Welcome to our comprehensive interview series – Humans of Blockchain ™ where we get the best in the business to answer a diverse set of questions.
This series will clear the air of doubt in the blockchain space today by focusing on bringing more transparency to the readers. Our guest today is Steven Nerayoff – Co-Founder of CasperLabs, Architect of the ICO
Steven is an experienced Legal Advisor in the Cryptocurrency Industry and has some insightful opinions about Decentralisation and the future.
Humans of Blockchain ™had the pleasure of meeting Steven at TOKEN 2049.
Not wasting much time, let’s hear it out from Steven himself.
1. We would love to know more about you and your journey which brought you into the Blockchain space.
So, I am a tech entrepreneur and a venture capitalist for 25 years, both in silicon valley and New York. Entered Blockchain in 2011 and early 2013-14 got involved with the Ethereum Project. I was the one who was tasked to figure out how to conduct a crowd sale. So I came up with a concept of basically analogizing Ether to a good (sale of a future good). That basic structure is what we call the ICO today and it is a great way to raise capital but I would say that in many cases it wasn’t used as the way we wanted it to be used. Then I worked with many projects in the space, many of the names you probably must have heard of. Fast forward to 2017, got involved with another project called tZero. Structured tZero, was able to do the seminal utility token and was fortunate enough to conduct the security token. About half my work is on the utility token protocols and the other half is on Security tokens. And it is a massively amazing time to be alive, seeing these two quadrillion dollar opportunities which encourage disruption, democratizing of things, information and value capital.
Last year I got involved with, what I believe will be the holy grail of protocols,CasperLabs which is built on Vlad’s research which was the CBC Casper. People had always said the holy grail of Blockchains could not be achieved, because of the three pillars of Blockchain, Security, Scalability, and Decentralisation. Many of the protocols have security, all of them have one or the other from Scalability or Decentralisation. Like Bitcoin and Ethereum are the two very Decentralised protocol at the expense of Scalability and all the others that are scalable are at the expense of Decentralisation (they have some centralized aspect attached which allow them to be scalable). The problem with that is if you are looking to be a main public chain and if you tell the people who own an asset on the chain that there is a fraction of a percent for possible collusion and their assets can be taken away. What I think is that a lot of these chains are really good at special use cases. I am not saying that the chains which scale at the expense of Decentralisation don’t have a place, they do. Similar to centralized databases in the world today, they aren’t going anywhere soon. And some of these that scale have specific use cases and limited to a particular type of user or users. This fine for the smaller networks but what about the big ones which have billions and trillions of dollars on them?
2. Can you tell us more about CasperLabs? The Vision/ Mission.
Now when I saw Vlad’s creation, I said, ‘Wow this is as big of an invention as we have seen in Blockchain‘. I mean sure the Nakamoto consensus was the start and without a doubt, the Ethereum protocol was the second tectonic shift and I believe what Vlad has created is the third tectonic shift. Building on those other two very closely. His invention is of Scalability. And what you’ll find, if you look back in history, the person that invented the way to scale is often times the one who’s remembered and is the one who riches go to.
For example, take the automobile, Benz invented the automobile, Henry Ford invented the assembly line which was an invention to improve Scalability. Friendster invented Social Networks, however, Mark Zuckerberg’s Facebook took the lead becauseFriendster couldn’t scale, Facebook did. Similarly, Yahoo invented Search Engines butGoogle figured out a way to use algorithms and make it one of the biggest business models in history.
So, I believe that’s what Vlad has created. We’re super excited about it because it’s one of the things we haven’t seen in the Blockchain space. A lot of people usually say ‘we haven’t seen the Killer App’ therefore a lot of detractors of the Blockchain say, that Blockchain has no use case, there’s nothing out there. I think a big part of the reason is because of a chain that is fully decentralized and scalable hasn’t existed as of yet. And there’s a reason why, if you are a Dapp (Decentralised Application) producer, you could be a Dapp producer for Bank of America and you are most probably a startup so you have a budget and time for the chain you are building which is seeing 7-10 transactions per second, and most importantly you are building something that can live within the current centralized environment which does not have to facilitate 1000 transactions per second so you don’t have a need to build an actual killer app. We see all these small applications and they are doing very well for specific use cases making them appropriate chains but if you want to build something big it’s simple –
‘Build the right chain and the Developers will come’
That’s what we are super excited about our project and we are going to be launching it in a 2019 event.
3. Did you leave the Ethereum Foundation to join CasperLabs?
Yes, I wasn’t an integral part of the Ethereum Foundation, more like an Advisor. Basically, I had to figure out a structure for a crowd sale. I was also helping through other stuff also but throughout 2014, I was mainly working on the crowd sale. I also got involved in helping to restructure the foundation, but mainly the main focus was on figuring out a legal structure for the crowd sale. We were fortunate that a recognized law firm gave us an opinion letter, nobody had been able to do that up until that point. And this new structure was not intended for setting off an ICO craze but it did. There were other things that have mattered in a similar sense like the folks at Ethereum developed the ERC-20. The ERC-20 was pivotal because it allows projects to monetize their products through tokenization and that was super important, much more than ICOs as I sometimes consider.
4. What are your thoughts on the current information/ education flow in the Blockchain industry?
It’s terrible. It’s really terrible. We as an Industry, have to do better getting our message across. There are many establishments that are viewing us as a threat. I believe they are wrongly judging us as threats but they are out to brand us as a vehicle for terrorism, money laundering, for funding murders haha, and the reality is that thephysical FIAT does a thousand time more damage than Bitcoin has ever done. In fact, Bitcoin is far more useful in combating all of that, because actually, everybody can see what is happening. So that’s the irony in all of this.
Now the folks that are the detractors of Blockchain fall into two camps. It’s important to understand their motivations to see how do we counter them.
- Camp number one is folks that believe we are a threat to them. So there’s government institutions, the banks and all kinds of people that believe we are a threat to their existence. And in some of the instances, long term they might be correct but in most of the instance, it is more dependent upon their behavior. Like other innovations which were viewed as a threat.
Hollywood viewed the VHS and pay-per-viewing as an absolute threat to the Movie Industry. Turns out that it is way bigger revenue to them than the normal Movie Industry ever was.
The Music Industry originally viewed Napster as a threat, streaming music did make the record sales plummet but the music industry revenue was up in an overall figure. Then an invention like Spotify came along and it is one of the greatest inventions in the Music Industry today, but they didn’t see that far and I kind of get it if you are sitting on a Multi-Billion Dollar Stash, they do not think about how things could be better because that’s not a mindset at that position and it shouldn’t necessarily be.
I think that’s what we are looking at for Bitcoin and Blockchain. Some banks are gonna close but I think most banks will get 10s, 100s, or maybe a 1000 times bigger than they are right now if they become part of the Decentralised Financial Future. And for the participants will benefit because literally, the Finances or Wealth Creation will be a thousand times more. And the banks who see and recognize this are asking ‘How do we become a part of all this?’, I mean look at Microsoft. They were originally viewed as Open Source but they closed the doors stating no we’re not open source, it is all proprietary, licensed, etc. but all of a sudden they got a new CEO and he was like ‘no no, wait a minute this open source gig is wayyy bigger than the gig we’re running right now’. So I’d rather have twenty percent of this new market that’s like a hundred times bigger than our old market. At the end of the day, it’s growth and revenue for them. Now it’s one of the best use cases out there, he literally turned things around in a couple of years and now everyone is thinking open source and they’re making more money than they have ever made.
Banks are really the same thing if you look closely, right now they are proprietary, licensed and closed. We are paying fees to them because of our proprietary relationship with them (our accounts). But if they open it up, their services are invaluable. I think Banks do a lot of things that are wrong but if the Banks stop functioning then we as a civilization stop functioning. Because Banks provide services which cannot be replaced by a Blockchain so the starters who integrate this open source attitude will grow.
- The Second Type are entities and people who see this but really don’t question it and there’s not much we can do about that. And I think it’s important for people to stop thinking about becoming the trajectory is set. What’ll happen will happen. We just need to stay positive in getting our message out and the ones that are seeing this and trying to question it intentionally will never succeed on the long haul. The crack has happened and it’s getting larger and larger. That crack to go across the marble of society will take time. And that’ll change things but that’s okay, prior to electricity we did things differently but then electricity came in and the crack happened, but if you look closely, electricity gave life to all these other new inventions that we never had before. And it’s not so bad, it’s not like there was a big revolution and people died, no. It’s a good thing in human progress. And as Human beings, we need to be better than we were yesterday. That is an innate Human’s trait which is why our species have survived this long. I look at Blockchain and what Satoshi has unleashed as a Multi Century Trend. I don’t think it’s a ten/ twenty years trend, I think it’s a three hundred years trend. Eventually, where does this end up is pretty fascinating and that’s why being Fully Decentralised is so important. That’s why we recognize ourselves as ADAP (As Decentralised As Possible). And if you look back what were Satoshi’s ideas for inventing the Bitcoin protocol? I mean there were a lot of things but on a broader basis, it was the best form of copy protection and I can send value all over the world using the protocol. But a really fascinating thing from a societal standpoint was that I can now interact with you without somebody which is always an institution standing in the middle.
5. We are in the first quarter of 2019, what are the future plans for CasperLabs?
We’re fully focused on two areas right now –
The first area is getting the tech right out the door so we would be setting up the test-net and getting folks participating in it. It’s a fully open-source project. We’re big believers of open source and decentralization, in fact, the parent company which holds CasperLabs is ADAPtive holdings and in ADAPtive, the ADAP stands for ‘as decentralized as possible’. So we want to get it out into the community, we want to bring Vlad’s creation to life and put it out into the open source community. However, we end up as a contributor in the end like everybody else.
At that point, I come to our second point. I am a strong believer that any open source project is only as good as its community. We can have the best tech, or unique in our case because we are solving Scalability while staying Decentralised, however, it means absolutely nothing if you don’t have a large developer community on it. You know Ethereum and Bitcoin were amazingly successful in their inventions, but if you look closely, their community had a large role in that success. Now, these communities are as strong as they have ever been and they have to be as they are breaking new ground where you have to believe in the something that is much bigger than yourself and if you’re not then I don’t think you should be in this space.
Any Ending words for the Industry, Steven?
Now if you look at these big institutions, their roles have changed, and the first main focus was on Banks and Finance because Banks make up twenty percent of the Global economy. That is why Satoshi chose to disrupt the financial world first with Fintech. However, that was not one of the far-reaching implications, but when people talk about Governments with Blockchain, I take that very seriously. Other than the person who discovered Decentralisation, Vlad also carries the thought process of being thoughtful about Governance. And it’s really impressive to look at what he’s done and how many people he has turned around thinking about it. A lot of people are supportive of him and for me, coming from a legal background, super supportive. And governance can be linked to an actual government. Why can’t we have a Decentralised government? I actually believe we will, it is not a possibility but an inevitability. Now Decentralised governments are not anarchy.
And I think a lot of people in our industry fall short, but it’s okay because we are all in a learning process. However, the outside world sees us as Anarchists, like a lot of people will die haha, I mean slow down. But we may have a better Societal Standard if we change the way we think about it. Now it’s not unusual because years and years ago we had empires (Roman, Persian, Ottoman) and they improved upon the prehistoric times, then after that, we went into the Middle Ages, the Dark Ages, and there was feudalism and I wouldn’t argue that it was a better environment than empires. But it was a transitional period which gave way to the current state we are in. Currently, we are in a Federal Environment but maybe we are still in a transitional stage, going from the age of Empires to being fully Decentralised. Our current period can be considered as a Bridge between those two.
Decentralized governance states that we will not be looking up to this one Leader (i.e. the President). The leader is the Society. I agree we have not even entered first grade in terms of understanding this change and how it will operate or the implications. And I don’t know if we ever will in my lifetime, but I know we are asking the right initial question like when a 5-year-old child asks questions about life, we are asking questions about the Evolution of Human Society. They are basic right now but further on they will get sophisticated. The real key take-home is that we are asking questions and that is how we are seeing people apply their ideas and knowledge in areas which were never expected upon.