Three Years of Blockchain

After nearly three years as Chief Product Officer, my time at Digital Asset has come to an end. I learned so much about both the blockchain industry and in leading our product team, and I will forever be grateful for the growth this experience afforded me.

After leaving DA, I spent over a week rambling around Istanbul. Diving into its history, reading Turkish authors (Orhan Pamuk and Sabahattin Ali), learning a bit about the prophet Mohamad, and walking and thinking. Oh, and I listened to a lot of Johnny Cash and podcast interviews of Rick Rubin, out promoting his new book “The Creative Act: A Way of Being.” All in all, I think this is a better way to clear one’s head than lying on a beach. I came back refreshed and ready to plot my next work adventure.

This blog post will take a quick look at some of the things I saw in my three years in the blockchain industry. I realize most of you are miles away from blockchain, so I won’t go too deep. I will also talk about how Digital Asset gets it right, and, because I am stumping for my next gig, a little bit about what my role was as CPO.

The Big Picture: Thoughts about Blockchain

When I was looking for my next gig, at the beginning of the pandemic in early 2020, we were in the throes of a long crypto winter. While I felt somewhat vindicated, in what proved to be a premature celebration, in my barroom arguments with various crypto bros, I couldn’t shake the sense that the underlying technology, blockchain, solved new problems. That’s what attracted me to DA. For the crypto world, that meant being able to exchange assets peer-to-peer without relying on a centralized operator. For the world web 3 blockchain visionaries hoped to create, the broader appeal was disaggregating power away from the big winners of the web 2 world - the Facebooks, Amazons, Googles, but also the Paypals and other new financial pillars of the digital economy. The focus was on decentralization. One way to think about this, as we did at DA, is that Web 2 was a big copy machine that enabled the free exchange of information, but did little to enable the transfer of value without recreating the digital equivalent of large brick and mortars.

What I saw, though, was that the success of crypto, and the hyperbole built up around it, prevented serious enterprises from understanding limits of the underlying technology. Technologists began to fall in love with the implementation, in much the same way that you may think ripped shirts and needles make you a punk rocker rather than a guitar and two (or, if you are really good, three) chords. In a way, blockchain is an unfortunate name for this class of technology as it focuses on how a particular problem is solved rather than on what the problem itself is. Compare this, say, with the term database, which has spanned network, relational, object-oriented, NoSQL, and many other implementations by focusing on what it does rather than how it does it.

But part of the reason enterprises get caught up in the hype of blockchain is an attraction for the ecosystem that has built up around cryptocurrency. Although cryptocurrency is still a tiny part of our financial system (less than 1%), it represents both the shiny new thing, and I’m willing to guess, employs an outsized percentage of our aforementioned bros.

Cryptocurrency, and the blockchains they are deployed to, sometimes prove too big a gravitational field for any light to escape. To make matters worse, industry pundits confuse cryptocurrency and blockchain. And they confused bad actors with crypto. The big recent case in point is Sam Bankman-Fried, who committed age-old fraud that just so happened to take place in the crypto market. It's like blaming the airline industry for the Lufthansa heist. But the noise around SBF would have an impact not only on the crypto industry, but on the blockchain industry itself.?

All this fog made it hard to get the main messages about DA’s place in the blockchain market clear with pundits, analysts, and customers.?

The Reconciliation Problem

So what is the fog obscuring? To understand this, let’s look at what problem blockchain really solves beyond cryptocurrency and NFTs.

I mentioned earlier that one of the big differences between web 2 and web 3 is that web 3 adds value exchange without centralizing all transactions. To restate this, it solves the problem of how can I do a peer-to-peer atomic transaction across two enterprises (or other boundaries) where the transaction cannot be gamed by some transaction manager. This is the key innovation of blockchain. Note that in this proposition, I said nothing about incentive mechanisms, proof of work/state, blocks, hashes, etc. That is all implementation, and those who I ran across fixated on the implementation details missed the forest for the Merkle trees.

This is all so abstract, still. What business problem does this solve?

Simply put, blockchain addresses a core, expensive problem at the root of financial transactions: the expensive and time-consuming manual reconciliation process. Why don’t bank checks clear immediately? Why do stock transactions take days to settle (i.e. “t+2”)? All because the ledgers on the two sides of a trade become inconsistent, and untangling this inconsistency is a manual process. A technology that can automate and speed this process would have benefits across the risk, cost, and revenue spectrum. Similar problems exist in other industries (logistics, healthcare, etc), but fintech is the most obvious place to start, in part, ironically, because the crypto hype has primed the pump

Once you see this problem, it cannot be ignored. It will be solved, and today Digital Asset has the clearest vision of how to solve it.

But Why Not Solve this on Ethereum or Other Existing Chains?

Ethereum is not built for commercial enterprise. All data on Ethereum is public, which is great for creating an ecosystem, terrible for allowing you to build or protect a business and deal with regulators.

What is needed is a blockchain that protects privacy as a core tenet, built into both its smart contract language and the blockchain that implements the runtime. You can attempt to solve this problem in several ways, but the most common approaches have severe drawbacks.

Some platforms use transaction level privacy, in which all data in a transaction is visible to its parties. This works well until you try to compose a new transaction out of two underlying transactions. In a platform in which privacy is at the transaction level, all data of the underlying (sub)transactions are leaked across to parties of the other transaction. This forces a dilemma in which the developer must choose between consistency and privacy.

Some other platforms attempt to solve this with channels. All data within a channel stays private to just the parties in this channel. But this similarly constrains composability and forces consistency vs privacy tradeoffs.?

Much research (and, my word of the day, hyperbole) is dedicated to Zero Knowledge Proofs as a mechanism to ensure privacy. It has also spawned an industry of terminology (SNARKS and STARKS and rollups, oh my). ZKPs remain very hard to use, astronomically expensive in computer power, and in general suited today only to single-use blockchains like Zcash) and not general purpose smart contract platforms.

ZK-Rollups take this hyperbole even further: they take a privacy solution (ZKPs) and try to make them more scalable by using something akin to batching. In the process, they leak data within the rollup itself.?

DA takes a different approach. By guaranteeing privacy at the subtransaction level, it enables full composability in which composed transactions respect the privacy of the underlying transactions, guaranteeing a developer can create a new Delivery vs Payment or Delivery vs Delivery atomic swap without compromising privacy. Now real business can begin.

Of course, there is much more to be discussed about the different approach we took at Digital Asset, but to me, this was always the starting point.?

Three Years of a Product Team, Very Quickly

I took over the product team more or less in summer of 2020, although there would be organizational changes in 2021 that more codified my role.

When I entered DA, we had great technology, but no real product strategy. The first job was to bring structure to products, including packaging and pricing. While packaging came relatively easy, pricing has been a more evolving story. This is par for the course: trying to come to some understanding about how you see the levers of value vs how your customers see them is always a process.

Over the ensuing years, we rolled out a new blockchain platform (Canton) and a unique tokenization toolkit (Daml Finance), enabling us to realize the technical vision we had with our smart contract language, Daml.

But the role of a product organization is much more than product management, and I was fortunate to have a great product manager leader, and, over time we built out a strong product management team.?

The rest of the organization was not as well set. In 2021, we started to build out a documentation team, and I learned a lot about the transition of an engineering-led documentation effort to a full professional documentation organization. I’m hoping my customers reading this post will also appreciate the improved documentation.

I also built a small product UX team that gave me a new appreciation for how research and UX design shapes the customer's perception of the underlying product. UX was not something I had seen my prior companies do well, and it was a joy to watch true designers at work.

In 2022, I started to build a full training and education practice, and I am hopeful they will play a large part in helping our customers overcome the hype I talk about throughout this piece.?

I had also inherited a developer relations team. I learned that getting developer relations strategy right in the throes of a crypto winters, pandemics, and the fog of new technology is damned hard and frustrating.?

Throughout this all, I learned so much, not just about technology, but about leadership. I got to work with some of the smartest people - and that is saying something - I have ever worked with. I am so grateful to the people at DA who gave me this opportunity, and I hope my next challenge will be as invigorating.

The most important lesson I learned: using two spaces after a sentence is for us old farts.? So there.

(Note: this article was written before the launch of the Canton Network in May, which creates an interoperable network of networks for institutional finance.)