Author
Vincent Chen
Vincent Chen is a student at Stanford University studying Computer Science. He is also a Research Assistant at the Stanford AI Lab.
If you learn primarily by coding up your own projects, here are some ideas to get started:</p>\n<ul>\n<li>Build your own wallet. It can be a be a web, mobile app or desktop app. </li>\n<li>Create your own ERC-20 token and deploy it on the test net. </li>\n<li>Modify crypto kitties (dogs, tanks, zombies…) and deploy it on the test net.</li>\n</ul>\n<h2>Looking Forward</h2>\n<p>In its current state, yes, blockchain development is messy. No, there aren’t clean frameworks and tools analogous to those that exist for modern web development. But why not see the blockchain’s nascent state as an opportunity to impact a paradigm-shifting technology?</p>\n<p>On the blockchain, you don’t need to deploy any centralized servers, which means that there’s no single point of failure. If your whole stack is decentralized, there is no trusted third party involved making it censorship resistant, and your database is publicly verifiable. As the new paradigm offers opportunity to publicly share data, we observe a supreme advantage to decentralizing databases. This is the future we’re building towards on the Blockchain— where information and power are distributed systematically by cutting out the middleman.</p>\n<p><a href=https://www.ycombinator.com/"https://news.ycombinator.com/item?id=16107597\%22>Comment on Hacker News</a>.</p>\n<hr />\n<p><em>Thanks to Ben Yu (Stream) and Brandon Millman (0x) for lending their time to be interviewed, and thanks to Niharika Bedekar, Craig Cannon, Claire Shu for reading drafts of this post.</em></p>\n<!--kg-card-end: html-->","comment_id":"1101697","feature_image":null,"featured":false,"visibility":"public","email_recipient_filter":"none","created_at":"2018-01-09T03:28:17.000-08:00","updated_at":"2022-02-03T16:40:50.000-08:00","published_at":"2018-01-09T03:28:17.000-08:00","custom_excerpt":"If you’re here, we assume that you’re a developer/hacker who’s intrigued by the blockchain. You’re convinced that you understand how it works and now you’re itching to figure out what the blockchain means for you and your developer skill set.","codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a710cf","name":"Vincent Chen","slug":"vincent-chen","profile_image":"/blog/content/images/2022/02/vincent-chen.jpg","cover_image":null,"bio":"Vincent Chen is a student at Stanford University studying Computer Science. He is also a Research Assistant at the Stanford AI Lab.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/vincent-chen/"}],"tags":[{"id":"61fe29efc7139e0001a7118f","name":"Blockchain","slug":"blockchain","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/blockchain/"},{"id":"61fe29efc7139e0001a7118d","name":"Paths","slug":"paths","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/paths/"}],"primary_author":{"id":"61fe29e3c7139e0001a710cf","name":"Vincent Chen","slug":"vincent-chen","profile_image":"https://ghost.prod.ycinside.com/content/images/2022/02/vincent-chen.jpg","cover_image":null,"bio":"Vincent Chen is a student at Stanford University studying Computer Science. He is also a Research Assistant at the Stanford AI Lab.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/vincent-chen/"},"primary_tag":{"id":"61fe29efc7139e0001a7118f","name":"Blockchain","slug":"blockchain","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/blockchain/"},"url":"https://ghost.prod.ycinside.com/building-for-the-blockchain/","excerpt":"If you’re here, we assume that you’re a developer/hacker who’s intrigued by the blockchain. You’re convinced that you understand how it works and now you’re itching to figure out what the blockchain means for you and your developer skill set.","reading_time":8,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":null,"feature_image_caption":null},"mentions":[],"related_posts":[{"id":"61fe29f1c7139e0001a71905","uuid":"15bceaf8-f687-4d2a-b46e-cce465a2103f","title":"Employee #1: Coinbase","slug":"employee-1-coinbase","html":"<!--kg-card-begin: html--><p><strong>A conversation with Olaf Carlson-Wee, Coinbase’s first employee.</strong></p>\n<p>Employee #1 is a series of interviews focused on sharing the often untold stories of early employees at tech companies.</p>\n<p>Olaf Carlson-Wee was the first employee at Coinbase. He currently runs Polychain Capital, a hedge fund which invests in a portfolio of blockchain-based assets. He is also an angel investor and filmmaker, based in San Francisco.</p>\n<p><strong>Discussed:</strong> The Early Days of Bitcoin, Interviewing at Coinbase, Finding Employees on R/Bitcoin, Scaling Support at Coinbase, Spotting Fraud, Vetting Founders in a New Field, Launching Polychain Capital.</p>\n<p>You can <a href=https://www.ycombinator.com/"http://eepurl.com/cbJZnj/">subscribe to The Macro newsletter</a> to receive future conversations.</p>\n<hr />\n<p><span class='t-orange'>Craig :</span> What are you currently working on?</p>\n<p><span class='t-orange'>Olaf :</span> I actually launched a company yesterday.</p>\n<p><span class='t-orange'>Craig :</span> [Laughter] Whoa, congrats.</p>\n<p><span class='t-orange'>Olaf :</span> Yeah, thank you. I don’t feel like celebrating quite yet because it’s just the beginning but it’s called Polychain Capital, “chain” here referring to the blockchain. It’s a hedge fund that invests in a diversified portfolio of cryptocurrencies.</p>\n<p><span class='t-orange'>Craig :</span> Man, that’s wild. Is it a big team at this point? Is it just you?</p>\n<p><span class='t-orange'>Olaf :</span> Just me.</p>\n<p><span class='t-orange'>Craig :</span> And how are you picking the currencies?</p>\n<p><span class='t-orange'>Olaf :</span> So I’m looking at things like novel uses of cryptography in the protocol. Or is the protocol attempting something that a blockchain has never done before. I’m also looking at core developer team quality, the developer ecosystem, and asking questions like are there a lot of apps being built on this, with GitHub forks, GitHub stars, and then looking at the community ecosystem. What’s the size of the forum? How often do people post relative to other forums? Is it an active community? Stuff like that. So part is core analysis of protocol, and part is quantitative metrics surrounding the use of the protocol.</p>\n<p>I’ve launched with five million under management so mostly right now I’m focused on operationally executing the portfolio perfectly. And then making sure that I’m tracking the space and developments at the protocol level. Keep in mind, my last day at Coinbase was eight weeks ago.</p>\n<p><span class='t-orange'>Craig :</span> Wow. Did you raise the five in that eight weeks?</p>\n<p><span class='t-orange'>Olaf :</span> Yeah, I’ve been on the phone a lot. I have this stupid headset that I wear all the time. [Laughter]</p>\n<p><span class='t-orange'>Craig :</span> [Laughter] You’re one of those guys?</p>\n<p><span class='t-orange'>Olaf :</span> Yeah. It’s really embarrassing.</p>\n<p><span class='t-orange'>Craig :</span> We’ll let it slide. Ok, so let’s talk about Coinbase. How did you find out about them?</p>\n<p><span class='t-orange'>Olaf :</span> So I wrote my undergraduate thesis about Bitcoin and the larger implications of open source finance in 2011. I was Coinbase’s 30th user and now we have four million. I literally cold emailed jobs@coinbase and said, “I love bitcoin. Here’s my thesis. I’ll do any job.”</p>\n<p><span class='t-orange'>Craig :</span> So you cold emailed these guys a document that was like 60 pages long?</p>\n<p><span class='t-orange'>Olaf :</span> Yeah, like 90 pages long. [Laughter] But, to be fair, I clipped the 30 page chapter that was specifically on Bitcoin and cryptocurrency. But yeah, I did. I emailed an annoyingly long and annoyingly academic document.</p>\n<p><span class='t-orange'>Craig :</span> And they responded?</p>\n<p><span class='t-orange'>Olaf :</span> Fred [Ehrsam] replied in five minutes and said, “Hey, can you hop on Skype?” That’s when I started learning how things work in Silicon Valley. The pace of things.</p>\n<p>We got on Skype and talked for 20 minutes. Then I got an email from him that said, “Okay, we wanna do an in-person interview. You’re going to come to the office tomorrow. I want you to have two finished presentations, 15 minutes each. The first should explain something complicated you know very well. The second should outline your vision for Coinbase.”</p>\n<p>So I got to work. At the time I was on a road trip and actually was crashing on a friend’s couch in Oakland so the scheduling worked out well.</p>\n<p><span class='t-orange'>Craig :</span> Did you study CS in school?</p>\n<p><span class='t-orange'>Olaf :</span> I majored in sociology so I’m self-taught on computer science. Though I’m not a great coder. If I’m a building a website, I’m not very good at that. But I do know cryptography pretty well and, in particular, I know game theory well, which is really important in cryptocurrency.</p>\n<p><span class='t-orange'>Craig :</span> Gotcha. So what were your presentations?</p>\n<p><span class='t-orange'>Olaf :</span> Okay. So the first one was on the pharmacological induction of lucid dreams. It is complicated, but it’s a mechanism to induce lucidity in your dreams. You can control your dream by waking up in the middle of the night and taking an over-the-counter supplement called galantamine, which increases levels of the neurotransmitter acetylcholine in the synapse. Fun fact is that I’ve been writing down my dreams for 11 years.</p>\n<p>The second presentation was on Coinbase and my high level strategy for the company. Coinbase had a lot of problems at that time. When I was applying, there were really bad bugs. Actually, on the first day of my work trial, there was <a href=https://www.ycombinator.com/"https://news.ycombinator.com/item?id=5427985\%22>a top Hacker News post</a> that said, “My balance is wrong. I lost all this money.” <a href=https://www.ycombinator.com/"https://news.ycombinator.com/item?id=5245847\%22>Everything was broken</a>.</p>\n<p>My strategy was to clean up PR problems but focus 100% on security. Bad customer experiences will eventually be forgotten but a security incident will not be forgotten. I basically was saying, “Listen, people want us to move faster than we can.” I mean, Brian [Armstrong] was literally building everything. I was saying to Brian, “We cannot hack something together that ends up leading to a security incident. Even though everything is on fire, let’s do this very carefully.” And I think that resonated with them.</p>\n<p>But Coinbase, especially in its early days, had a lot of hard tradeoffs between moving really quickly like a traditional startup and operating as a financial institution. Even then we were storing tens of millions of dollars of people’s money. And of course there were security incidents. Fraud was a big problem. People trying to buy bitcoin with stolen identities. We wanted to give good customers high limits and we we wanted to give scammers low or no limits. There are a lot of hard tradeoffs. I basically took the perspective that we need to be a security juggernaut and any bad customer experiences will long-term be forgotten.</p>\n<p>On the other hand, if you get hacked or you have a massive fraud incident and lose all your money, it’s catastrophic. The main thing is avoid the catastrophic events. And what’s funny is looking back, that’s really what Coinbase has done. A big way that Coinbase is the leader in the space is just that we didn’t get hacked, honestly. We did many things right. But that is honestly the number one thing.</p>\n<p><span class='t-orange'>Craig :</span> Ok, so you do the presentations. Is this to both of them?</p>\n<p><span class='t-orange'>Olaf :</span> This is just to Fred. Fred and I probably talked for 45 minutes–a long time. Then Fred gave me a really brutal mathematics problem and said, “Okay, why don’t you figure that out while I go talk to Brian?”</p>\n<p>So I knew I had at least on some level passed the first part. I knew he’d walk me out without meeting Brian if it definitely wasn’t working out.</p>\n<p>Do you want to know the problem?</p>\n<p><span class='t-orange'>Craig :</span> Yeah, absolutely.</p>\n<p><span class='t-orange'>Olaf :</span> Okay. So there are 100 lockers in a row. They’re all closed, okay? A kid goes by. He opens every single locker. A second kid goes by. Now he closes every other locker, every second locker. Third kid comes by, every third locker. If it’s open, he closes it. If it closed, he opens it. Then the fourth kid goes by. Every fourth locker, he changes the state. And now 100 kids go by. What is the state of the lockers after 100 kids go by?</p>\n<p><span class='t-orange'>Craig :</span> Oh man, I’d definitely need some time for that.</p>\n<p><span class='t-orange'>Olaf :</span> Yeah, so don’t try to figure it out because it may take a while. So I’m sitting there and thinking like, “Okay, focus Olaf. If Brian comes down and the first thing you have is the answer to this problem, this is gonna seal the deal.” At least in my head I thought that. In retrospect, that was getting ahead of things a bit much.</p>\n<p>To be honest, I don’t know what happened but I had this crazy flash of insight and had the answer. And when Brian came back, we started talking through it and I just figured it out way faster than I reasonably should have.</p>\n<p><span class='t-orange'>Craig :</span> Whoa. So what’s the answer?</p>\n<p><span class='t-orange'>Olaf :</span> The answer is perfect squares are open. The reason being, they’re the only numbers that have an odd number of factors. So the number of factors determines whether a locker is open or closed because that’s the number of kids that interacted with it. And so the odd number of factors means it’s open and even number of factors means it’s closed. And the only numbers that have an odd number of factors are perfect squares like 16, 25, 36.</p>\n<p><span class='t-orange'>Craig :</span> How long were you given to solve that?</p>\n<p><span class='t-orange'>Olaf :</span> Oh, probably like three minutes.</p>\n<p><span class='t-orange'>Craig :</span> Holy shit, okay.</p>\n<p><span class='t-orange'>Olaf :</span> Yeah. It was probably three minutes. I don’t believe in divine intervention or anything. But that was a time in my life when I had an uncanny flash of insight that I would never pretend I could recreate. But anyway, then Brian grilled me for another hour.</p>\n<p><span class='t-orange'>Craig :</span> [Laughter]</p>\n<p><span class='t-orange'>Olaf :</span> Brian’s questions were really intense. “What do you wanna do with your life?” “What drives you as a person?” “What’s a belief you have that is extremely unpopular?” He wanted to really know me.</p>\n<p>I think Fred had gone up to Brian and said, “Listen, Olaf’s at least sort of qualified for this. I talked to him. I think he could do the job. Now we need to figure out do we want to actually work with him.” And Brian went super deep on a lot of really intense questions about my life, what drove me, what mattered to me, why I wanted to do this, all that stuff. And we had a very intense conversation about what it meant to want to do things, what it meant to be a human trying to go about the world.</p>\n<p><span class='t-orange'>Craig :</span> Did you feel prepared to answer those questions?</p>\n<p><span class='t-orange'>Olaf :</span> I definitely had to think about each question but I tend to have a pretty crystallized ideology about the way I think about the world. It changes, but at any given moment, I know what it is. So yeah, I think it was pretty reasonable for me to say, “Here’s why I wanna do this.”</p>\n<p><span class='t-orange'>Craig :</span> Okay, and then how does it wrap up?</p>\n<p><span class='t-orange'>Olaf :</span> They say, “Okay, great. We’ll let you know.” And then they walk me out. I heard back, I wanna say, four days later. They said, “You should come in for work trial.” And that was a two week paid trial. I worked really hard because I knew this was the final test. At the end of those two weeks they said, “Okay. You have a formal job offer.”</p>\n<p><span class='t-orange'>Craig :</span> What was the actual job?</p>\n<p><span class='t-orange'>Olaf :</span> Customer support. Like I said, I came in and was willing to do anything. I did customer support by myself until we had 250,000 users.</p>\n<p>It was a marathon. It was like 12-hour days of fast replying. And, to be clear, we did not have good support during that time. I’ll say that as the person who was doing it. You would get an email. It wouldn’t necessarily come right away. It wouldn’t necessarily perfectly answer your question. But we were replying. [Laughter]</p>\n<p><span class='t-orange'>Craig :</span> [Laughter] Okay. So then did you become involved in hiring future people?</p>\n<p><span class='t-orange'>Olaf :</span> Yes. So basically what happened was we were trying to hire more customer support people, because it was not scaling with just me. We did four work trials for our customer support people to join me in San Francisco. We rejected all of them. Meanwhile the problem is getting worse and worse and worse, right?</p>\n<p>The delay in replies and the quality of replies is just going down in a bad way. I think at the peak, the average time to reply was five days. And this is a financial institution. It’s really inappropriate.</p>\n<p>So I got really desperate and I posted a Bitcoin SAT on Reddit. What this was was a test, a Bitcoin aptitude test so to speak. And it had questions like, “What is the hash of the genesis block?” That was the first question. And the idea there was if you’re asking yourself, “What does that mean?” this isn’t the job for you. If you have no idea what that is then get out of here.</p>\n<p>It was a bunch of Bitcoin-style brainteaser-y questions and <a href=https://www.ycombinator.com/"https://www.reddit.com/r/Bitcoin/comments/1oj0l2/olaf_from_coinbase_here_were_building_a_remote//">I just posted it</a> on Reddit’s <a href=https://www.ycombinator.com/"https://www.reddit.com/r/Bitcoin//">/r/bitcoin and <a href=https://www.ycombinator.com/"https://bitcointalk.org//">Bitcoin Talk</a> and I said, “If you get a perfect score, you get an interview for remote customer support.”</p>\n<p>And we got like 250 people to take this test. Skip ahead maybe four months. I have 43 people reporting to me in a distributed team.</p>\n<p><span class='t-orange'>Craig :</span> Whoa.</p>\n<p><span class='t-orange'>Olaf :</span> This team covers merchant integrations, API support, anti-fraud investigations, compliance investigations, and did customer support. We now have all of these teams at Coinbase. They mostly came from this one Bitcoin SAT. It was so successful that I posted it a second time at some point and got a new round of candidates.</p>\n<p>It was a globally distributed team. The first person I hired was in New Caledonia. It’s weird how these things work. Skip ahead two years, he works at Coinbase in San Francisco and is the director of customer support. He’s an amazing guy. He started remote and I remember thinking when we had our first talk – he had a master’s in computer science from George Washington University – and I was like, “Why do you wanna do customer support?”</p>\n<p>And he said, “I’m in New Caledonia. This is the best job I could hope for and I love Bitcoin.” And I was like, “Well, you’re hired.”</p>\n<p>And that was when I realized that the remote structure was actually going to work really well. There were hard things about it, but I now feel very confident running remote teams. This was when we were using HipChat–before Slack. Then Slack came out and that helped a lot. And then we had Google Hangouts. Basically the tooling was good enough. Like Google Docs where we can all edit something. The tooling really was good enough, just at that moment. I think if were to try to do this distributed team two or three years before, it would’ve fallen on its face.</p>\n<p><span class='t-orange'>Craig :</span> So you were managing support but then you eventually ran risk, right? How does that happen?</p>\n<p><span class='t-orange'>Olaf :</span> Yup. So I was kind of managing what was really like the whole operational part of the company and it was really burning me out. This was a year and half of 12-hour days without any vacations. I took Sundays off. We scaled to probably 30 or 40 people in San Francisco before I hired a Director of Support and became the Head of Risk.</p>\n<p>So as Head of Risk the main things I focused on were account security and fraud prevention. It wasn’t like infrastructure security around preventing hackers. It’s user-facing, like they enter their password on a phishing site.</p>\n<p>Basically with security there are two angles: We can get your coins stolen or you can get your coins stolen.</p>\n<p><span class='t-orange'>Craig :</span> [Laughter] Right.</p>\n<p><span class='t-orange'>Olaf :</span> [Laughter] So yeah, I was responsible for the latter and anti-fraud, i.e. people buying bitcoin with stolen identities. While I was running support I had a huge part in handling all that stuff. And when fraud had gotten bad in early 2013, I designed the Risk Queue that would review people that we thought were stolen identities. At one point I would review every single buy on the website–one by one.</p>\n<p><span class='t-orange'>Craig :</span> Whoa.</p>\n<p><span class='t-orange'>Olaf :</span> These are things that absolutely don’t scale, but you can build it in one day and start working on it that day. So Brian built it and I would review every single buy. As a result I started to get an incredible eye for stolen identities. Like I had a sixth sense for whether an account was a stolen identity or not.</p>\n<p><span class='t-orange'>Craig :</span> Can you explain that a little bit? What are you looking for?</p>\n<p><span class='t-orange'>Olaf :</span> Ok, so there are a couple tiers of scammer. Let’s pretend you’re a unsophisticated scammer. You sign up. The email you use is Edward.Fitzgerald@whatever.com and the name you use is Laura Johnson. Then the bank account you use is Alexander Smith. Obviously something’s going on there. So big name mismatches are the easiest to spot.</p>\n<p>Then there are patterns. So, for example, scammers would buy dumps–some guy will a hack a site, he’ll get a bunch of bank account numbers and then he’ll use them all. And those dumps will often share certain traits. For example, I’d suddenly see like 20 SunTrust bank accounts get added in 20 minutes and they all share certain formatting rules or the email domain is the same, or something like that. So again, it’s basically pattern recognition.</p>\n<p>But then it gets way more complicated because for sophisticated scammers, their entire job hinges on me looking at something and saying, “that’s legit.”</p>\n<p>And it can mean massive payouts for them. Our limits at that time were 50 bitcoin a day. So, if you could sneak past me, you could buy 50 bitcoin every day until the real account holder called their bank and said, “I’m seeing all these crazy charges.”</p>\n<p>But yeah, I learned a lot very quickly. I learned a lot about traditional payment mechanisms. Before I knew a lot about bitcoin. Now I know a lot about credit cards. And ACH. And bank wires. And all that stuff.</p>\n<p><span class='t-orange'>Craig :</span> Yeah, it sounds like you’ve dug in. I assume not everyone who works at Coinbase now has the same degree of knowledge. How do you scale understanding at a company that is based around something inherently technical?</p>\n<p><span class='t-orange'>Olaf :</span> In the early days, everyone was a cryptocurrency fanatic. The first two engineering hires were these absolutely brilliant people who basically came to Coinbase because they wanted to work on cryptocurrency. And what’s interesting is a lot of our anti-fraud people are also super into Bitcoin. They’re not people who worked anti-fraud at Stripe. They’re Bitcoin people first.</p>\n<p>So yeah, we’d sort of filter for smart people that were passionate about Bitcoin. It’s my opinion that if you’re smart you can learn a new skill and all the details. But passion and innate interest cannot really be learned. We tended to hire people who said, “I love this company. I don’t quite have the experience.” Versus people that said, “I have the experience, but I’m looking at four other places and maybe I’ll pick Coinbase.”</p>\n<p>My belief is that the inexperienced, interested person will outperform the experienced, uninterested person over time.</p>\n<p>That said, when we started scaling we did have to start trading between interest in Bitcoin and domain experience. The person who runs Compliance, for example, can’t just be winging it.</p>\n<p><span class='t-orange'>Craig :</span> What was it that made you want to join Coinbase?</p>\n<p><span class='t-orange'>Olaf :</span> Before I was gonna apply, I read all about the founders. There were a bunch of competitors at the time. The massive market share was MtGox, <a href=https://www.ycombinator.com/"https://en.wikipedia.org/wiki/Mt._Gox/">which ended in tragedy</a>, as you may know. And then like there were bunch of other companies that were bigger. BitInstant, Tradehill, these are all defunct. Every single one of them is dead now. But at the time, Coinbase was like the new little company.</p>\n<p><span class='t-orange'>Craig :</span> Okay, so the underlying question is how do you vet founders in a new field?</p>\n<p><span class='t-orange'>Olaf :</span> Yeah. I have pretty strong feelings on that. I’d say meet them and make sure 100% that you like them, that you could work for them, and that you will run the whole marathon with them. Running a company and scaling a startup is so much stress, so much work. And they’re gonna be sitting next to you the whole time</p>\n<p>If you don’t feel like they’re in it 110% and that you can work with them and be friends with them, it’s not gonna work. Especially in a very micro team. I mean, once a company is 40 people, that’s still like a startup but the founder matters for you personally a little less. It does for the company’s success but not for you personally. But if you’re joining like a sub-10-person startup you really need to make sure that the founder is gonna drive this all the way. This needs be a grand slam.</p>\n<p>So much of it is about personality and drive. Even if you’re technically brilliant, there are these dark times. And dark like bad things are happening. There’s always gonna be bad events.</p>\n<p>You have to ask, are they gonna focus in and just move forward, or are they gonna give up? And it doesn’t matter if they’re technically competent if they’re in the latter category. They could be the best person in the world at this but if at the end of the day they don’t have the drive and spirit to make this happen, it doesn’t matter. So to me the technical competency of course is vital. But if you met someone and said, “Wow, that guy is the number one expert in the world at this,” but you felt like he’s kind of flakey. Pass. Always pass.</p>\n<p>With Brian and Fred, they’re two of the smartest, most focused and driven people I have ever met. And I knew that after the interview. I was like, “These guys are really not fucking around.” Seriously, it really made me wanna work there.</p>\n<p><span class='t-orange'>Craig :</span> So to your point of the bad things always happening, what were the bad things that happened?</p>\n<p><span class='t-orange'>Olaf :</span> Oh, man. I think in 2013 our user base increased 100x. And the price of bitcoin went up 100x. Our volumes went up I think even more than 100x. You know when people talk about like rapid aggressive scaling? That’s exactly what it was and a tiny number of us were scaling all of it. At the beginning of that year it was two people. At the end of that year, just eight.</p>\n<p><span class='t-orange'>Craig :</span> Wow.</p>\n<p><span class='t-orange'>Olaf :</span> Brian and Fred are very careful about hiring. They only hire people that they truly think are superstars. At Coinbase one thing that gets said a lot is, “On a candidate if you’re not a ‘hell yes’, you’re a ‘no’.” If you’re like, “I like them. I think they’re smart. I think they’re great.” That’s a “no.”</p>\n<p>You really have to fight to keep that up. You have to feel like if this person does not get hired, we’re crazy. That’s how you have to feel for someone to get hired at Coinbase.</p>\n<p>And that early team was really unique individuals. Like, it was the perfect puzzle pieces. But anyway, the scaling during that time was brutal. It was absolutely brutal. And we had bugs that were really bad.</p>\n<p>Here’s the thing, it’s not like having bugs on Twitter where maybe something gets retweeted wrong. When you have a bug on Coinbase, balances are incorrect in what are essentially bank accounts. And transactions that are time sensitive aren’t getting sent out. The stakes are way higher yet you’re still just five people in a room making the whole thing.</p>\n<p>One time the ACH file we use with banks got duplicated. That’s means that if you bought $100 of Bitcoin we duplicated the transaction so you’re buying $200 of Bitcoin. When something like that happened I would get a thousand emails in 20 minutes because these are bank accounts and people definitely notice that stuff.</p>\n<p>The one thing that’s so lucky is we never had an incident where someone gained access to our infrastructure and pulled out Bitcoin from the hot wallet. That was just the blessing. I think even Brian would probably tell you that there were times in Coinbase’s history that were sort of coin flips. But we survived them. Other companies had incidents like that and had to shut down. We caught things fast enough.</p>\n<p><span class='t-orange'>Craig :</span> That’s funny. It’s exactly the same thing <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/09/employee-1-dropbox//">Aston said about Dropbox</a>. Basically, “Shit went wrong all the time but the one thing we never did was lose a ton of files.”</p>\n<p><span class='t-orange'>Olaf :</span> Exactly. This is exactly Coinbase’s story. In those early days everything went wrong except the one thing that couldn’t go wrong.</p>\n<p><span class='t-orange'>Craig :</span> [Laughter] Exactly. So at what point were you like, “Okay. I’m ready to do something else?”</p>\n<p><span class='t-orange'>Olaf :</span> Yeah. So I basically saw what, for me, has been the biggest trend in the space I’ve ever seen, and I’ve been in this heads down for five years. People are doing this new behavior where they’re actually raising capital and issuing what is essentially network ownership of their network on the blockchain. So these are like bits of equity in peer-to-peer networks that are built on the blockchain.</p>\n<p>A crude example here is imagine if an early user of Facebook gets a thousand shares of Facebook. Now, instead of just normal network effects, there’s also monetary incentive network effects built into this protocol. And these new types of protocols are built on new blockchains or as subtokens of existing blockchains. The opportunity for me was too big to pass up. The trend was too strong. Plus I needed a new adventure. So I left to start Polychain.</p>\n<p>And it’s only been eight weeks but Polychain has seen a lot of interest because this trend is really strong. I think that over the next year, there’s gonna be amazing opportunities here. The alternative thing that I could’ve started is a venture fund that invests in companies built on the protocols.</p>\n<p>But in this new model, there’s really no place for traditional VCs because the protocol tokens themselves are the issuance of ownership. Not shares on a piece of paper. And as the company wants to raise their Series A, their Series B, their Series C, all that is them holding say 5%, 10% of the protocol tokens and those going up in value as their network becomes more valuable. And then they can sell tokens and become diluted to get liquid cash. It works very well. It’s a lot of similar mechanics to venture capital fundraising, but they can do it all with this native protocol units and crowdfunding, and there’s just no place for paper shares or VCs.</p>\n<p>So, instead of betting in companies built on protocol, I’m actually buying units of the protocol. I’m buying scarce blockchain tokens and creating a portfolio of those tokens. I’m basically buying ownership in all of these new 2.0 peer-to-peer protocols.</p>\n<p><span class='t-orange'>Craig :</span> That’s wild.</p>\n<p><span class='t-orange'>Olaf :</span> Yeah, that’s why Polychain is a hedge fund instead of a venture fund. Because I’m holding solely protocol tokens. To a normal person what I’m doing is extremely esoteric.</p>\n<p><span class='t-orange'>Craig :</span> [Laughter] Uh, yes.</p>\n<p><span class='t-orange'>Olaf :</span> It absolutely is. That said a lot of smart people in Silicon Valley think it’s on that edge where this is going to grow substantially over the next five years.</p>\n<p><span class='t-orange'>Craig :</span> You’re definitely in the right place. Ok, random question. Aside from the Bitcoin readings you recommended, what books do you recommend?</p>\n<p><span class='t-orange'>Olaf :</span> I have a couple that come to mind. So I love David Foster Wallace and <a href=https://www.ycombinator.com/"https://www.amazon.com/Infinite-Jest-David-Foster-Wallace/dp/0316066524/">Infinite Jest</a> is probably my favorite book. His short stories are also amazing.</p>\n<p>Another book that comes to mind is <a href=https://www.ycombinator.com/"https://www.amazon.com/House-Leaves-Mark-Z-Danielewski/dp/0375703764/">House of Leaves</a>. The premise is crazy. So the actual book is a manuscript written by an old man. With annotations by a narrator who has found and reconstructed this book. With annotations by an omnipotent editor. Who is finding the annotations of the person who reconstructed this old man’s book.</p>\n<p><span class='t-orange'>Craig :</span> Oh my god.</p>\n<p><span class='t-orange'>Olaf :</span> And now this is where it gets even crazier. The old man’s book is a analysis of a movie that doesn’t exist.</p>\n<p><span class='t-orange'>Craig :</span> [Laughter]</p>\n<p><span class='t-orange'>Olaf :</span> And the narrator who’s annotating and reconstructing this old man’s book is being driven crazy because there’s so much detail and he can’t find this movie. And it like actually doesn’t appear to exist. And the old man, all his sources are fake articles and things. It gets really weird but it’s much more of a page turner than David Foster Wallace.</p>\n<p>Anyway, I’d recommend both because they’re super long and once you get into them, they completely consume your brain. They’re my favorite kind of books.</p>\n<p><span class='t-orange'>Craig :</span> Right on. Ok, let’s end there. Thanks for your time.</p>\n<p><span class='t-orange'>Olaf :</span> Sure thing.</p>\n<hr />\n<p><strong>Olaf’s Suggested Reading</strong><br />\n<a href=https://www.ycombinator.com/"https://www.amazon.com/Blood-Meridian-Evening-Redness-West/dp/0679728759/">Blood Meridian</a> by Cormac McCarthy – Probably my other favorite book along with Infinite Jest.<br />\n<a href=https://www.ycombinator.com/"https://www.amazon.com/Programming-Metaprogramming-Human-Biocomputer-Experiments/dp/0692217894/">Programming and Metaprogramming in the Human Biocomputer</a> by Dr. John Lilly<br />\n<a href=https://www.ycombinator.com/"https://www.amazon.com/Journey-Ixtlan-Lessons-Don-Juan/dp/0671732463/">Journey to Ixtlan</a> by Carlos Castaneda<br />\n<a href=https://www.ycombinator.com/"https://www.amazon.com/Steppenwolf-Novel-Hermann-Hesse/dp/0312278675/">Steppenwolf by Herman Hesse</p>\n<p><strong>Here are three posts that explain the Polychain thesis well:</strong><br />\n• <a href=https://www.ycombinator.com/"https://medium.com/the-coinbase-blog/app-coins-and-the-dawn-of-the-decentralized-business-model-8b8c951e734f#.d9kebtd31\">App Coins and the dawn of the Decentralized Business Model</a><br />\n• <a href=https://www.ycombinator.com/"http://avc.com/2016/07/the-golden-age-of-open-protocols//">The Golden Age Of Open Protocols</a><br />\n• <a href=https://www.ycombinator.com/"http://continuations.com/post/148098927445/crypto-tokens-and-the-coming-age-of-protocol/">Crypto Tokens and the Coming Age of Protocol Innovation</a></p>\n<!--kg-card-end: html-->","comment_id":"1096678","feature_image":null,"featured":false,"visibility":"public","email_recipient_filter":"none","created_at":"2016-09-28T03:32:34.000-07:00","updated_at":"2022-02-03T16:45:08.000-08:00","published_at":"2016-09-28T03:32:34.000-07:00","custom_excerpt":"A conversation with Olaf Carlson-Wee, Coinbase's first employee.","codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a71084","name":"Craig Cannon","slug":"craig-cannon","profile_image":"/blog/content/images/2022/02/Craig-1.jpg","cover_image":null,"bio":"Craig is the Director of Content at YC. ","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/craig-cannon/"}],"tags":[{"id":"61fe29efc7139e0001a7118f","name":"Blockchain","slug":"blockchain","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/blockchain/"},{"id":"61fe29efc7139e0001a71184","name":"Employee #1","slug":"employee-1","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/employee-1/"},{"id":"61fe29efc7139e0001a71175","name":"Interview","slug":"interview","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/interview/"}],"primary_author":{"id":"61fe29e3c7139e0001a71084","name":"Craig Cannon","slug":"craig-cannon","profile_image":"https://ghost.prod.ycinside.com/content/images/2022/02/Craig-1.jpg","cover_image":null,"bio":"Craig is the Director of Content at YC. ","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/craig-cannon/"},"primary_tag":{"id":"61fe29efc7139e0001a7118f","name":"Blockchain","slug":"blockchain","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/blockchain/"},"url":"https://ghost.prod.ycinside.com/employee-1-coinbase/","excerpt":"A conversation with Olaf Carlson-Wee, Coinbase's first employee.","reading_time":19,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":null,"feature_image_caption":null},{"id":"61fe29f1c7139e0001a71a2b","uuid":"7744d3b2-2c16-453b-a00c-45465ad60d68","title":"The Decentralized Future Series","slug":"the-decentralized-future-series","html":"<!--kg-card-begin: html--><h2>Premises, Promises, and Reality</h2>\n<p>There is a massive divide between the promises of cryptocurrency and the use cases they currently support. Most skeptics point out reasonably that there’s little to show regarding real adoption. At the same time, people in the industry argue that they need time to finish the infrastructure before they can deliver game changing apps. And the tribalism clouding the topic doesn’t help. There is room for dialogue that would benefit both sides.</p>\n<p>A good method for discovering startup ideas is to look into technological breakthroughs and think about what they unlock that wasn’t possible before. In this introductory post, we are going to use this framework. We’ll look at Bitcoin and consider potential use cases that we can directly deduce from its properties. We’ll discuss the common counter-arguments and what needs to happen for each use case to become widely adopted. Finally, we’ll outline the posts coming up in this series–each will dive deeper into specific use cases.</p>\n<h2>Why</h2>\n<p>When Satoshi Nakamoto released the <a href=https://www.ycombinator.com/"https://bitcoin.org/bitcoin.pdf/">Bitcoin Whitepaper</a> he defined it as a peer to peer electronic cash system. Its main achievement was solving the <a href=https://www.ycombinator.com/"https://en.wikipedia.org/wiki/Double-spending/">double spending problem</a> without any centralized authority. It was a significant leap, allowing us to transact without intermediaries. It’s not a coincidence that the whitepaper was published after the 2008 subprime mortgage crisis. Just like the printing press removed the power of knowledge from governments and religions, Bitcoin and other cryptocurrencies give people the tools to control their own money.</p>\n<p>Bitcoin kickstarted the so-called decentralized future<sup id=\"footnoteid1\"><a href=https://www.ycombinator.com/"#footnote1\">1</a></sup>, where products could be built not by centralized companies or authorities but by groups of peers that work together towards a common goal. These new products would exhibit the main features and benefits of Bitcoin. Let’s dive into the clear use cases.</p>\n<h2>1 – A New Asset Class</h2>\n<p>With most cryptocurrencies anyone can make transactions but, once they are confirmed, nobody can alter or roll them back. They are tamper-proof. Most cryptocurrencies also have a limited supply of coins by design. The maximum number of coins is set in the source code and nobody can create more. Bitcoin, Litecoin, and Monero are examples of this. And its value isn’t stored in a physical object therefore nobody can destroy or <a href=https://www.ycombinator.com/"https://twitter.com/AriDavidPaul/status/941832482256592896/">seize your coins</a>.</p>\n<p>This property leads to the first real use case of cryptocurrencies, a digital store of value. Bitcoin is probably the best-positioned to dominate this use case because it’s the most adopted and its network is the most secure because it has the most miners. So far, we have seen adoption by citizens in countries with record-setting inflation rates like Venezuela<sup id=\"footnoteid2\"><a href=https://www.ycombinator.com/"#footnote2\">2</a></sup>.</p>\n<p>However, for first world countries and their institutions to take the Bitcoin market seriously it needs to grow. The gold market sits at around $7T<sup id=\"footnoteid3\"><a href=https://www.ycombinator.com/"#footnote3\">3</a></sup>, and the offshore-account market is about $30T<sup id=\"footnoteid4\"><a href=https://www.ycombinator.com/"#footnote4\">4</a></sup>. The Bitcoin network value now is around $130 billion, so there’s still a long way to go. The release of futures by the CME and rumours about a potential ETF are signs that point in the direction that adoption is going to keep increasing.</p>\n<p>Investing in crypto assets to gain a financial return has been incredibly profitable for the last few years. However, skeptics would quickly remind you that it has been a market with high volatility and big doses of speculation. That said, cryptocurrencies and crypto assets might be the philosopher’s stone of a modern portfolio. Chris Burniske and Jack Tatar suggest that crypto assets have low/negative correlation with traditional asset classes<sup id=\"footnoteid5\"><a href=https://www.ycombinator.com/"#footnote5\">5</a></sup>. They could offer diversification and thus, reduce the risk of your portfolio. The asset class is starting to gain traction as an investment; according to a Citi report, it amounts to several GDP points in countries like Russia, New Zealand, Nigeria, and the UK<sup id=\"footnoteid6\"><a href=https://www.ycombinator.com/"#footnote6\">6</a></sup>.</p>\n<p>There are still significant risks when you use cryptocurrencies as a way to store your wealth or as an investment. The price volatility is an emotional test for investors, seeing them decrease by 60% in a week is not easy to stomach. Investing in it and keeping your investment safe is not simple. Your private keys can be damaged, lost forever, or stolen. Nobody can save you if it happens. Nobody can rollback illegal transactions made with your private keys. Multisig wallets, hardware wallets, time-locks and vaults are initial attempts to solve this problem but they are way too complicated for the normal user. In the next few years, custody is going to become more and more critical, and a new industry will be created to solve it.</p>\n<h2>2 – Disintermediation</h2>\n<p>Thanks to blockchain technology, all transactions included in the ledger can never be altered. Every transaction contains an identifier from the previous one and you cannot change the ID without changing the content. That makes this ledger immutable and tamper-proof. Today, we resort to many layers of documentation and mediators to ensure that transactions happen. In many cases it is more costly and time consuming to prove that you did something than actually doing the work. You can see this behavior in real estate property rights and transfers.</p>\n<p>Many people would argue that all you need to solve this excess of paperwork is a good distributed database. However, a distributed database without incentives wouldn’t be maintained but if this distributed database is maintained by a company, you are trusting a third party. When you put sensitive data in the hands of a single trusted entity like a health company, a bank or Equifax, your information is eventually going to get exposed<sup id=\"footnoteid7\"><a href=https://www.ycombinator.com/"#footnote7\">7</a></sup>. The question is not whether they are going to be hacked or not, the question is when. These are natural honeypots for hackers.</p>\n<p>Another benefit of removing intermediaries is that you can perform tasks that were prohibitive before because of pricing. Now, with LTC or the Bitcoin Lightning Network you can send cents or fraction of cents to anyone in the world with nearly zero fees. Micropayments may seem like a pretty niche use case. Many people would be right to remind us than Venmo, Paypal and other solutions work perfectly for us today. Why do we need an alternative? How often do we send fraction of cents?</p>\n<p>A compelling answer may be then that six billion people don’t have access to these applications, let alone bank accounts. Andreas Antonopoulos argues that the same way many developing countries leapfrogged directly into mobile phones and skipped landlines, they will skip traditional banking and have a crypto account in their mobile phone<sup id=\"footnoteid8\"><a href=https://www.ycombinator.com/"#footnote8\">8</a></sup>. They will still need to compete with services such as <a href=https://www.ycombinator.com/"https://www.mpesa.in//">M-Pesa that attempt to solve this problem and are quite mature.</p>\n<p>Cryptocurrencies provide a clear path to transact without borders and offer banking resources to the unbanked. In order to do so, they need to improve their wallet user experience considerably. Clearer and more natural ways to convert to/from fiat currencies are also needed.</p>\n<h2>3 – Governance</h2>\n<p>The Bitcoin whitepaper also created a network of participants that collaborated on a single project without knowing each other. Bitcoin has a primitive governance mechanism that ensures that the incentives are aligned. Mutual trust is built-in, enforced, and ensured by the miners.</p>\n<p><a href=https://www.ycombinator.com/"https://medium.com/@homakov/stop-calling-bitcoin-decentralized-cb703d69dc27/">“But miners are centralized!”</a> Yes, they are to some degree. Decentralization is not black or white, it is a range and it is going to <a href=https://www.ycombinator.com/"https://ycombinator.wpengine.com/crypto-evolution//">keep evolving</a>. We can see Bitcoin as the first iteration. It is just the starting point. The mechanism for change and how to evolve a network based on consensus from the participants is what matters. <a href=https://www.ycombinator.com/"https://dfinity.org//">Dfinity, <a href=https://www.ycombinator.com/"https://www.tezos.com//">Tezos or <a href=https://www.ycombinator.com/"https://aragon.one//">Aragon are exploring this space further.</p>\n<p>We also touched on incentive alignment. The average tenure of an employee in Silicon Valley is less than two years<sup id=\"footnoteid9\"><a href=https://www.ycombinator.com/"#footnote9\">9</a></sup>. One of the causes is the lack of alignment between employees and the owners. This is called the <a href=https://www.ycombinator.com/"https://en.wikipedia.org/wiki/Principal–agent_problem/">Principal-Agent Problem</a>. Every group of people has principals (owners) and agents (employees) and it is easy for them to become misaligned. What may be good for the employee may not be good for the company. In startups, principals and agents are the same. That’s why they are all really motivated to work together and can create enormous amount of progress in small periods of time. The velocity in crypto development teams like Ethereum exhibit this same energy along a greater number of participants.</p>\n<p>Another interesting parallel happens between startups and cryptocurrencies. Most corporations govern by law and process. Startups in their early stages govern with a limited process. Most actions occur implicitly, built on trust. As companies get bigger, you have to deal with procedures and rules to get anything done. An avid reader may note that Bitcoin’s community lack of consensus also stalled the network and it precipitated the creation of several forks like Bitcoin Cash. The difference here is that there is a mechanism for evolution (forks) and the decisions are taken by all the participants, not just by the owners (consensus mechanism).</p>\n<p>Cryptocurrencies provide a way of organizing people at scale with the potential to prevent the Principal-Agent problem and the <a href=https://www.ycombinator.com/"https://en.wikipedia.org/wiki/Tragedy_of_the_commons/">tragedy of the commons</a>. Bitcoin participants were so aligned, and the network effect was so strong that they ended up creating the <a href=https://www.ycombinator.com/"http://jasondrowley.com/2015/12/04/the-bitcoin-network-is-11000x-faster-than-the-top-500-supercomputers-combined//">most prominent computer network</a>.</p>\n<h2>4 – Tokens</h2>\n<p>Bitcoin is also programmable. It’s programmable money. You can define certain conditions to trigger transactions if they are met. For example, if you want to add extra security you could say that any transaction bigger than $1,000 USD needs to be verified by both you and your father. Ethereum took the concept a step further and supported more complex functionality in its <a href=https://www.ycombinator.com/"https://github.com/ethereum/wiki/wiki/White-Paper/">smart contracts</a>. Everyone can now create their own token that models their network, assets or team and distribute it accordingly. We wrote more about this <a href=https://www.ycombinator.com/"https://ycombinator.wpengine.com/the-token-effect//">token effect here</a>.</p>\n<p>The token conversation is particularly confusing because of the variety of tokens and use cases they support. Tokens are being used to raise money through <a href=https://www.ycombinator.com/"https://en.wikipedia.org/wiki/Initial_coin_offering/">ICOs. They are a way to raise funding from many contributors. It is important to note that you can also have a cryptocurrency or token without raising money through an ICO. Bitcoin or Litecoin never did an ICO.</p>\n<p>A common question about raising money through tokens is “how are they different from crowdfunding?” There are three key differences. First, you don’t trust any centralized entity to do the fundraising. Second, you have a lot more flexibility in what you can offer to your contributors (equity included). Third, contributors can transfer their assets instantly and easily to other people (pending regulation).</p>\n<p>Tokens can be used to incentivize participants and prevent the rent seeking behaviour that affects many communities and networks. This problem basically states that many participants of the network look to capture value without creating any. One specific version of this is spam. Any sufficiently adopted tool will see many people advertising their own endeavors for their own personal gain, decreasing the overall quality of the network and reducing trust. Online communities are littered with this problem and all of them devote countless amounts of time and money to keep the quality of their community safe from trolls and spammers.</p>\n<p>Tokens resolve these two problems. You need to contribute if you want to participate in the network. If you want to run some code on Ethereum you need to pay for it. It basically makes spam and rent seeking costly and, ultimately, not viable. If you have an online community, in order to post you need to stake your reputation. If your post benefits the network, you get rewarded, if it doesn’t, you get penalized and next time you want to post you will be charged accordingly. <a href=https://www.ycombinator.com/"https://steemit.com//">Steemit is experimenting with some of these ideas.</p>\n<p>Historically it’s been very complicated for companies to give equity to early adopters that help kickstart their products. Using tokens new companies can create network effects that help them compete with established incumbents. Tokens allow new ventures to bootstrap networks from the beginning with a solid wave of early adopters invested in their product that are committed to help it grow. Ethereum, from its inception and through its ICO, has created a strong decentralized community with skin in the game.</p>\n<p>Experts like David Sacks and Balaji Srinivasan believe that ownerships will get blockchained the same way content (video, text, and music) got packetized and sent over the internet<sup id=\"footnoteid10\"><a href=https://www.ycombinator.com/"#footnote10\">10</a></sup>. Once tokenized, they can be subdivided into near infinitely small pieces and exchanged freely, providing liquidity. Legal instruments of ownerships like deeds or securities will benefit from using a blockchain in terms of affecting transfers and chains of title. At the same time, it is also true that many things that are being tokenized now are just attempts of raising quick money from unwary investors. We need some type of regulation here and a solid framework to foster innovation while minimizing bad actors.</p>\n<h2>5 – Power (And Data) To The People</h2>\n<p>Bitcoin is cryptographically secure. You can transact with other people without ever exposing your private key i.e the series of characters that give you access to your funds. It is like signing up to many websites on the internet without communicating your password.</p>\n<p>Bitcoin has a 150 billion dollar bounty on it. So far the protocol has never been hacked. People may argue that Mt Gox, Okcheck, and other exchanges have been hacked, but Bitcoin the protocol has never been hacked. Exchanges, wallets, and custodians were compromised. Again, central, trusted parties can be hacked and will be hacked because they are honeypots.</p>\n<p>In this day and age, we see hacks happening every week. We need to handle dozens of passwords with complex passwords managers. Blockchains and cryptocurrency will solve this problem. Using a <a href=https://www.ycombinator.com/"https://radarrelay.com//">Decentralized exchange</a> or playing <a href=https://www.ycombinator.com/"https://www.cryptokitties.co//">Crypto Kitties</a> without needing to create an account is a magic moment.</p>\n<p>You can now own all your data and assets. Nobody can access your information without your private key. Third parties like social networks would not be able to benefit from it without your permission. Your privacy, finally, belongs to you. This use case is gaining adoption. For example, Microsoft is working on decentralized digital identities<sup id=\"footnoteid11\"><a href=https://www.ycombinator.com/"#footnote11\">11</a></sup>.</p>\n<p>However, right now you need to install browser extensions like <a href=https://www.ycombinator.com/"https://metamask.io//">Metamask to interact with websites that enable “crypto functionality”. They are still really clunky and the average user does not know they even exist. Native and more polished experiences both on web and mobile to sign and validate transactions need to happen for this to become meaningful. Until then, only tech savvy adopters will benefit from secure identification on niche use cases.</p>\n<h2>6 – Permissionless Innovation</h2>\n<p>Bitcoin, Ethereum, and most cryptocurrencies are open source. Every person in the world can contribute and send a pull request. Innovation is pushed to the edges. Innovation is not controlled by Satoshi, Vitalik Buterin, or any group of developers. It is permissionless. You can rely on being able to build your business on top of it.</p>\n<p>The Internet started the same way. It was built on open protocols like email or TCP/IP and everyone was able to create an easy to discover website. That’s not true in the internet anymore. Closed networks like Facebook or Twitter are gated communities that use their user data to gain an unfair advantage. They also have the potential to shut you down as soon as you compete with them or violate their ToS <sup id=\"footnoteid12\"><a href=https://www.ycombinator.com/"#footnote12\">12</a></sup> <sup id=\"footnoteid13\"><a href=https://www.ycombinator.com/"#footnote13\">13</a></sup> <sup id=\"footnoteid14\"><a href=https://www.ycombinator.com/"#footnote14\">14</a></sup>. And rightly so, they spent many years building their walled gardens and they don’t want to grow their successor in their yard.</p>\n<p>These closed entities or corporations argue that it is all about blockchain, not about cryptocurrencies. They say that private blockchains would be used to empower business process and increase efficiency. In my opinion, a blockchain without a cryptocurrency is just a distributed ledger or a glorified spreadsheet. There is no censorship resistance, no alignment of incentives, no network effect, and no trustless collaboration. This is extremely important if we want to empower equal networks where any individual can participate without being censored.</p>\n<p>An inclusive network allows any participant to innovate and the group benefits from it. Organizations and networks that restrict innovation will eventually stall and lose momentum. It already happened on the intranet vs internet debate. A lot of people argued for intranets at the beginning. They become really difficult to maintain and the content eventually stalls. A similar thing is happening between permissioned and permissionless blockchains right now. Permissioned blockchains will probably exist in closed organizations, but they will be interconnected by open permissionless blockchains.</p>\n<p>These open blockchains are powering protocols that will support open and permissionless applications. Decentralized <a href=https://www.ycombinator.com/"https://truebit.io//">computing, <a href=https://www.ycombinator.com/"https://filecoin.io//">storage, and <a href=https://www.ycombinator.com/"https://0xproject.com//">payments are setting up the groundwork for the proclaimed next web<sup id=\"footnoteid15\"><a href=https://www.ycombinator.com/"#footnote15\">15</a></sup>. These decentralized alternatives are fighting a difficult battle because their unit economics and/or customer experience may not work better than centralized options like Amazon Web Services. Censorship resistant may not be appealing enough for end consumers in many applications.</p>\n<p>However, because of its permissionless nature, you now may access a global and decentralized world computer that nobody owns. Whether this world computer would become the new standard or just for use cases where censorship-resistance is important remains to be seen. It has been true in the past that open innovation trumps permissioned innovation and we can sincerely hope this trends continues. The alternative doesn’t look different from an Orwellian future where we use government cryptocurrencies. Everything is recorded but still in the possession of the few.</p>\n<h2>Conclusion</h2>\n<p>In my opinion, real adoption is coming. There is an infrastructure inversion on the horizon. We have suffered several infrastructure inversions in the past century. They are never obvious, only in hindsight. Cars were made fun of when they got stuck in mud roads dominated by horses. Once the infrastructure switched and roads improved, horses could still walk on them, but cars got way faster. Telecommunication companies refused for years to switch from analog to digital to communicate more data. Once they did, it was trivial to run voice over their new infrastructure, but the other way around was almost impossible. I think the same is true with Bitcoin: traditional banking that takes days and charges high fees can be easily implemented on Bitcoin, but the opposite is not true.</p>\n<p>That new infrastructure is being built today. During this series we are going to speak with subject experts that are building it to make these long held promises possible. We are going to release deep-dives on the following topics:</p>\n<p><a href=https://www.ycombinator.com/"https://blog.ycombinator.com/the-decentralized-future-series-a-new-age-of-investing//">A New Age of Investing</a>.<br />\nThe Future of Payments.<br />\nThe Future of Organizations.<br />\nTurning Assets into Tokens.<br />\nSecurity starts with Identity.<br />\nThe New World Computer.</p>\n<p>Stay tuned and HODL on for more!</p>\n<p><strong>Notes</strong><br />\n<b id=\"footnote1\">1.</b> <a href=https://www.ycombinator.com/"https://en.wikipedia.org/wiki/Bitcoin#Decentralization\">Bitcoin Decentralization</a>. Wikipedia.<a href=https://www.ycombinator.com/"#footnoteid1\">↩</a><br />\n<b id=\"footnote2\">2.</b> <a href=https://www.ycombinator.com/"https://www.economist.com/blogs/graphicdetail/2018/02/daily-chart-1/">When the prices are too damn high</a>. The Economist.<a href=https://www.ycombinator.com/"#footnoteid2\">↩</a><br />\n<b id=\"footnote3\">3.</b> <a href=https://www.ycombinator.com/"https://www.fool.com/investing/2017/08/17/how-does-bitcoins-market-cap-stack-up-next-to-gold.aspx/">Bitcoin Market Cap vs Gold</a>.<a href=https://www.ycombinator.com/"#footnoteid3\">↩</a><br />\n<b id=\"footnote4\">4.</b> <a href=https://www.ycombinator.com/"https://www.reuters.com/article/us-offshore-wealth/super-rich-hold-32-trillion-in-offshore-havens-idUSBRE86L03U20120722/">Trillions in offshore Havens</a>. Reuters.<a href=https://www.ycombinator.com/"#footnoteid4\">↩</a><br />\n<b id=\"footnote5\">5.</b> <a href=https://www.ycombinator.com/"http:// https://www.barrons.com/articles/the-bitcoin-consensus-yes-its-a-bubble-buy-it-anyway-1511909599/">The Bitcoin ‘Consensus’: Yes It’s a Bubble, Buy It Anyway</a>. Barron’s. <a href=https://www.ycombinator.com/"#footnoteid5\">↩</a><br />\n<b id=\"footnote6\">6.</b> <a href=https://www.ycombinator.com/"https://www.businessdailyafrica.com/news/Citi-warns-over-risk-of-Kenya-bitcoins/539546-4263658-format-xhtml-rxcrr3z/index.html/">Citi Bitcoin GDP study</a>. <a href=https://www.ycombinator.com/"#footnoteid6\">↩</a><br />\n<b id=\"footnote7\">7.</b> <a href=https://www.ycombinator.com/"http:// https://techcrunch.com/2017/09/10/unsecurity//">Equifax Hack</a>. TechCrunch. <a href=https://www.ycombinator.com/"#footnoteid7\">↩</a><br />\n<b id=\"footnote8\">8.</b> <a href=https://www.ycombinator.com/"https://www.amazon.com/Internet-Money-Andreas-M-Antonopoulos/dp/1537000454/">The Internet of Money</a>. <a href=https://www.ycombinator.com/"#footnoteid8\">↩</a><br />\n<b id=\"footnote9\">9.</b> <a href=https://www.ycombinator.com/"http://www.businessinsider.com/employee-retention-rate-top-tech-companies-2017-8/">Retention Rate Silicon Valley</a>. Business Insider. <a href=https://www.ycombinator.com/"#footnoteid9\">↩</a><br />\n<b id=\"footnote10\">10.</b> <a href=https://www.ycombinator.com/"https://www.cnbc.com/2018/02/06/ex-paypal-david-sacks-on-craft-fund-and-harbor.html/">David Sacks on Craft Fund and Harbor</a>. CNBC. <a href=https://www.ycombinator.com/"#footnoteid10\">↩</a><br />\n<b id=\"footnote11\">11.</b> <a href=https://www.ycombinator.com/"https://cloudblogs.microsoft.com/enterprisemobility/2018/02/12/decentralized-digital-identities-and-blockchain-the-future-as-we-see-it//">Decentralized Digital Identity</a>. Microsoft. <a href=https://www.ycombinator.com/"#footnoteid11\">↩</a><br />\n<b id=\"footnote12\">12.</b> <a href=https://www.ycombinator.com/"https://thestack.com/cloud/2015/10/05/twitters-withdrawal-of-reliable-share-count-api-is-a-bold-monetising-move//">Twitter ShareCount endpoint shutdown</a>. The Stack. <a href=https://www.ycombinator.com/"#footnoteid12\">↩</a><br />\n<b id=\"footnote13\">13.</b> <a href=https://www.ycombinator.com/"http://fortune.com/2015/04/22/facebook-newsfeed-algorithm-publishers//">Facebook Advertising Algorithm Changes</a>. Fortune. <a href=https://www.ycombinator.com/"#footnoteid13\">↩</a><br />\n<b id=\"footnote14\">14.</b> <a href=https://www.ycombinator.com/"https://www.recode.net/2016/6/30/12067578/spotify-apple-app-store-rejection/">Apple Itunes Spotify rejection</a>. Recode. <a href=https://www.ycombinator.com/"#footnoteid14\">↩</a><br />\n<b id=\"footnote15\">15.</b> <a href=https://www.ycombinator.com/"https://medium.com/@FEhrsam/the-dapp-developer-stack-the-blockchain-industry-barometer-8d55ec1c7d4/">The Dapp Developer Stack</a>. <a href=https://www.ycombinator.com/"#footnoteid14\">↩</a></p>\n<p><em>Thanks to Raul San Narciso, Alex Shelkovnikov, Brad Lightcap, and Craig Cannon for reading drafts of this post.</em></p>\n<!--kg-card-end: html-->","comment_id":"1102207","feature_image":null,"featured":false,"visibility":"public","email_recipient_filter":"none","created_at":"2018-02-14T00:00:15.000-08:00","updated_at":"2022-02-03T16:40:21.000-08:00","published_at":"2018-02-14T00:00:15.000-08:00","custom_excerpt":"A good method for discovering startup ideas is to look into technological breakthroughs and think about what they unlock that wasn't possible before. In this introductory post, we are going to use this framework to examine Bitcoin.","codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a710b8","name":"Ramon Recuero","slug":"ramon-recuero","profile_image":"/blog/content/images/2022/02/ramon.jpg","cover_image":null,"bio":"Ramon was a Hacker at YC. Before working at YC, he worked at Zynga, Moz and founded Netgamix.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/ramon-recuero/"}],"tags":[{"id":"61fe29efc7139e0001a7118f","name":"Blockchain","slug":"blockchain","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/blockchain/"},{"id":"61fe29efc7139e0001a7116d","name":"Essay","slug":"essay","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/essay/"}],"primary_author":{"id":"61fe29e3c7139e0001a710b8","name":"Ramon Recuero","slug":"ramon-recuero","profile_image":"https://ghost.prod.ycinside.com/content/images/2022/02/ramon.jpg","cover_image":null,"bio":"Ramon was a Hacker at YC. Before working at YC, he worked at Zynga, Moz and founded Netgamix.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/ramon-recuero/"},"primary_tag":{"id":"61fe29efc7139e0001a7118f","name":"Blockchain","slug":"blockchain","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/blockchain/"},"url":"https://ghost.prod.ycinside.com/the-decentralized-future-series/","excerpt":"A good method for discovering startup ideas is to look into technological breakthroughs and think about what they unlock that wasn't possible before. In this introductory post, we are going to use this framework to examine Bitcoin.","reading_time":12,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":null,"feature_image_caption":null},{"id":"61fe29f1c7139e0001a71a59","uuid":"00a3a0f7-e41b-47fe-9d1f-e9debf0d12a1","title":"Crypto Investors Linda Xie and Avichal Garg on Opportunities, Use Cases, and Regulation","slug":"crypto-investors-linda-xie-and-avichal-garg-on-opportunities-use-cases-and-regulation","html":"<!--kg-card-begin: html--><p><a href=https://www.ycombinator.com/"https://twitter.com/ljxie/">Linda Xie</a> is the cofounder of <a href=https://www.ycombinator.com/"http://scalar.capital//">Scalar Capital</a>, a cryptoasset management firm. Before that she was a Product Manager at <a href=https://www.ycombinator.com/"https://www.coinbase.com//">Coinbase (YC S12).</p>\n<p><a href=https://www.ycombinator.com/"https://twitter.com/avichal/">Avichal Garg</a> is a Managing Partner at <a href=https://www.ycombinator.com/"https://electriccapital.com//">Electric Capital</a>, a digital asset management firm. He’s also an Expert at YC. Prior to that he was the Director of Product Management at Facebook.</p>\n<hr />\n<div id=\"backtracks-player\" data-bt-embed=\"https://player.backtracks.fm/ycombinator/ycombinator/m/74-linda-xie-and-avichal-garg\" data-bt-theme=\"orange\" data-bt-show-art-cover=\"true\" data-bt-show-comments=\"true\">\n</div>\n<p><script>(function(p,l,a,y,e,r,s){if(p[y]) return;if(p[e]) return p[e]();s=l.createElement(a);l.head.appendChild((s.async=p[y]=true,s.src=r,s))}(window,document,\"script\",\"__btL\",\"__btR\",\"https://player.backtracks.fm/embedder.js\"))</script></p>\n<p><script>\n(function(p,l,a,y,e,r,s){if(p[y]) return;\nif(p[e]) return p[e]();s=l.createElement(a);\nl.head.appendChild((s.async=p[y]=true,s.src=r,s))\n}(window,document,'script','__btL','__btR',\n'https://player.backtracks.fm/embedder.js'))\n</script></p>\n<p><script>\n!function(n,i,s,c){n[s]||(n[s]=function(i){n[s].q.push(i)}),n[s].q||(n[s].q=[]),\nc=i.createElement(\"script\"),\nc.async=1,\nc.src=\"https://c.bktrks.com/utils-1.0.0.all.min.js\",\ni.head.appendChild(c)}(window,document,\"BTUtils\");\nBTUtils(function(use) {\n var options = {\n autoplayLinks: false\n };\n use('backtracks-autolink', options).init();\n});\n</script></p>\n<hr />\n<h1>Subscribe</h1>\n<p><a href=https://www.ycombinator.com/"https://itunes.apple.com/us/podcast/y-combinator/id1236907421/">iTunes
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If you’re here, we assume that you’re a developer/hacker who’s intrigued by the blockchain. You’re convinced that you understand how it works and now you’re itching to figure out what the blockchain means for you and your developer skill set.
If you need more of a primer we’d recommend starting with the bitcoin white paper and Ethereum white paper.
Our goal in this post is to:
1. Explain how blockchain development differs from existing development paradigms
2. Provide context for the opportunities and challenges in this space
3. Point you to resources that will give you the foundation to start developing in this new paradigm
Internet applications benefit from network effects because they maintain centralized silos of information. Built upon shared, open protocols (e.g. TCP/IP, HTTP), companies like Yelp, Facebook, and Amazon benefit from having all of their users – and, as a result, data – in one place. This way they not only have an advantage over competitors with less data but also complete control over the way they monetize the data. In the words of crypto investor Joel Monegro, the current Internet paradigm captures most of its value through fat application layers, whereas the thin, underlying communication protocols capture minimal value.
Alternatively, the distribution of value in the blockchain paradigm can be described with fat protocols and a thin application layer. This paradigm shift is possible due to the innovation of cryptographic tokens, which are described well by Albert Wenger of USV:
“Historically the only way to make money from a protocol was to create software that implemented it and then try to sell this software (or more recently to host it)… With [cryptographic] tokens, however, the creators of a protocol can ‘monetize’ it directly and will in fact benefit more as others build businesses on top of that protocol.”
Previously, the creators of open communication protocols for the Internet, largely DARPA researchers and non-profit contributors, could not align financial incentives with protocol development. In contrast, protocol creators today can issue “tokens”, like Bitcoin and Ethereum, that represent the value of their decentralized protocols.
Monegro believes that this paradigm shift affects the way that developers should think about their applications: “The combination of shared open data with an incentive system that prevents “winner-take-all” markets changes the game at the application layer and creates an entire new category of companies with fundamentally different business models at the protocol layer.”
We’ve come to the understanding that in the blockchain paradigm, developers can capture value through protocol innovation. To continue our discussion, we review how blockchain technologies evolved to eventually cater to developers. Eight years ago, Bitcoin was conceived as a virtual currency that removed the need for centralized financial systems. Initially, developers actually tried building applications upon the Bitcoin blockchain by storing data in the blockchain itself, but it turned out to be pretty inefficient (as described in another old Joel post!). One of these developers, Vitalik Buterin, was frustrated by Bitcoin’s immobilism and risk averse culture for adopting new developer-friendly features. So, he built his own platform, Ethereum.
While Bitcoin was originally intended to serve as a new medium for financial store of value, Ethereum was invented to serve as a Turing complete developer environment. In Ethereum, developers write smart contracts in the Solidity programming language, and those smart contracts are run in the Ethereum Virtual Machine (EVM). Here, we observe an opportunity for developers to fork and implement their own blockchains to serve different purposes. To do so, however, would require rekindling developer support and network effects that existing blockchain technologies had previously achieved. Today, building on top of existing networks like Ethereum allows developers to become stakeholders in not only their own applications, but also the underlying protocol.
Today’s blockchain developers often build decentralized applications, or dapps, on top of existing protocols to address specific markets and end users. In doing so, developers can issue tokens, or app coins, that are used to execute certain “functions” of the dapps themselves, not unlike Chuck-E-Cheese tokens are used for specific purposes like skeeball. These “functions” are the “smart contracts” that promise a dapp’s services in return for a digital asset, thereby removing the need for a middle-man to ensure the transaction. In other words, smart contracts promise that for one Chuck-E-Cheese token, you can exchange one game of skeeball.
As the functionality of the dapp becomes more sought after, the fixed number of app coins increase in value as a function of supply and demand. In other words, if it turns out that the Chuck-E-Cheese experience is truly remarkable and highly-demanded, the fixed supply of tokens become more valuable. This is the underlying principle that informs all ICOs (initial coin offerings), in which dapp developers solicit investment by offering app coins in return for capital to fund their projects.
But wait, you might ask, “Why not use an existing token as opposed to issuing your own, dapp-specific token in the first place?” Dapp-specific app coins enable small-scale economies that facilitate the application’s purpose. These tokens serve as scarce resources that can be regulated and governed to more closely align with the functionality of a dapp. This is where Ethereum comes back into the picture — with Ethereum, developers can very easily issue their own tokens for the specified use of their own dapps.
With an understanding of the underlying mechanisms of dapps, it’s important to think carefully about how decentralization would benefit your end users. Rather than jumping into a list of side projects, swapping relational databases for blockchain implementations, we urge you to consider the benefits of decentralization. For instance, Augur creates prediction markets by relying on decentralized participants to make correct predictions because they share financial incentives.
At a meta-level, there are also opportunities for innovation in the developer stack. Many blockchain developers liken the maturity of the blockchain tools and frameworks to those of the web during early days of the Internet. We spoke to Ben Yu of Stream, who described this as a new opportunity for developers: “There is extremely low-hanging fruit in making the field more accessible, and a lot of technical infrastructure needs to be built up to bring blockchain from 1994, in internet terms, to 2017.”
With the innovation of the blockchain, many have identified the opportunity to build a new, decentralized web stack that does not depend on centralized government or corporate entities. The traditional web stack is composed of building blocks like TCP/IP, DNS, databases, web servers, authentication systems and CDNs, and we are in the midst of replicating these components by using platforms like Ethereum as the base layer.
Unfortunately, a technology that is likened to the early iterations of JavaScript almost certainly comes with challenges, the most apparent of which is related to the immutability of new protocols. Developers cannot change the underlying blockchain or higher-level smart contracts. Libraries or contracts cannot be easily versioned. The recent Parity bug that locked 150MM USD in funds, among many other similar incidents, reminds us of the urgent need to build “future-proof” architectures.
Brandon Millman, an engineer at 0x, described how blockchain immutability affects the way he thinks about security concerns: “Being in this space means being a lot more careful, especially because people’s money is at risk. Part of the benefit of the blockchain paradigm is that if you’re holding onto your private key, it’s hard for people to take money from you, but a lot of scams are getting you to willingly send your money to the wrong place instead of reaching in to steal money from your wallet.”
Developers, especially those accustomed to the fast pace of the startup world, are forced to consider tradeoffs between speed and security. As Ben Yu of Stream describes, “You have to move extremely fast, because the space is going enormously fast, but you can’t move fast and break things, which is the traditional philosophy for development being done now. If you break things, you lose hundreds of millions of dollars.”
Building on the blockchain requires a different level of planning. Developers can no longer apply hot-fixes or overnight patches, because they no longer have centralized control over entire systems. Instead, introducing system changes often involves hard forking entire protocols, or in some cases, providing separate sources for protocol parameters that aren’t tied directly into the blockchain.
Beyond the general challenges of immutability, Ethereum includes several limitations that blockchain developers might encounter. For one, Ethereum is unable to access real time data from outside the blockchain. Developers need to rely on trusted third party data providers, called oracles, to provide smart contracts with outside information like weather, random numbers, or currency values.
Moreover, Ethereum’s specification prevents real-time computations. Processing of block transactions takes upwards of 15 seconds (which is lightning fast compared to Bitcoin’s 10 minutes). As a result, developers need to write asynchronous code with front-end frameworks that can update states accordingly (like React).
With Ethereum, you are also tied to paying for your transactions by the operation with gas that translates into Ethereum’s ether. As a result, using the current version of Solidity, you could very feasibly find yourself hitting a transaction limit if the computation you intend to perform is too expensive (like verifying checkmate in a game of chess). As a result, on-chain computations because become costly in terms of money and network bandwidth. There are interesting alternatives like Truebit to perform more intensive computation off-chain.
In general, it can certainly feel overwhelming getting into this space. It’s an interdisciplinary field, spanning domains of economics, game theory, finance, computer science, math, cryptography, and more. However, that also means that there’s a lot of surface area to contribute.
Brandon of 0x recommends diving into areas where you have some interest or experience instead of trying to learn everything at once: “If you’ve done JS development beforehand, there are a lot of JS libraries that you can contribute to. While you will definitely need to know [how everything fits together] eventually, you don’t need to feel like you need to take an entire course initially.”
In the spirit of decentralization, most of the code for projects on the blockchain are also available through open-source. There are a number of good resources to get your hands dirty:
In addition, the developer communities are remarkably receptive and helpful. Check out:
If you learn primarily by coding up your own projects, here are some ideas to get started:
In its current state, yes, blockchain development is messy. No, there aren’t clean frameworks and tools analogous to those that exist for modern web development. But why not see the blockchain’s nascent state as an opportunity to impact a paradigm-shifting technology?
On the blockchain, you don’t need to deploy any centralized servers, which means that there’s no single point of failure. If your whole stack is decentralized, there is no trusted third party involved making it censorship resistant, and your database is publicly verifiable. As the new paradigm offers opportunity to publicly share data, we observe a supreme advantage to decentralizing databases. This is the future we’re building towards on the Blockchain— where information and power are distributed systematically by cutting out the middleman.
Thanks to Ben Yu (Stream) and Brandon Millman (0x) for lending their time to be interviewed, and thanks to Niharika Bedekar, Craig Cannon, Claire Shu for reading drafts of this post.
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Vincent Chen is a student at Stanford University studying Computer Science. He is also a Research Assistant at the Stanford AI Lab.