Angie Lau: Well, the world is banking on blockchains to transform our future. So how far are we from living our lives in the new digital age? And have the current blockchain and decentralized projects been able to tackle the problem of single-point-of-failure associated with centralized software and companies? That’s a lot of technical jargon for what we’re really trying to answer — how secure is our future in the hands of technology?
I’m super-excited to welcome you to Word on the Block, the series that takes a deeper dive into blockchain and the emerging technologies that shape our world at the intersection of business, politics and economy. It’s what we cover right here on Forkast. I’m Editor-in-Chief Angie Lau.
Today we’re in conversation with Jason Lee, chief operating officer of Algorand Foundation, which is working on enabling a decentralized, inclusive economy based on the Algorand blockchain. Thanks for joining us, Jason. It’s really great to have you here.
Jason Lee: Thanks, Angie. It’s a pleasure to be here, as well.
Lau: Well, first, when we talk about blockchain decentralization, often that’s not entirely the case. At times, there are ways to influence the network. We all have heard about that ‘51% attack,’ for example — when a single person or entity gains more than 50% of a blockchain’s hashing power.
Jason, can you explain for those in the audience trying to understand — and a lot more understand it a little bit more these days — but still, to catch everybody up, why is true decentralization something that you’re working on at Algorand and Algorand Foundation? And how exactly are you all trying to achieve that?
Lee: Yep. So, just to take a step back with the Algorand Blockchain itself, designed by MIT Professor and Turing Award winner Professor Silvio Micali. He came on board to essentially solve what we know as the ‘blockchain trilemma.’ And out of the ‘tri,’ we have security, scalability and decentralization, and I think the area of focus that you talk about is decentralization.
It’s a very important piece, because that’s what makes it uniquely capable of really delivering that global promise of blockchain technology. And why is decentralization so important? I think, in one word, intermediaries. Intermediaries have shaped our world. And that has really been the whole premise of Web 1.0, Web 2.0, Web 3.0 — Web 1.0 being the focus of just a one-way function, Web 2.0 is where there are actually intermediaries that help us engage on the internet, as we know, but in Web 3.0, we’re removing intermediaries, and that results, in a very high-level, simplistic way, in decentralization.
Algorand serves to meet that purpose. We’re on a path towards decentralization — in fact, even decentralizing our Algorand Foundation itself, through our home community governance program. And that’s the most exciting piece about how … the Algorand platform, and also across the industry, many organizations are looking to sort of decentralize … So it’s a bit (of a) high-level (account) of what decentralization is.
Lau: In a macro-environment where we see centralized points of power — even politically or economically or financially — there are arbitrary, it feels like, centralized decisions that then are meted out for everybody else, whether you like it or not. Does decentralization overcome that? Is this the promise of a different set of structures? Is it a different infrastructure that we potentially could all participate in?
Lee: Yep. I think the answer is ‘yes.’ But there’s a little bit more complication to it, with guardrails included, because decentralization enables the direct transfer of value. A good example is the Ukraine crisis. With this crisis, there are a lot of groups, fundraising and activities happening. And I, too, personally have a friend, a former colleague, who’s in Ukraine, and he just told me last night he just moved with his family to the western part of Ukraine, and I was able to transfer some digital assets over directly to him through a wallet, and that’s all done on the blockchain network. And that’s sort of a great example of the beauty of decentralization itself. Rather than going to an intermediary, where there’ll be associated costs, (and) we don’t know exactly where the funds go, that’s one example of it. And that’s just exponentially put into multiple use cases, where we may not know exactly how things are being formed or moved, except that it’s decentralized as well as open and transparent. That makes decentralization unique here.
Lau: It absolutely is true. And when we think about blockchain and the ecosystem that’s being built out, once upon a time we really thought it was going to be ‘one protocol to rule them all.’ Algorand and so many other protocols emerged to essentially debunk that thesis. Where do you see this multi-chain universe kind of leading all of us here?
Lee: So I think, as they say, all roads lead to Rome. I think all roads lead to … a multi-chain future, and beyond Algorand, other protocols are working towards it. In fact, in Algorand itself, we have just really been working on new technology upgrades. One of them is stake proofs, which actually brings us into an interoperability future, a smart contract, the contract calling, which actually allows us to, again, move away from intermediaries, to more decentralization, not (just) within our network but across networks, as well.
And we’re also working with other chains. So, for example, we just called out a grant for EVM (Ethereum Virtual Machine) compatibility, so that Algorand can work with the Ethereum Virtual Machine. And these are all really the building blocks and the scaffolding towards building a multi-chain future. And the way I see it in our teams is a bit like we’re Planet Algorand, and there are different planets, and you want to just build interplanetary communication and transport and infrastructure and growth throughout our economies.
Lau: But what’s distinct about Algorand? What’s the value proposition that’s unlike Ethereum or Solana or Cardano, etc.
Lee: Algorand is unique because it achieves transaction throughputs at the speed of traditional finance, but with immediate finality or near-zero transaction costs, on a 24-7 basis. There hasn’t been any downtime since we launched in 2019. On top of that, we believe very strongly in sustainability. We’re a carbon-neutral, if not -negative platform. And we have a very unique proof-of-stake consensus mechanism developed by Professor Silvio, of course, through his verifiable random functions — VRF. And this whole concept of pure proof-of-stake really solves that blockchain trilemma. And that’s what makes us unique.
And on top of that, we also are really focused on not just building the blockchain promise in the enterprise and traditional sector, but we’re really deep into the DeFi (decentralized finance), NFT and gaming spaces, so we try to capture across the gamut of things where it’s almost like there’s something for everyone in this creator, borderless economy.
Lau: I want to dive a little bit deeper into contract calling. This is a fascinating new layer that allows even within blockchains to speak to each other in a way that creates efficiencies and removes perhaps even that third layer, or even that needed interoperability layer, where right now a lot of blockchains are interacting with each other. This is direct. Can you share a little bit more about this concept of contract calling and (how) it appears to be enormous for finance?
Lee: Before contract-to-contract calling, there used to be contract-to-application calling, and that’s essentially directly connecting with the application itself. Now, contract-to-contract calling would mean that a contract calling another contract in the type of like an inert transaction, and since it’s a transaction initiated from inside a smart contract, as such, that contract would then be part of that same transaction group, so that means that all contracts are executed together or none of them are.
So in essence … it allows for a lot faster, a lot more seamless function of things. Think of it as just life becoming much smoother and in place, because it’s not contract-to-app, app-to-contract, but it’s directly a connection between both parties through that inner transaction, or that inner circle. That’s how contract-to-contract calling works. Now, in applying that to the world itself, (there are) examples like decentralized finance with exchanges, where you can actually then have multiple transactions occur in a single time, and … an NFT marketplace, as well, if you were to, let’s say, purchase an NFT that has a number of assets in place … that contract-to-contract calling allows for all the transactions to take place and occur in a really seamless manner.
Lau: What I like about it is that it’s really functional for the end user, that at the end of the day, I can program my contract, and whoever meets the standards of whatever I put in place — which is the lowest, best price, or the lowest possible fee — my contract is smart enough to execute on that versus me, a human… maybe there’s some FOMO or psychology at play … ‘Oh, should I go with this? Maybe I should go with that. Who’s got the best deal?’… and then, in that split second, you lose out on it.
But contract-to-contract, it seems as if there’s an ability for you to even just design your own algorithm and then have it execute directly with the other contract that meets whatever it is that you’ve designed or coded in. That’s really incredible for finance.
Lee: If you think of it, in a real world where you need to sign multiple signatures, or one document, there’s a whole process where purchasing an asset is like a property or a car or so on. In the future, where contract-calling-contract takes place, this bridges that. It becomes so seamless, there is no process where you need all your thumbprints and your signatures and all these additional pieces to actually move forward to purchase an asset or to be involved in a particular economy. It’s a very exciting technology.
Lau: Jason, I want to know more about that. I want to know more about what’s happening in the Algorand ecosystem and the role that Asia is playing … We’re going to talk more about whether decentralized projects can shake off the influence of their founding developers and the role of Asia in building a new ecosystem for the world. I want to pick back up on this concept, Jason — the impact of a single leader on decentralization. There’s the theoretical and then there’s the real world. And, case in point — Andre Cronje, the founder of Yearn Finance and perhaps one of the most influential DeFi leaders, very publicly quit the industry. And as a result, we’ve seen the Fantom protocols’ TVL (total value locked) tank massively, along with the Fantom and Yearn Finance tokens. And so, back to decentralization and back to the impact of Cronje’s announcement. How much can a single entity, a single event, impact investor confidence here?
Lee: Yeah, I understand, and let me just take it back to the three key attributes of decentralization, or of decentralized finance. The first is that the settlement is done on a trust-minimized blockchain platform, meaning that it’s the base layer, it’s digital assets, and it’s peer to peer. The second piece is that the services are non-custodial. So the element is that no one takes full ownership or control of custody over the investors, as it’s used to hold onto it. And the third piece of decentralization is that the services are open, programmable and composable. And that’s where Cronje and his team comes in — that there are elements where you can add additional components to the blockchain network itself. And I guess that’s one piece that’s important, because for someone like him to decide to move on, he actually takes out a part of what he prefers. But the first two elements state the fact that the assets are non-custodial, meaning that the assets are the holders’, and it’s trust-minimized, meaning that you still can transact.
So, I believe Yearn Finance and Fantom have not seen any specific loss in tokens, but probably a loss in confidence. And I think one thing that we don’t usually talk about is the reputational element of a blockchain platform. I think we can have an amazing technology, but it’s the people driving this technology that actually makes it count. So, I think for him, that reputational aspect has led to what’s going on. But without commenting too much on the project, I think one important part of the piece is, it’s the talent and the people that are behind.
Lau: Staying on the topic of leaders, or, rather, leaderless protocols: Bitcoin — this is the first decentralized peer-to-peer network in the world. We don’t even know if it’s one person, if it’s a team of people, if his or her name is really Satoshi, who this person or persons are. But the fact that Satoshi left the network, and since then, Bitcoin has become the No.1 cryptocurrency — it seems to solidify the principles of decentralization. Do you think that, in fact, there needs to be removal of personification of projects, that the person or people who started in the first place actually do need to fall back into the background and let the technology speak for itself.
Lee: I completely agree, Angie, and I think that this is, like, an evolution. Back in the early days, I was there in 2016, 2017, when everyone was like, ‘Who is Satoshi Nakamoto?’ And people claimed to be him or them or her. And now, no one really talks about who Satoshi is anymore. Everyone has now moved towards, ‘Hey, how is Bitcoin doing as a network itself?’ And I think it’s great that we had a face and a name to the platform in the beginning, but really, in the future, we shouldn’t be talking about this. For example, in the early days, Henry Ford, when he started really industrializing the car manufacturing space, everyone was talking about Henry Ford, and said, ‘Oh, if you ask me what we want, we want faster horses. But he’s building cars.’ And now, no one really talks about Henry Ford, unless we studied him as a case study, and we all just drive a car, so — same way, as well. We’re not so preoccupied right now about who Satoshi is, but there are important aspects, especially in this stage of the industry that we’re in, so it’s good to acknowledge the people who are founding it, but in the future, I do hope that it would be sort of almost like a faceless, nameless endeavor, but having also a really deep appreciation of those who have brought it here, to what we can appreciate now.
Lau: Well, absolutely. I mean people are what builds technology — and, speaking of which, also regions. The role of Asia. How do you regard Asia’s role, the people, the region and the ideas that are coming from Asia to build the ecosystem? How do you think about it at the Algorand Foundation?
Lee: I think Asia is extremely crucial. Asia is a continent … I think there are about 4.5 billion people, more than half the world’s population, a rising middle class, a really young economy, a whole group of nations that are really keen to sort of break different barriers, be they poverty, the gender ceiling, education… and moving to the next level from a social mobility perspective. So, I think we’re seeing a lot of growth happening in Asia, especially in this industry. It’s not excluded, as well.
So, for example, in the new innovations like NFTs, gaming, metaverse … we’re seeing really strong growth in Asia, and it’s starting to be a really important hub for us right now. Even at Algorand Foundation as well, there’s going to be a lot of focus and attention on growth in Asia as a continent and making sure that that happens. We’re hosting events, activities, infrastructure, and I guess if you put it from a traditional perspective, we have a lot of direct foreign investment into Asia itself. But in a sense, because we live in a global place, Algorand Foundation is actually incorporated in Asia, in Singapore itself. And we believe in the ability for a lot of good and a lot of value to come out of Asia because of this.
Lau: What exactly do you think is going to drive growth with blockchain adoption in Asia? What are the projects that we’re seeing? You mentioned some of them — NFTs, play-to-earn. This is all really exciting stuff for a very young, demographically-driven region trying to leapfrog into the future. But what are the projects that excite you right now, as you view it at Algorand? What are you seeing coming out of Asia that excites you?
Lee: At Algorand itself, what we’re seeing is a lot of grassroots, microtransaction-based communities. So, for example, in the DeFi space in Asia-Pacific, we’re seeing Uni, Algomint, PAC. These are all decentralized exchanges, bridges and DeFi applications that work in the NFT space. Actually, it’s hard to say — because everyone’s working distributed right now — to say that they’re based in Asia, or something, but the users…
Lau: It’s very true.
Lee: That’s right. But there are a lot of activities happening. So, for example, Opulous is a platform that looks into the music and entertainment industry. And I know the team here are looking at Singapore and across the world, but there’s just a lot of concentration of users in this space itself, and in the gaming space, as well. We’re seeing a lot of mentioned microtransactions taking place, so it’s not the big users that we see, but more decentralized users. And the trend that we’re seeing is that there are a lot of heavy activities from a digital asset ownership perspective in other parts of the world. But in Asia there is this high value of numbers in small transactions, so even when we look at our internal dashboards, we’re seeing a high amount of wallet growth — and actually even monthly active wallets — that are coming out of different parts of Asia.
Lau: That’s enormously fascinating. And it’s reflective of a very large unbanked percentage of the world that exists in Asia. And it also speaks to the need in emerging and developing markets versus mature markets like the U.S. and Europe, (where) the systems are already in place… people already have their ‘OS’ systems… they already have it figured out. But micropayments suggest that we’re going to try to figure it out, and this is the technology that allows us to do it.
Lee: Yeah. I was just speaking in a panel at Barclays bank in Singapore last week, and we were having another panelist guest saying that he’s developing a product that enables the payment of bills, day-to-day services, transport, with digital assets, and that’s happening in the Philippines, and soon Indonesia and Malaysia. So, you’re seeing users that don’t have a bank account, they don’t have a digital wallet, per se, but they do have a digital asset wallet through this platform to pay for their day-to-day services, so this is a form of financial inclusion, sustainability… and actually brings people up upward in the economic cycle through the use of digital assets.
Lau: That is fascinating … We’re going to dive into Algorand’s partnership with Waivlength, this social media concept in decentralization. We’re going to hear all about it, and, of course, the future when it comes to Algorand and what it plans to build out with its ecosystem.
Web 3.0 has been such a loaded and widely used umbrella term that people often struggle to understand its true meaning … We’re going to figure out what that true meaning is, and try to at least peel away some layers of the onion to get to the truth of Web 3.0, and the impact and the opportunity. Jason Lee … COO of Algorand Foundation, what does Web 3.0 mean to you?
Lee: Web 3.0 means to me where you have direct interaction, community-to-community, rather than corporate-to-community, which is more of an organized corporate body, sort of, on a high level. And Web 3.0 to me means economic empowerment, individual freedom and ability to transact in a truly borderless economy.
Lau: And that borderless economy. Those communities are more important than ever before. If you just take a look at … not only the tensions that exist around the world, but even our intimate, day-to-day lives where we’re really questioning… our social media platforms… are we the commodity? What have we given up in terms of privacy? All of those things. I want to ask you about Waivlength here. This is a decentralized social media platform. What does that mean? That means nobody owns it? Everybody owns it? What is this concept of a decentralized social media platform, of which there are several out there? Why do you think it’s important to fund this project?
Lee: So for context, Waivlength, (an Algorand Foundation) grant award recipient, the key area is, as mentioned, social media in a decentralized way. And I think the biggest piece of this is actually the ownership of what you share on social media, and we all know that when it comes to social media, the real owners and (those who have) access to all your content that you post online are the people who are hosting the platform. But with an organization like Waivlength and the like, they want to empower the ownership to users, and then you can do what you want with your data — whether you prefer to keep it, publish it, and for some people, (who) want to sell it, as well, they can do so. And that’s sort of one unique piece of decentralization, as we’ve been talking about. One part of it is the ownership of data.
Lau: That ownership of data should rest with us right now. If you migrate right now off a centralized platform, you lose all of that data. You can’t take it with you. What kind of economy does that create in future, do you think?
Lee: I think it creates an economy where every individual now is super-empowered, and you have the ability to own and to dictate and to decide what you prefer to have. From fungible to non-fungible tokens to custody of your own assets, or if you prefer not to do it. So all of us have more options right now. If you look back through evolution again, we see that there were fewer options in life, as opposed to now, where you have entertainment, you’ve got travel, you’ve got commerce, you can shop online and have things delivered to you. Your taste buds have grown compared to thousands of years ago. It’ll be the same thing for asset ownership, albeit in a digital manner.
Lau: Jason, I’m going to coin this phrase right now: We’re creating an economy where the CEO is you. We are all the CEOs. We are the CEO of our own lives. And this is the promise of that technology — to own our own assets and be able to economize off of that. It’s a fascinating world. This was a fascinating conversation. And I’m going to welcome you back on the show anytime, because there’s a lot more to discuss. But Jason, thank you so much for joining us on Word on the Block. It was great to have you.
Lee: You’re welcome. Thank you. It was a wonderful interview, as well.
Lau: And thank you, everyone, for joining us on this latest episode of Word on the Block. I’m Angie Lau, Forkast Editor-in-Chief. Until the next time.