In fact, we recently introduced a library for developers called “Blockstack Connect” that makes the login process even smoother and drops the name “browser” entirely. We increasingly want people to understand that you can use Blockstack apps just like traditional web applications, right from the internet browser of your choice such as Chrome, Safari, Internet Explorer, and so forth. Unlike many traditional web applications, these DApps allow users to control their data, store their data, and control which applications and third parties can access their data.
FL: How many of those projects featured on your main page are real working ones? Have they been developed by Blockstack or the third parties?
Dr. Muneeb Ali: As far as ownership, all the apps you see on that page are developed independently. Blockstack PBC doesn’t own or operate any production app in the ecosystem. We maintain a few demo apps for educational and testing purposes, but any Blockstack app you’re likely to see will have been built by one of these independent developers.
Barring any surprises or unexpected downtime, all the apps on our main page are working. Like any ecosystem, apps come and go or projects are abandoned, but we’re excited about projects such as Dmail who just received funding, Mumble and several others add new features just about weekly, and the team and others in the community regularly use Sigle, Runkod, Note Riot, Blocksurvey, and others.
FL: Can we expect a standalone browser, if yes, when?
Dr. Muneeb Ali: We do not have any current plans to create a standalone browser. We will remain focused on building a user-owned internet by moving the Blockstack ecosystem towards complete decentralization and ensuring the core protocols and developer tools are robust. If you’re interested in a browser purpose-built for Blockstack and digital rights, be sure to keep an eye on New Internet Labs, founded by Larry Salibra, a Blockstack alum.
FL: What makes Blockstack valuable so that it actually needs a proprietary token?
Dr. Muneeb Ali: The Stacks tokens play a key role in the Blockstack ecosystem. The tokens are used for registration of internet assets and are consumed as fuel for smart contracts written in Clarity (currently available on the Stacks 2.0 Testnet). The Stacks token will also be a key aspect of the upcoming Stacks 2.0 launch. With the launch of Stacks 2.0, STX miners will be able to forward bitcoin (BTC) to participate in mining. STX holders will be able to earn Bitcoin by participating in consensus. You can learn more about how we believe this mechanism will anchor Web 3.0 to Bitcoin here or dive into the whitepaper here.
FL: Will you shed more light on the STX token listing on Binance? There was plenty of controversy about that with some reports claiming Binance charged Blockstack $250,000 to list Stacks. At the time you insisted it was a “long term payment” rather than a “listing fee.” Do you still stick to that statement? What does a long term payment actually mean in this context?
Dr. Muneeb Ali: It is still correct that the fee was not a listing fee. It was part of a marketing agreement we made with the Binance team. The long-term payment will support marketing campaigns that we plan to launch later on.
FL: Still, why Web 3.0 is so important, and how do you think people could actually get to believe in it, given that most people are reluctant to change habits?
Dr. Muneeb Ali: In human civilization, whenever you have introduced property rights, the living standards for those people and societies have gone up, because, as soon as you introduce property rights, people start to self-organize. Now, the web has property rights. People own their own stuff.
Web 3.0 is imperative in giving back users control over their data and digital property. I believe that Web 3.0 will emerge on top of blockchains. It is apparent how the same underlying technology of cryptocurrencies is the same underlying technology that enables Web 3.0 apps. The concept of private keys in cryptocurrencies that people use to own digital currencies can apply to users owning internet assets.
I believe that the best foundational layer for Web 3.0 will be Bitcoin, the most secure blockchain.
By creating a digital society on a secure blockchain such as Bitcoin, people will be able to trust Web 3.0.
Dr. Muneeb Ali was interviewed by Andrew Asmakov
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