A conversation with Ryan Lackey, Tezos Foundation
We greatly appreciated the opportunity to speak with Ryan Lackey, Chief Security Officer at the Tezos Foundation, during his recent trip to Tokyo. Here are some of his key comments. For the whole conversation, please check out our podcast on Apple Podcasts, or any other major podcast platform.
…on his early steps
I have been interested in computer security and cryptography for a very long time. When I was about 10 or 11 years old, I discovered some mailing list forums and some books about how individuals can use technology to protect their own rights against larger groups of people. Historically, this has happened with certain technologies in two ways: certain things are really good for individual rights versus a larger group, and then certain technologies are very good for larger groups versus individuals. Cryptography is unique, because it it not one of the things, it is actually really good for both.
I found the cypherpunks mailing list back in the 1990s, where almost all the technologies that are being worked on today, in terms of electronic payment systems, digital privacy, etc., were discussed and prototyped. But it was too early for a lot of the technology to be commercially deployed. Just getting a basic piece of software to run on your computer was a huge challenge. The only people really using this technology at the time were other tech people.
It was only once the technology became easier and easier to use, and available to a larger pool of people, that individuals who have genuine problems — people working in human rights, people that are living in countries that have challenges with the payment systems, etc. — were able to take advantage of the technology. If it was only available to people that are living in very rich countries and that are working in technology, there is not as much use case for it. And that is what really got me interested.
…when the tide turned
Throughout the 1990s, we were just building the underlying infrastructure for everything. The internet boom in the US, and more importantly, the overhang after the bubble burst, when all of these resources became available cheaply, served as huge catalyst. All the investments had been written off, and it was very cheap to build stuff. From 2002 to 2004/5 was probably the most interesting time for all this technology, because all the components were there, and the technology was finally good enough to build things. Just look at the companies founded around that time. Google created the early parts of social networking, PayPal became the first widely successful non-bank payment system.
…his first startup experience
After spending 2003 to 2010 working as a defense contractor in Iraq and Afghanistan, in 2011, I started a company with a couple of my friends from the Bay Area that made it possible for cloud computing to prove to the end users that the software was was doing what they wanted it to do. It was a secure way of doing cloud computing. I ran that company from 2011 to 2014, then I sold it to CloudFlare, a large DDoS mitigation company.
…the move intro crypto and Tezos
While I was at CloudFlare, I was learning a lot about network protection, DDoS mitigation type stuff, and also followed crypto again. I was on the cryptography mailing list run by Perry Metzger, where Bitcoin was announced. I was much more interested in how to apply computer security technology to help crypto projects in general, not necessarily the use case for crypto projects themselves. I was friends with Arthur Breitman, one of the co-founders of Tezos, as well as some other people in the Tezos ecosystem. I was with Arthur and Kathleen during the fundraiser to make sure nothing would happen in terms of people attacking the fundraiser technology. We saw a couple things that were either mis-configured remote systems or potentially network attacks, but the system was designed to be resistant against a lot of attacks, so that went pretty well.
…how to measure Tezos’ success
I do not really track the Tezos price itself as a metric for success. I think you could track market caps at a very high level, just to see what the interest is in various models. But we do not really know what the correct metric is to track to know how successful individual projects are. I suggest that “meaningful use” is the standard that everybody should be going for. It does not do any good if there is a huge treasury held by somebody, while one token is traded back and forth once a year. If there is a system that a lot of people are actually using for significant applications, and these applications could not have happened without that cryptocurrency, that is probably the greatest way to value the system. And by that metric, Bitcoin, Ethereum and Tezos have all been very successful.
Bitcoin obviously was the first cryptocurrency that was in wide use. Ethereum was the first broadly adopted smart contract platform. And by now we have seen smart contracts work successfully. And Tezos is a system designed from the ground up for security and community governance. And we have seen those things work exceptionally well in practice.
…on Tezos’ governance
I believe that the Tezos’ governance, including the invoice approach of inflation funding for new extensions to the system, will be a key ingredient that will make Tezos successful over the next 20-30 years.
One of the big challenges with cryptocurrency projects is that you end up either with a fundraiser or an ICO raising a huge amount of money at the beginning, or you have challenges to incentivize developers to contribute to the system after a while, because they have not been part of this initial funding round. You then end up with forked protocols, making you lose a lot of the network effects in the system.
The Tezos model of making proposals to the community and get inflation-based funding for new projects is a very good incentive model. We have not necessarily seen every possible way this works in practice. There are many different angles to this, maybe someday there will be venture capital funds that that will invest in a project, and the investors will be able to recoup on an exit later. It might be that some community groups get established and develop the system further. So we are still in the very early stages, but I think we have set a good foundation.
…on the role of the Tezos Foundation
The role of the Tezos Foundation is to advance the Tezos ecosystem, and that is its statutory purpose. We are making sure that the core development teams are funded for their projects. And in some cases, we are actually pushing them to hire more people and expand faster. We are actively trying to find more teams to build the supporting software around the core protocol. The Foundation also provides grants on inbound requests for funding from various sources, everything from making t-shirts to running community events to building new storage engines to reference libraries and smart contracts, new programming languages. Grants fund a lot of this development.
I believe that in the very long term, many of these initiatives will be funded by activities on the network itself. So either invoices or fees charged to users. The role of the Tezos Foundation is definitely very front-loaded to get all the foundations in place, but you do not need to have that level of support when a system is is fully mature and used widely.
…on the Asian crypto ecosystem
I was just with Elevated Returns in Thailand, they are likely going to be the first STO project that launches in our ecosystem. Overall, there are three or four of them that are racing to get launched first in the first quarter of 2020. Elevated Returns recently got regulatory approval for their exchange. They have to get some other regulatory things done. But it’s really the last steps of exactly how the final demo works for the regulators, how the exact audit standards for everything are done. They are very close to launching, and we expect them to be a major real estate exchange for the Asian market.
Thailand is a very interesting market because the Thai SEC, their regulator, is very technically competent. They were open to getting help in writing appropriate legislation, from Thai experts in both securities and in technology, and they have a vision that is actually more expansive than even people within the technology industry have. They want to move as much of the market into tokenized technology as possible over the next five to ten years.
They have technically high requirements, but in terms of process, it is fairly straightforward. They understand that there there might be risk in applying new technology. And they are willing to accept some potential difficulty if there is a commensurate reward in making their economy much more efficient. All that will make it easier for tech companies to raise money. A lot of regulators around the world are focused only on the downside risk. It is difficult for them structurally to be focused on making sure positive things happen as well.
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