Alexander Zaidelson, the CEO of Beam, a cryptocurrency being built on the MimbleWimble protocol, talks about how he came to start Beam, how it differs from Grin, another cryptocurrency being built on MimbleWimble and what types of users the cryptocurrency is targeting. See the full show notes at: http://www.forbes.com/
Interested in a weekend of yoga, nature, healthy food and talking crypto? Then join me, Meltem Demirors of CoinShares and Jalak Jobanputra of Future Perfect Ventures at Omega Institute in Rhinebeck, NY, from September 20-22. Sign up today! https://www.eomega.org/
Thank you to our sponsor!
CipherTrace: http://ciphertrace.com/
Episode links:
Beam: https://www.beam.mw
Medium: https://medium.com/
Overviews of Grin vs. Beam:
https://bitcoinmagazine.com/Comparisons of Beam to Zcash and Monero:
https://medium.com/beam-mw/Beam Roadmap: https://medium.com/beam-mw/
Beam emission schedule: https://medium.com/beam-mw/
Beam FAQ: https://www.beam.mw/faq
The Block on Mimblewimble: https://www.theblockcrypto.
Wallet vulnerability: https://medium.
Blockchain stoppage: https://www.
Transcript
Laura Shin:
Hi, all. Laura here. Just a quick note before we get started today. I love doing this podcast, but the conversation is pretty one-way. It would be great to have more of a dialog, and there’s a fantastic opportunity coming up. Meltem Demirors of CoinShares and Jalak Jobanputra of FuturePerfect Ventures and I are all teaching a crypto workshop at Omega Institute in Rhinebeck, New York from September 20 to 22. It will be a weekend of, yes, talking crypto, but also of doing yoga, eating healthy food, and enjoying the outdoors on Omega’s 250-acre campus. From my days as a yoga instructor I remember many of the yoga and meditation teachers I revere would lead workshops here, so I’m so honored to be teaching my own, even if it’s on a very different topic. Check out the show notes for the link to sign up, and I hope to see you all there.
Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I’m your host, Laura Shin. Unchained is now on YouTube. You can find the most recent episodes there every week on the Unchained Podcast channel, and we’ll soon be getting the full archive up. Also, if you’re not yet subscribed to my weekly newsletter, go now to unchainedpodcast.com to sign up.
Cipher TraceCipherTrace makes it easy for exchanges and crypto businesses to comply with cryptocurrency anti-money laundering laws, avoid illegal sources of funds, and maintain healthy banking relationships. CipherTrace is helping you grow the cryptoeconomy by keeping it safe and secure.
Laura Shin:
My guest today is Alexander Zaidelson, CEO of Beam, a cryptocurrency based on the Mimblewimble protocol. Welcome, Alexander.
Alexander Zaidelson:
Thanks, Laura. Really excited to be here. Love your podcast and I expect a very interesting conversation.
Laura Shin:
Last week I had on core members of the Grin team. Listeners should definitely check that episode out if you haven’t yet. It was fascinating, and they described the Mimblewimble protocol, but since this is complex technology and it’s always useful to hear different explanations, can you describe the Mimblewimble protocol?
Alexander Zaidelson:
Yeah. Absolutely. So Mimblewimble protocol is a very nice invention that allows for full confidentiality on a blockchain without any scalability penalty. Now, the protocol works very differently from all the previous families of protocols, especially Bitcoin and all the related protocols. So the key thing I would say is that in Mimblewimble there’s no such thing as an address. Instead, every user holds a set of keys and each one of those keys locks a coin or a UTXO, right? I like to imagine that as a safe deposit box with coins.
Laura Shin:
Unspent transaction output for people who don’t know what that is.
Alexander Zaidelson:
Unspent transaction output. That’s correct.
So, the blockchain, if you look at it, it actually holds a set of all those safe deposit boxes. All of the safe deposit boxes look exactly the same from the outside, exactly the same kind of gibberish, right? You cannot tell anything, you just see that there is a lot of those safe deposit boxes, and each box has an owner, but only the owner knows which one is theirs, right? So when a transaction happens, the owner of the input boxes opens them, the recipient creates a new deposit box that would be an output, and the sender puts the change into output for herself if needed, and this construction of input safe deposit boxes and the output safe deposit boxes is signed by both parties, and then it’s sent to the blockchain for validation.
Now, the miners, the validators, they don’t know neither who sent, who is the sender nor who is the recipient, and they also don’t know the values. The only thing they actually need to validate is that the sum of all the inputs equals the sum of all the outputs, and also that all the values are positive. This is very important, and by validating that they actually pronounce this transaction as legitimate and this, eventually this new state of the blockchain becomes known to everyone, right? So, the transaction is actually a transition from one set of safe deposit boxes to another one. So, that’s Mimblewimble.
Laura Shin:
And when you said that it’s important that all the values are positive, can you just walk us through, like, why that is and what it would mean if one was negative?
Alexander Zaidelson:
Absolutely. Absolutely. So, as I mentioned, if me, Alex, I want to send to you, Laura, let’s say 50 Beam, I would take a safe deposit box of 80, for example, let’s say that’s what I had because I just mined it. So I would divide it. In this transaction our input would be 80 and one output would be 50 and the other one, the change for myself would be 30, and then, you know, we validate it. Yeah, whatever, the inputs are equal the outputs, right? So 80 equals 30 plus 50. All good.
But we could do a neat trick like that. I could take 80, give you 180, and give myself minus 100, right? The sum of input would still equal the sum of the output, right, because 80 equals 180 plus minus 100, right? It’s 80 on both sides, but here we would actually print money, right? We would take 80 and create 180 for you, and then I would get a negative amount of money which actually would create an overflow and might even create, like, a huge number, and that’s obviously illegal.
So that’s why the validators need to make sure that all the values are positive, and for that we’re using a flavor of zero-knowledge proofs called Bulletproofs that actually validate that all the numbers are in a certain range, between zero and a very large number, again, without the validators seeing the actual values.
Laura Shin:
How did you come to hear about the Mimblewimble protocol and then launch Beam?
Alexander Zaidelson:
So, the team heard about the protocol somewhere in the end of 2017, and back then, you know, there was already some development going on by the Grin team, and it was decided that it can be good to create an alternative implementation. We had a good development team and started working on that. We on the team all share an understanding that a currency must be confidential, right? If we really want something to be used as a monetary instrument, confidentiality is of paramount importance, because nobody actually likes their finances to be exposed, not private people and definitely not businesses. So if we hope to realize the crypto dream of cryptocurrencies being used meaningfully as money, whether it’s store of value, means of exchange, or a combination of that, that needs confidentiality, and the Mimblewimble protocol actually is the first architecture that allows confidentiality, has it built-in from the ground up, and has also no scalability penalty, right?
Other implementation of privacy coins like Zcash, Monero, and others, they do provide privacy, but at the price of a very large blockchain. Transaction sizes are much bigger because you have to hide stuff, while on Mimblewimble the protocol is built in such a way that you don’t have anything actually to hide, and it’s much more scalable. So we realized that it was the path to the future, and thus the project was born.
Laura Shin:
And how much lighter do you project it will be than those blockchains? Like maybe per transaction or per some unit?
Alexander Zaidelson:
So our calculations suggest that it should be like one third to one tenth of Bitcoin per transaction. It’s still somewhat early to say, because the size of the blockchain is actually dependent on the number of UTXOs mostly, and it depends on the usage, right? So if we all use a lot of different…I mean, if we were to make a lot of very, very small transactions, you know, breaking down each of the UTXOs into like, millions of pieces, then blockchain would grow in one way, but if we used, you know, larger amounts, then it would be smaller. So we’re doing some analysis. So right now, I think the blockchain per transaction is somewhat smaller than Bitcoin, but not much, but again, right now the blocks are still not full, so we cannot say that the, you know, it’s been just three or four months, so we’ll be continuing to monitor that, and eventually it will become much smaller per transaction.
Laura Shin:
And then compared to Monero and Zcash, do you have a projection?
Alexander Zaidelson:
So, in our research, we saw and we did some calculations and we published an article in our Medium post just looking at officially published stats of blockchain sizes and transaction counts. So Zcash was like nine times or ten times bigger per transaction than Bitcoin, and Monero before the latest upgrade was I think 25 times bigger than Bitcoin, and now it’s just five times bigger than Bitcoin per transaction after the new upgrade.
Laura Shin:
And for Zcash, were those numbers based on the shielded transactions or all transactions, like including…
Alexander Zaidelson:
Total. Everyone.
Laura Shin:
Oh, okay.
Alexander Zaidelson:
Everyone. So probably a shielded transaction is even much bigger.
Laura Shin:
Okay, and what were you doing before you launched Beam?
Alexander Zaidelson:
So myself, I had a background in software development, entrepreneurship. I started my first company in 2005, I co-founded a company called Nareos, and we were doing a lot of things in peer-to-peer file sharing networks that were super popular back then. You might remember eMule, eDonkey. So we were doing, now I would say it’s some kind of civil attacks of those networks trying to push legitimate content into those networks to monitor those networks. We also did peer-to-peer file sharing on the mobile, so it was pretty exciting back then, and you know, now when I’m looking at the blockchain I’m seeing that blockchain solved some of the technology problems that were inherent in those P2P file sharing networks where, as I mentioned, you know, an actor that was, you know, whose purpose was not exactly to share free content, but say to monitor the network, could easily do that or even push content that was, you know, paid, which looking back, it was kind of a stupid idea because obviously very few people wanted to pay us to buy songs on eMule, but you know, we did that as well. We did, you know, kind of social networking, file sharing on the mobile back in the Symbian days, if you remember that operating system. It was very nice technology by Nokia.
After that, I had another startup where I actually almost singlehandedly created a piece of software that was a desktop dictionary. You could click, like, any word on your screen, either in the browser or in your Word document or anywhere, and get instant translations to like, multiple languages and definitions from Wikipedia, Wiktionary, you know, videos, or pictures describing the notion. That was a very nice little startup which was eventually acquired by a large Israeli conglomerate.
Then I did product management. I worked for a company called WeFi. We were doing big data analytics of networking traffic and then of application usage. Worked with carriers and cable companies in the States, and then I spent about two years in a venture fund here in Israel investing in growth in late stage companies in various areas from semiconductors to software to 3D printing and such.
So a pretty diverse background, and to add to that, my MA is in applied linguistics, so I kind of…and I think it’s an…you know, I like to think that it’s good to have a broader view on different technologies, and you know, different things in general.
Laura Shin:
I saw on your FAQ that some people asked why, if you liked the Mimblewimble technology, you didn’t just join the Grin team, since they had started working on an implementation of the Mimblewimble protocol back in the fall of 2016, and you guys got started in March 2018. So why not just join Grin?
Alexander Zaidelson:
So you know, we believe in this funded startup mentality, and we believe that a dedicated team that gets paid can get do much more than a team that is not incentivized, and that’s why we actually built Beam, and I think we’ve proven that our execution is really fast and pretty high quality, and we plan to continue doing more and delivering more stuff really quickly. So we thought that, again, a much better way, a much faster way, and hopefully higher quality way to create a project like that is to have funding, and that actually enables you to do a lot of different things, you know, starting from traveling to conferences to hiring a very good development team and paying salaries, and a lot of other stuff. So most, from my experience, most of the startups in the world are funded and also get some benefit in the success, from the success of what they’re building. So we thought it was great technology and a great opportunity to build something very valuable for the community, and do it in a fast way and a good way.
Laura Shin:
All right. Yeah. We’ll come back to that topic a little later, because I want to ask a bit more about that, but first let’s kind of draw out some more of, you know, what Beam is about. So who are the customers you’re targeting with Beam?
Alexander Zaidelson:
So, well, right now the customers are, you know…Beam is…so let’s take a step back. So, Beam is a confidential cryptocurrency trying to best in class confidential cryptocurrency both in terms of performance, privacy, usability, everything. So, right now our customers are crypto enthusiasts, miners, traders who are doing stuff with Beam.
We really want to push Beam as a means of payment for various services, you know, starting from privacy-oriented stuff like VPNs and eventually more. So we’re now working on integrations with payment processers so that merchants can start accepting Beam. Right now, crypto is unfortunately not used that much as means of payment, you know, I’m not talking just about our currency, but crypto in general, so it will take time, but we want to be there once this starts happening. We want to have all the pieces in place.
Now, later down the road we also want to enable businesses to accept confidential currency and eventually be able to pass AML tests for the currency if they desire to do so. So the bigger, long term vision is to create a layer that is the best confidential cryptocurrency, but then add more layers that would allow people who want that to create some sort of history that can be used to also pass AML and also present audit.
Laura Shin:
Yeah. Can you walk through what that would look like, then? So maybe there is a business, and you gave that example of a VPN, and I wasn’t sure, by that, do you mean a customer using a VPN could pay using a privacy coin?
Alexander Zaidelson:
Yeah. That’s what I mean. That’s a use case that is very valid today, right? There are a lot of places where people don’t want to expose their internet traffic to the government or to other people, they use VPNs, but if we think of it, now, okay, I use a VPN but usually I have to pay for that, so the same government can actually know that I paid for this VPN if I’m not using a confidential means of payment, and Beam is such a means of payment that can be used for acquiring those services. It kind of is a perfect match, but there are other stuff as well, of course. Other stuff as well.
Laura Shin:
And when you were talking about KYC, like what’s an example of a company that would do that with auditing, et cetera?
Alexander Zaidelson:
So the KYC is much later down the road. The vision is that, you know, imagine a department store or an online merchant that is like Amazon, right, or another retailer, a web store that sells, you know, books or stuff, or you know what? Let’s just mention a regulated exchange, right? Like I think the sponsors of this show are exactly talking about AML. So an exchange, in some places, when you bring a bunch of coins to the exchange, they want to do some tests, right? They want to make sure that they won’t be attacked by the government for, you know, failing those AML tests. So what we want to enable in the future is to enable the user of the coin to prepare in advance and store some sort of a history that would prove that the money was acquired in a legitimate way, or in other words, pass AML tests, but while still being fully confidential, right? Because today, with Bitcoin you can pass those tests, but the price is that everybody sees everything, right? With a confidential currency today it’s very hard to pass those tests because there is no trace at all, but imagine a situation where you could create such a trace, which would still be confidential, but you could show it to somebody you trust or kind of have to trust, and then they would check this history and say, yeah, okay, those funds are legit and we can accept them.
Laura Shin:
So, how do you persuade businesses to use Beam? Is it going to be done with a typical sales team who go out pitching this cryptocurrency to businesses? And how will that work when both the merchant and then their supplier, whoever, when both sides need to agree to use Beam? Like, do you convince both sides or how does that part work?
Alexander Zaidelson:
Well, so first of all, businesses do realize and will realize more that using a nonconfidential cryptocurrency is a problem, right? We don’t need to go door to door and try to sell them on that. We’ll do that through partnerships with payment integrators and so on. So our goal is just to enable that. So first, businesses will realize that they need confidential currency, because as a business you cannot just expose all your books to everyone, right? And then, they will also need to realize that some of them at least need to do some sort of reporting, right, and pass some sort of tests, and so we are planning to develop this technology that would allow both, and when businesses will start looking for cryptocurrency to use, that will be the cryptocurrency they will be able to use, actually, because others would lack either confidentiality or this opt-in audit functionality.
Laura Shin:
And one other thing is we’ve kind of seen that one of the issues with a number of these cryptocurrencies where people have attempted to get merchants or banks to use them is that the price is not stable compared to, you know, a more traditional currency that we transact in such as the dollar.
Alexander Zaidelson:
Absolutely.
Laura Shin:
So, how are you going to get businesses to use this currency that may have a fluctuating price? Why not make Beam a private, scalable, stablecoin?
Alexander Zaidelson:
So that’s a great question. That’s one of the bigger problems in the crypto space, one of the things that’s hurting adoption. So Beam right now is a cryptocurrency, but the next step in the development is turning Beam into a platform by enabling people to issue other kinds of tokens on the platform, and some of those tokens can be stablecoins, right? So we’re now actively thinking about building bridges to Ethereum so people could lock certain assets on Ethereum, for example stablecoin, and issue its exact representation in Beam, and then trade in full confidentiality, right? And this is true for other tokens as well. We can think about STO tokens or other stuff because for any kind of transfer of value, in most cases you want confidentiality, right? You don’t want your value to be transferred in public.
Laura Shin:
Wait. So, I didn’t follow. So you’re saying now that businesses won’t actually use Beam, that Beam will be used to issue other coins that businesses will us?
Alexander Zaidelson:
We will offer both possibilities, right? So in time cryptocurrencies might become more stable in terms of their value, or you know, even now if we look at Bitcoin, or even Beam for that matter, but you know, we don’t have such a long history yet, and then compare it to some fiat currencies in places like Venezuela or others, so our currencies are much more stable than that, and hopefully in the future they will become more stable so it will be more usable by businesses, in the same way, by the way, even today, some of the businesses, not many, but some of the businesses do use Bitcoin, right, especially in our ecosystem. So some people accept Bitcoin and either convert it to fiat or some even don’t do that, some just keep it that way, but we’ll give people the options of using Beam as a currency in a totally confidential way or use stablecoins issued on the Beam network, not by us most likely, we’ll just create those bridges and allow confidential trading of stablecoins on Beam.
Laura Shin:
You’ve said that the work on Beam in 2019 will move along two tracks, Beam Core and Beam Compliance. Can you describe each track and what work is entailed in each of those?
Alexander Zaidelson:
So, actually most of the work in 2019 will be based on Beam Core, and Beam Core is just building the best in class privacy coin and an ecosystem around it, right? So, and that includes wallets, we have a very nice desktop wallet, very easy to use, now we just released an Android Mainnet wallet, we’ll soon be releasing an iOS wallet. So all integrations with different, other wallets, merchants, and adding whatever stuff that is required for the functionality of both the blockchain, researching maybe additional consensus methods, improving privacy as we can. So all this is Beam Core, and Beam Compliance is a longer-term project where we’re now researching the ways of making it possible for a confidential coin to also be opt-in compliant.
Laura Shin:
And from what I’ve read, you’ve said that this will enable, or that there will be a compliance suite that you’ve described as “a complex piece of software incorporating various use cases and integrated with third-party services and conforming to country-specific regulations.” Can you give some examples of who or what kinds of companies those third-party services would be and how the software would function?
Alexander Zaidelson:
So, I’ll give you an example. Imagine a company that wants to accept Beam for payment for its services, but they want to make sure that they have a way to report their transactions, and they also want to say, KYC their clients, or be able to check their history. So they will have this very specific piece of software, let’s call it the business wallet, that will allow them to A, keep the history of all their transactions, B, attach specific documents to each transaction or require specific documents from the counterparty for each transaction, and then store a reference to those documents on the blockchain after the transaction is completed.
So for example, a business pays the supplier in Beam. They would initiate a transaction and you know, the wallet will actually request the supplier to attach an invoice to the transaction, and the invoice will be reviewed by the payer and agreed, and you know, once they click okay, this transaction will be sent to the blockchain and it will also include a reference to all the document package which can create invoices, contracts, it might also…the business might demand KYC from the sender or the recipient of the funds.
So those third-party providers can be KYC providers, it can also be auditors that will need to interface with the blockchain and with this off-chain storage of documents to be able to validate the full transaction list of this particular wallet.
Laura Shin:
We’re going to discuss the consensus algorithm and the raise in venture capital after the break, but first, a quick word from our fabulous sponsors.
Cipher TraceDid you know that if money laundering were an economy, its GDP would be the size of Canada’s? Large volumes of tainted cryptoasset move through financial networks, often below the radar of banks. Cyber criminals use unregulated crypto exchanges to avoid detection. No wonder governments around the world are rolling out tough new anti-money laundering laws for cryptocurrencies. Complying with those laws isn’t easy. Banks and exchanges need the best cryptocurrency intelligence available to avoid penalties. Now you can use the same powerful AML and compliance monitoring tools used by regulators. CipherTrace is securing the crypto economy. To learn more, visit ciphertrace.com/unchained.
Laura Shin:
Back to my conversation about Beam with Alexander Zaidelson.
So, we discussed this briefly, you know, the differences between Beam and other existing privacy coins such as Zcash and Monero, and you talked about how this, you know, you perceived to be more scalable, but those are already kind of in use, so why at this point would someone choose to use Beam versus one of the other privacy coins?
Alexander Zaidelson:
Better usability and better scalability, right? Better scalability allows more people to use it, and better usability, as you know, we’re building now all those wallets and all those user-friendly features, and it just makes it easier to use, and I think our whole space is very nascent, it’s very small, so there are so many people who will be coming into the crypto space in the coming years that, you know, they will choose the best technology that they think will best fit their use cases, and also something that will be the most convenient to use, and Beam will be there, and also, again, our longer term vision of making the currency business friendly will attract eventually more people.
Laura Shin:
And when you talk about how it’s more scalable, is that something that is apparent to the user? Do you know what I’m saying? Like, I get from a technological perspective why that’s an advantage, but is that something that they would be aware of and have some experience with that would make them, you know, choose something else that is newer at this point?
Alexander Zaidelson:
Very much so. For example, when you install, you know, a Bitcoin node you have to download, like, 200 gigs, and it takes, like, you know, depending on your setup, it might take several days just to get the think up and running, and that’s where people…or Moneros is, I think, 20 gigs, and it also takes tons of time to download it and set it up and running, right? With a much more scalable blockchain it takes much less time to set it up, and you can also run it on smaller devices. You can even run it on a mobile device. You can run your own node, potentially, on a mobile phone, which…
Laura Shin:
So you’re saying that businesses that will use this for payments, they’ll also run their own nodes?
Alexander Zaidelson:
I think so. I think eventually most of the people will choose to run their own nodes because it’s much more secure. You don’t have to trust anyone, and that’s what, you know, crypto is all about, right? Being your own bank, and the way to do that is to run your own node.
Laura Shin:
All right, and so we talked a little bit earlier about the differences between Beam and Grin, which as I mentioned, was featured on last week’s episode, so why would someone choose to use Beam as opposed to Grin, because, you know, that has the same properties of scalability and privacy.
Alexander Zaidelson:
That’s right, the scalability and privacy is arguably the same, although we have somewhat…we have a little bit better implementation of Dandelion, with a little bit more decoys, so better privacy there. We are more usable right now. So you know, for Grin, you know, the UI wallets are just starting to pop up, but so far it’s mostly CLI which is very, very hard to use for a nontechnical person.
Laura Shin:
Command line interface.
Alexander Zaidelson:
Yes. Command line interface. That’s correct, that most untechnical people just have no idea what to do with, and we right now are completing a set of wallets for all the platforms out there.
We’re also doing a lot of innovation, and one of the limitations of Mimblewimble is that the two wallets have to talk, right, in order to set up a transaction, meaning that you have to be online. You know, with Beam we are solving…we’re actually hiding all of this complexity using a messaging subsystem that we call the SBBS, Secure Bulletin Board system, which is distributed and run by all the nodes, which actually allows the two wallets to communicate without the user needing to, you know, even know that these things happen, but they still have to be online.
We’re soon adding something we call one-sided payments, where it will be possible to publish some sort of preset collection of UTXOs and then let everybody know how to reference it, and then people will be able to pay to this set or pay to those UTXOs without the recipient wallet being online at all. So it will be much more convenient.
And we are working, again, as I mentioned, on other stuff. Lightning is something we’re also looking at. So our friendly competition with Grin is on usability, on innovation, and eventually on business friendliness as well, on being able to fit the financial ecosystem.
Laura Shin:
In the first five years of block rewards on Beam, what percentage goes to the treasury? Because I read in a few places online that it was 20 percent, but in the blog post about that allocation I calculated it to 25 percent, so which one is it?
Alexander Zaidelson:
It’s 20. It’s 20 percent exactly.
Laura Shin:
Oh, okay.
Alexander Zaidelson:
Yeah. I’m not sure which blog post.
Laura Shin:
Because the blog post, it was about the emission schedule, and it said when the block reward is 80 then 20…sorry, when the block reward is 80 Beams per block then 20 Beams will go to the treasury, and then when it’s 40…
Alexander Zaidelson:
Yeah. So that’s 20 percent.
Laura Shin:
…then ten.
Alexander Zaidelson:
You know, it depends on…
Laura Shin:
No, it’s 25 percent.
Alexander Zaidelson:
Well, if…
Laura Shin:
Twenty divided by 80 is 25 percent.
Alexander Zaidelson:
Well, you can look at it as the total block reward is 100, and 20 percent of that goes…for every block 100 coins are minted.
Laura Shin:
Oh, so it’s 20 out of 100?
Alexander Zaidelson:
Yeah.
Laura Shin:
Wait, it’s 20 out of 100, not 20 out of 80?
Alexander Zaidelson:
Yeah. Of course. Yeah. Of course. It’s 20 out of 100. Right. So for every block, 80 coins go to the miner and 20 go to the treasury.
Laura Shin:
Oh, now I get it. Okay. Sorry.
Alexander Zaidelson:
The total is 100.
Laura Shin:
Okay.
Alexander Zaidelson:
The total is 100.
Laura Shin:
I see. Right. Right. Right. Okay. Good.
Alexander Zaidelson:
Yeah.
Laura Shin:
No wonder. I was like, why does it say 20 everywhere else, but to me it said 25.
Alexander Zaidelson:
Yeah, it’s just the different ways to look at those percentages.
Laura Shin:
Okay. Now I get it.
Alexander Zaidelson:
Yeah, I understand where…yeah. So you got the impression that the 20 were taken out of the 80.
Laura Shin:
Yeah. Yeah.
Alexander Zaidelson:
Right? So I’ll need to revisit that article and maybe make it clear there, because yeah, I understand. Okay.
Laura Shin:
Okay. Okay. Yeah. I think I was confusing the miner reward with, like, the coin base emission.
Alexander Zaidelson:
Yeah.
Laura Shin:
Yeah. Yeah. Okay. So, and then also, how much did you raise in venture capital?
Alexander Zaidelson:
So we raised a little bit over five million dollars.
Laura Shin:
I’m sorry, you said five million?
Alexander Zaidelson:
Yeah. Five million dollars.
Laura Shin:
Okay. So, back to this question about Beam versus Grin, so obviously, you know, we talked about at least at the base layer they’re similar technology-wise, and then, you know, you talked about how you’re differentiating, like on usability and other things, but overall I would say the philosophies between the two coins are pretty different. You may have heard in my conversation with the core developers there that they would call the allocation to the treasury a dev tax, and you know, you’re kind of dispensing that amongst the foundation, the investors, the core team, and the advisors, and then of course you’ve raised venture capital, and Grin’s developers rely mostly on donations. So you know, is that, like, another area in which you feel like you’re trying to differentiate, or that people prefer to work with you, with Beam rather than Grin? Like, how do you…because I think for them, they would say, well, this is more like a community effort, it’s a coin for everybody, it’s more like Bitcoin in that regard, like, it’s not about us. What’s your response to that?
Alexander Zaidelson:
Well, I think at the end of the day, you know, the philosophy of the project is also important, but what’s not less or even more important is the actual quality, the speed of delivery, and the stuff that the team is developing and giving the community, right? So I think that, and the quality and the usability would probably be a very important factor for people, and as long as the project team is honest and clear about what they’re doing, you know, and we see today, right, people are mining and buying Beam and they’re mining and buying Grin, you know, in a similar fashion. The two projects are not too far from each other in terms of the price and the mining power. Grin is leading, but it’s not like Beam is too much smaller than that. So I think the main factors are the honesty of the team and the quality of the product the team is developing rather than, you know, how exactly it is funded or not, and we’ve been always very transparent about that, and you know, so far we’re seeing a lot of interest and a lot of positive feedback from the market.
Definitely some people would prefer Grin because they feel it’s better, and that’s fine. Other people would prefer Beam because they would feel that there is a funded team here that will develop the protocol more and more and more, it will not need to ask for donations and rely on, you know, benevolence of some donors, and also that the project, the treasury has set aside funds for the foundation that will continue the support of the project and that will ensure that, you know, people are incentivized to build on top of the protocol, even when the initial funds are out.
Laura Shin:
A few days after launch, Beam discovered a critical vulnerability in its wallet. How did you discover it and fix it, and was there any known negative impact?
Alexander Zaidelson:
So, there was no negative impact whatsoever. It was just a beginning feature that was not eventually developed that was kind of left hanging by our developers. You know, we just discovered that during some routine, you know, review of the code, fixed it pretty quickly. Unfortunately, because it allowed potentially, in a certain scenario, this thing allowed stealing the funds, we couldn’t…we didn’t want to immediately disclose it, and we had to release, like, closed source binaries and ask everyone to update and wait for several days before we actually released the source code with the fix, and that was, like, I think that created some sort of a confusion in the community, but you know, eventually it was all resolved and we’re fine.
Laura Shin:
And shortly after that, your blockchain also experienced a stoppage of about two and a half hours. What happened there?
Alexander Zaidelson:
So, what happened there was an interesting case of collision of two UTXOs. There were cases where people were running, and still are, running the same wallet, the same seed, right, wallets with the same seed on two different machines, right? And this, in certain scenarios, created, like, a combination of two UTXOs from that same wallet, same but different, and those two UTXOs kind of stuck together and created a block that could not be validated or processed, and it just created this halt. Okay, and it took us some time to find the situation, then we just issued a fix. Actually in that case we were very transparent to the community and it was fixed, I think in, like, as you said, two and a half hours, and it was like a moment of, you know, testing of our communication and technical skills as well, and we went through that.
Laura Shin:
You started Beam in March 2018 and launched in January 2019. Grin started development in fall of 2016, and you referenced earlier how you felt that going with a VC-funded company that had the incentives built in, you know, enabled you to come up with a better project and to move faster, but do you feel that the speed with which you launched is part of the reason that these two issues cropped up almost immediately after the launch?
Alexander Zaidelson:
That might be. That might be the case, although as we see, software has bugs regardless of how much you write it, how much you test it. We see projects like Zcash discovering bugs years after their release. So it’s hard to say. I think software inherently, whether you do it quickly or you take a lot of time, it inherently has bugs, and this is like an inevitable fact of life. I hope we don’t encounter such situations in the future, but you never know. The main thing is that if we do, we fix them and continue.
Laura Shin:
In the case of Zcash, the bug, you’re right, was found quite a bit later, but in this case, these happened, like, right after launch, so the wallet vulnerability presumably could have been found a little bit, you know, if you had waited maybe a little bit longer to launch and same, perhaps, with the blockchain stoppage. Wouldn’t you say so? That, you know, it’s one…like, in a way, maybe, those are…they should have been, perhaps, more obvious problems if they happened so soon after launch?
Alexander Zaidelson:
Well, probably, yes, but again, I don’t think any amount of, you know, waiting, can guarantee that there are no bugs. So, yeah, you know, you might be right, but you know, if we had waited for several more months maybe we wouldn’t have those bugs, but maybe not, because until you launch something there are some things that you just cannot test in the lab, right? So it’s kind of hard to answer here.
Laura Shin:
How is Beam being governed?
Alexander Zaidelson:
Beam is being governed by a team. So, we have, like, the core team of the project and we are creating our roadmaps. We’re having, you know, developer discussions all the time inside the team. It’s governed very similar to a startup where there are several key stakeholders, the team is relatively small. So it’s not just, you know, myself or our CTO or somebody else that just makes all the decisions. Everything is being discussed with, you know, the development team, the business team, and then, you know, we decide what’s the next thing to build, and then we just go and build it.
Laura Shin:
Let’s talk about the Beam Foundation. How will that function?
Alexander Zaidelson:
So, that foundation will have Beam coins set aside, it’s 20 percent of the treasury, right, is set aside for the foundation. The foundation will be run by a board of directors, which once we have it set up we’ll start going out and looking and offering people to join the board of directors, and that board will just issue grants, either for something the foundation thinks needs to be developed, or for things that people suggest that they want to develop, in a similar way like the Zcash Foundation does and maybe some others.
Laura Shin:
And where will it be based?
Alexander Zaidelson:
Hopefully in Switzerland. We’re working to set up in Switzerland.
Laura Shin:
Okay. When do you expect it to be launched?
Alexander Zaidelson:
Well, it should be, like, in a couple of months from now. We started the process already. It is just not very transparent, unfortunately. With the authorities things take time, so we are working on that. That’s what I can say.
Laura Shin:
And you plan not to have anyone from the company on the foundation board, correct?
Alexander Zaidelson:
No. There may be somebody from the company at least in the beginning, because you know, we have to set it up, but later on we’ll probably fade out or maybe have one seat out of a larger number, of five or seven.
Laura Shin:
Okay. Yeah. I was going to ask if after seeing what happened with Tezos where they didn’t have any of the creators on the foundation board and they ended up in a power struggle with their board members, if that was something that, you know, was giving you pause about not putting any company team members on the board, but it sounds like you plan to do that.
Alexander Zaidelson:
No. We’re still not…we’re not 100 percent sure yet. So when we set it up it will be run by the original team members, because you have to have some people in the beginning to set up the structure, and then we’ll attract more people from the outside, and then we’ll see. You know, it depends, but again, the goal is not to be in control. We might still want to have somebody from the original team because you know, these are the people who understand the project, arguably, best, at the moment at least.
Laura Shin:
All right. Let’s talk about your mining algorithm. You chose the Equihash mining algorithm. Why?
Alexander Zaidelson:
It was pretty well known back then. So we didn’t want to innovate too much in that area, and we just took something that was well known, memory intensive, so Equihash was there. So we modified the parameters and started using it.
Laura Shin:
And for listeners who are familiar with proof-of-work and proof-of-stake but maybe not Equihash, can you describe how that works?
Alexander Zaidelson:
So, it is solving what’s called a birthday problem. So it’s about finding collisions in large sets of numbers. That’s probably as much as I can explain, you know, in this format. I’m not an expert in how exactly Equihash works, but basically the idea is the same. It’s meaningless cryptographic puzzles that are being solved by going through huge amounts of numbers and just trying each of them one by one.
Laura Shin:
In recent months, a number of coins using the Equihash mining algorithm were 51 percent attacked, such as ZenCash, now called Horizen, and Bitcoin Gold. Why did you choose Equihash anyway, despite this seeming vulnerability?
Alexander Zaidelson:
I think that would be true for any GPU-mined algorithm, Equihash or not. The algorithm itself does not have anything specific that makes it easier or more difficult to attack.
Laura Shin:
Okay. Despite the track record?
Alexander Zaidelson:
Yeah. I think the track record is not because of the algorithm, but because it’s just popular on GPUs. So the probability of this 51 percent attack, you know, the possibility of this attack is because people can take a lot of GPUs and just, you know, turn them onto a specific protocol and try to mount such a kind of an attack, and it doesn’t matter which algorithm, which specific algorithm is being used. It’s not like Equihash is more vulnerable than any other algorithm that runs on GPUs.
Laura Shin:
And so are you aiming to move off GPU mining?
Alexander Zaidelson:
Eventually, yes. So, we plan to do two hard forks, one somewhere in July and another one somewhere in December, meaning that until then it won’t make sense for anyone to start working on an ASIC, but once we announce the second one and we announce the exact algorithm that will be used, so people will be able to start preparing the ASICs, meaning that somewhere in the middle of 2020 there will be ASICs on the market, and that they will be used for mining rather than the GPUs.
Laura Shin:
And basically you don’t want to announce what the future changes are because you want to kind of, what, get as broad a swath of miners as possible and then later to introduce more security to the network, then you’ll have more ASICs? Is that the thinking there?
Alexander Zaidelson:
I mean, the whole point to announce the hard forks and not to announce what exactly they will be is to signal to the market that it doesn’t make sense to start building ASICs now, okay, because if I were to say the exact algorithm that will be there in December, you know, people would start spending money probably. I mean, at least they would have this…they would be able to start, you know, developing an ASIC to mine, but right now we don’t want that. We want to keep the mining more democratized to allow every person who has a GPU at home to mine some Beam coins, and we also want the network to grow a little bit to make it worthwhile for people to develop ASICs, right, because we don’t want to be in a situation where, you know, there is a very, very small number of ASICs because the network is small, so it only makes sense for people to buy a small number of those ASICs, and then you end up with, like, very, very few people controlling the whole networks with a bunch of ASICs. So you want to grow first, and then let people develop ASICs.
Laura Shin:
Yeah. I think that’s one way in which actually your philosophy is similar to Grin’s.
Alexander Zaidelson:
That is correct.
Laura Shin:
Because they’re doing something, yeah, where they’re also trying…I mean, I guess a lot of these projects are doing that. So, let’s talk a little bit more about the friendly competition between you and Grin. Beam funded a security audit for Grin. Why?
Alexander Zaidelson:
Well, first of all, you know, we are in a good relationship with them, and again, we wanted to help out, you know, just out of being friends, but also, both projects are doing Mimblewimble, right, and if there is, like, a big security hole in Mimblewimble then it’s not good for either of us, right? So that’s why we felt it was…it made perfect sense, you know, to donate money to this particular purpose, and you know, and I think it was, well, very well received. Yeah, I wonder what…I don’t think you asked them about that, but I think they would…I mean, they were grateful, and I think we understood that it kind of made sense, because you know, we are both doing the same protocol.
Laura Shin:
Yeah. Yeah. I’m sure. I mean, and as, you know, we’ve been talking about, they are a protocol where they’re primarily donation funded, so you know, whether it comes from you or from somebody else, it’s a donation.
Alexander Zaidelson:
Yeah.
Laura Shin:
So, throughout the show you’ve talked about some of the new features that you plan to launch on Grin. Can you talk more about any…
Alexander Zaidelson:
On Beam. Yeah.
Laura Shin:
Or sorry, on Beam. Can you talk more about any that you haven’t mentioned yet or maybe further elaborate on certain ones that you might have mentioned briefly?
Alexander Zaidelson:
Okay. So we just released something we call payment confirmation, which is an important feature, and in some ways maybe a first step to this possibility of undergoing audit. So this is something that allows me to send you some funds and then be able to prove with a reference to the blockchain that I did send you this exact amount. It’s an important thing, because in theory, you know, I could send you a thousand Beam, but then you could deny that, you know? You could say, well, I only received 100, right? We would have a transaction kernel, I mean, I could prove that there was a transaction, but I couldn’t prove the amount. So this feature allows us both to sign some sort of a confirmation which nobody else can see, and it’s kept in the wallet, but if there is a disagreement later down the road, then I can prove that I did send this particular amount and that you actually saw that and signed it, or your wallet did. So that’s one important thing.
Another feature that we talked about briefly is one-sided payments, right? So this allows a merchant or somebody receiving donations to create something off-chain, something, some set of recipient UTXOs, actually, and allow other people to send money to that place without a need for the recipient wallet to be online at all. That’s also very important.
Other exciting stuff, I mentioned the mobile wallet, so this is pretty cool, and you know, we have Android, iOS is on its way, now we have to test that version, but we’ll have the Mainnet version soon, and we’re looking at ways to see how a full node can run on the mobile as well. It’s a long way, but there is some development there, pretty exciting. Yeah, and that’s where scalability comes in, right? So in theory, it’s possible, and this would give more security, right, and more democratized networks, right? Because today most mobile wallets just talk to some random or not random node, and that means that somebody else is kind of securing your funds. If you have your own then it’s much better, more secure.
Another thing is Lightning. We’re looking into that, on how to implement payment channels on Beam, because there is a lot of talk about Lightning and how it can really improve the payment speed and improve usability of crypto in general, so we want to be there, so looking into that as well.
Also doing some research into privacy of the blockchain. There are some plans about potential linkability of UTXOs and Mimblewimble, so we want to do something along those lines as well.
Atomic swaps. In the coming days we’ll be demoing an atomic swap between Bitcoin and Beam, and hopefully during April we’ll be releasing that, and then there are next steps like creating a distributed bulletin board for people to start trading without any trusted third party. So this is also a big thing, and you know, we just did a survey of our community, and this is like, the most desired feature. It turned out to be the most desired feature, creating this atomic swap, because people want to be able to, you know, buy and sell Beam for Bitcoin without even, you know, registering on an exchange or doing business with any exchange.
Laura Shin:
And then, what about, when you said the bulletin board, how are you defining bulletin board and how is that different from, like, an exchange or a DEX?
Alexander Zaidelson:
So, it’s sort of a DEX, but right now we’re not looking into building a full-fledged DEX, but think just of a board where people post, okay, I want to buy 500 Beam for whatever, 0.5 Bitcoin.
Laura Shin:
Oh, kind of like a LocalBitcoins or something.
Alexander Zaidelson:
Yeah. Yeah. Something like that that’s distributed, right? But we’ll see, we’ll see how exactly we’ll work, but the idea is to provide a place for people to post those buy and sell orders, right, not in a full-fledge way like you have in exchanges, but in a simple fashion, at least in the beginning. Later on we’ll be looking to add a DEX as well.
Now, in terms of building the platform that I mentioned a couple of times, and expanding from just using one coin to, you know, just having one Beam coin on our blockchain to having more assets, more confidential assets, we’re now looking at how we can build bridges to Ethereum, and then enable people to lock stuff on Ethereum and then confidentially trade it on Beam, and then being able to go back to Ethereum at any moment.
Laura Shin:
So what would that look like, exactly? I don’t know if I fully follow that. You have some kind of ERC-20 token and then, when you say a bridge, so…
Alexander Zaidelson:
So let’s say you have Dai coins, right, and you realize that whatever you do with them on Ethereum is visible to everyone and you don’t like that. So you would go, you would send them to a special place called this bridge, which would probably be a smart contract, with some other software on our side. The smart contract locks your Dai coins and issues their representation, let’s call them B-Dai, Beam Dai, to your Beam wallet, and then you have those coins on the Beam blockchain, you can trade them with anyone you want and it will all work with exactly the same level of confidentiality as the native Beam token, but it will be a different token, and then when you want out you will go to the same bridge and burn your B-Dai and take the necessary amount, or the corresponding amount of Dai from the smart wallet to your Ethereum wallet.
Laura Shin:
All right. Well, sounds really interesting. I guess we’ll wait to see what the further developments are. It’s been so great having you on Unchained. Where can people learn more about you and Beam?
Alexander Zaidelson:
So, our main place is our website, beam.mw. We have a very active Telegram channel which is referenced on the website, and we also have a pretty rich Medium with a lot of information, so please go to our website, join our Telegram, join our newsletter, and you know, the community very open, we are always there to answer any questions, really welcome any questions, any criticism, any ideas. So the more, the merrier.
Laura Shin:
Great. Well, thanks so much for coming on Unchained.
Alexander Zaidelson:
Thanks, Laura. It was a pleasure. Thank you so much.
Laura Shin:
Thanks so much for joining us today. To learn more about Beam and Alexander, check out the show notes inside your podcast player.
If you are not yet signed up for my email newsletter, go to unchainedpodcast.com right now to get my thoughts on the top crypto stories of the week, and be sure to check out our new channel on YouTube.
Unchained is produced by me, Laura Shin, with help from Ralene Gallipoli, Fractal Recording, Jennie Josephson, Daniel Nuss, and Rich Stroffolino. Thanks for listening.
