A Conversation with Zaki Manian, Blockchain Pioneer

By Alex Chien, Princeton ’20, AMINO Summer Insider, and Sue Xu, PhD, Managing Partner, AMINO Capital

Blockchain, the technological underpinning of cryptocurrency and fintech, is a hot topic. But it’s more than just the latest buzzword; the nascent technology promises to disrupt business, finance, and industry on a fundamental level.

However, blockchain continues to tread largely uncharted territory. It holds promise, but it has hardly reached its full potential. And as with any paradigm shift, rampant speculation and theories abound regarding its future.

I recently had the chance to sit down for a chat with Zaki, who is AMINO’s blockchain expert and part of the AMINO Crypto Fund. In addition to his work at AMINO, he currently serves as Executive Director at the Trusted IoT Alliance, after having previously co-founded Skuchain, of which AMINO Capital was the first outside investor since 2014. He is also currently an advisor for the Cosmos initiative, which aims to create a decentralized network of blockchains. Given his passion and expertise on the technical side of blockchain, I was curious to hear Zaki’s thoughts regarding the current state of blockchain, its future, and its consumer-facing implications.

There is a lot of buzz about how blockchain will revolutionize the world, with monikers like “Web 3.0” and “Big Compute.” What are the biggest obstacles preventing that from happening right now?

Let me begin by saying that all existing blockchains today should be understood to be useless: Bitcoin is useless, Ethereum is useless. The current generation of blockchain technology is just an early version — a prototype — of the future; the tech is maybe three to five years away from maturity.

The first question is: are there technical challenges where we fundamentally don’t know what to do, in terms of privacy and scalability? Or do we basically know what the answers are, and it’s just a matter of doing the engineering work? Prior to 2017, there were a lot of ideas about how to address these challenges, but there wasn’t enough funding to pursue any of them seriously. But one of the advantages of the madness that was last year is that enough credible people who’d been thinking about these issues for years were able to raise enough capital to pursue not just one potential solution, but essentially all possible solutions simultaneously.

Do you anticipate any regulatory roadblocks hindering the widespread adoption of blockchain?

The regulatory environment is actually quite permissive. People are spanning the spectrum when it comes to dealing with it, but as a practical matter, people can operate businesses across that spectrum. For example, take Binance and Coinbase. Binance has twice the users as Coinbase does, but Binance basically seeks the most permissive regulatory environment in the world. They’re aggressively pursuing regulatory arbitrage; they don’t tell anyone where their servers and developers are located, and CZ (editor’s note: Binance CEO and founder Zhao Changpeng) is constantly moving around. Now, the other side is Coinbase — and they say “we will comply with every single regulation,” like they will invent new regulations to comply with!

But it’s a sufficiently permissive environment, and I’d say the regulatory risk has been dropping dramatically over the last couple months. We’re ending up in a more permissive place than I would’ve anticipated.

Many people associate blockchain technology solely with cryptocurrency. But blockchain has grown to encompass much more than that, as your work with Skuchain and the Trusted IoT Alliance has demonstrated. What are some of the most exciting implementations of blockchain that have yet to capture public attention?

Blockchain’s ultimate purpose is the ability to enforce complex rules in an automated manner. In our current world, we basically have two kinds of rules: simple rules that potentially have automated enforcement, and complicated rules that are manually enforced. Blockchain leads to a world where we can embed these complicated rules in software… a world where these complex rules can manage real value, and in turn the rules can be fairly enforced. With blockchain, you can’t appeal to a higher authority, and you can’t easily cause the system to fault or deviate from its rules. This provides an unprecedented space in which we can design ways for human beings to cooperate and allocate resources. And so, I think blockchains are really about reimagining markets, and reimagining how people use markets to cooperate and accomplish tasks — that’s the fundamental.

Blockchain, by nature, tends to be backend-oriented and thus not visible to the layman who isn’t well-versed in tech. What are its most significant consumer-facing implications?

To begin with, blockchains are about a world where consumers have skin in the game. They are about a world where consumers hold potentially substantial portions of their networks in assets that exist within cryptographic programs, or distributed computing systems. By playing along with the rules, and by participating in these distributed systems, they gain wealth in their lives. And, by faulting or not cooperating, they lose wealth.

The question is, does anyone actually want to do this? My hypothesis is yes, because this is incredibly addictive…once you give people a taste of this, they won’t want to stop! I think that if you give people the right tools, blockchain will be fairly transformative. You’ve seen the number of people interested in running, say, hobbyist-scale miners; the number of people interested in running Cosmos validators; the scale at which people are interested in adopting these systems. They’re encouraging numbers, and they show that this idea of having skin in the game, being able to make money from participating and cooperating — from being part of the infrastructure of these systems — is pretty appealing to people.

Indeed, the inherently democratic nature of blockchain has been blockchain’s most appealing facet for me and many others. However, there seems to be a huge gap between zealous blockchain technologists, and the majority of people, who are barely aware of blockchain’s existence. How can we bridge this gap?

Well, I think things we’ve built so far are deficient when it comes to user experience and usability. They haven’t been focuses; we’ve pretty much had the worst design software ever. A lot of people have hypothesized that eventually the “Steve Jobs of blockchain” will appear and make it user friendly. I also think the funding environment is now in a place where people can make significant investments in user experience — but so far, few projects have made those investments.

Do you consider blockchain to be a disruptive or foundational technology? Do you think it will displace market incumbents or computing paradigms?

I’m firmly in the disruptive camp because I’m bullish on the idea of putting markets into everything, of people being active participants of markets on a day-to-day basis. Consider the lives of most people today: they go to their job, producing value, and then they spend the rest of their day being consumers of the value that they make from their jobs. Blockchain aims to disrupt this; the whole notion of decentralization relies on the emergent notion of prosumers. We’ve seen some examples of this on the internet; For example, Wikipedia consists of about 50,000 prosumers who create incredibly valuable content for free, or with the purpose of gaining social capital.

With blockchain, the relevant question is this: if we give people clearer, more liquid economic incentives, will this prosumer community grow by, say, two orders of magnitude? I think it will, because people like the idea of putting their skills directly into something they can control and make money from. Instead of “I have my job that I go to,” it’s “I run a proof-of-stake validation node on these 10 networks on the side, and I have a phone beacon on my roof that makes money, and I have these games and apps like Playlist, where instead of me just being a hobbyist choosing music, it’s now a source of income on the side.” That’s the kind of world we’re trying to imagine, build, and see if people will go for.

So essentially, blockchain is about breaking down boundaries.

Yes, breaking down the boundaries between jobs, hobbies, and sources of income, and trying to incorporate them into a decentralized economy. The current economy involves a small number of very large entities raising all the capital, and then employing people to do all the work. And those people then turn around and consume largely from those same companies, creating a circle. The decentralization of blockchain is a way to disrupt those economic incentives — to allow capital to be allocated far more directly, for/to/through people, and to allow direct participation in the economy.

What’s amazing is how much this sounds like what people thought the Web would be like, back in 1999 — that it would be this economic dis-intermediary force. And yet it ended up being incredibly centralized into basically five companies. I think blockchain is a second swing at that idea.

Are there any cautionary tales we may draw from the history of the Internet revolution? Looking at past mistakes, what do we need to avoid with Blockchain?

One of the most centralizing things about the web, and a major missing piece of web technology, is that there was no built-in payment rail. Say you wanted to profit off a search engine you designed. It wasn’t enough to just build a great search engine, you also had to build an incredible surveillance-driven advertising system to make money. And that was incredibly centralizing, because it meant that nobody could directly monetize their technical effort. It was a lot easier, if you were a good technologist, to go work at Google than to build your own product. In other words, it was easier to help build Gmail inside of Google, than to build an awesome email service and charge people for it. And Google would just take care of the monetization for you, with their enormous technical infrastructure.

Again, it’s a kind of barrier to entry, right?

Yes. For blockchain to really succeed, it must inherently disrupt the existing monopolies, potentially including the central bank monopoly.

Anything you’d recommend for people who want to learn more about blockchain?

I highly recommend Andreessen Horowitz’s “Crypto Canon” for further reading on the subject.

To sum it all up:

• Existing blockchains are basically experiments.
• Chain investing trend allows unprecedented experimentation to test technical limits and explore solutions.
• Regulatory environment is permissive, allows people to operate businesses.
• 2 approaches to business: flock to the most permissive regulatory environment, or comply with regulations and proactively invent new ones.
• Blockchain is about simple vs. complex rules — allows fairer complex rule enforcement.
• Blockchain can reimagine markets vis-à-vis collaboration.
• Blockchain allows people to profit from contributing to the network.
• It can attract lots of interest from the public.
• Currently, UX and ease-of-use is poor.
• Blockchain is disruptive.
• Question is whether sufficient economic incentives will cause community to explode.
• 2018 blockchain similar to 1999 Web — hope for a disruptive, dis-intermediary force.
• Problem: no built-in payment rail for web, so it’s more profitable to work for Google than build your own thing.
• Blockchain must inherently disrupt monopolies.
• Further reading: AH’s “Crypto Canon.”

AMINO Capital is a venture firm based in Palo Alto, focusing on seed to growth stage investments in big data and data driven technologies, including over 150 high growth startups, with over 21 successful exits, 7 Unicorns, and over 17 startups with over $100 million valuation, including Assemblage (acquired by Cisco), Orbeus (acquired by Amazon), Ozlo (acquired by Facebook), GrokStyle(acquired by Facebook), Woomoo (acquired by Priceline), Contastic (acquired by Sugar CRM), Mobike (acquired by Meituan/Tencent), Evertoon (Acquired by Niantic | PokemonGo), Yiqixie (Acquired by Kuaishou/Tencent), Chime Bank, Voyage, AIFI.io, Vicarious, Paperspace, Skycatch, Webflow and Grail.