10 Years of Decentralizing the Future
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Sergey Nazarov was wearing a plaid shirt when he arrived at our first interview in the bowels of San Francisco's Marriott Hotel. So of course I had to ask him about it. While doing preliminary background research on Nazarov, CEO of blockchain startup Chainlink, I'd become unexpectedly obsessed with his clothing.

In Berlin, in October 2018, he wore a plaid shirt while explaining how Chainlink intended to build a decentralized network of oracles that would solve what many observers consider the key existential challenge facing the crypto universe. Seven months later, at the Fluidity Summit in Brooklyn, New York, he wore the exact same shirt while delivering another presentation. And at Devcon in Osaka, Japan, just a few days before we meet in S.F., yes, the same shirt again.

I wanted to know ― was this a thing? Some kind of homage to Steve Jobs' black turtleneck or Mark Zuckerberg's hoodie? Or was it a shout-out to Chainlink's fervent online fans, a.k.a. the "Link Marines." If you Google the words Nazarov and plaid you will plunge speedily into a wild world of 4Chan memes and social media chatter by Chainlink boosters who treat Nazarov like a revered cult figure. And in this cult, plaid is rad. At one point, an anonymous Link Marine shared an Amazon link to the exact brand of plaid shirt that Nazarov favors ― and the Chainlink fanboys apparently immediately bought the shirt out of stock.

Nazarov says he doesn't have much time for social media. While he is appreciative of broad community support, he says his main job right now is making the case for Chainlink's technology wherever and whenever he can. There's no big mystery about his clothing, he says. He's just not the kind of guy who ever wants to waste precious time thinking about what he should wear that day. There's no "marginal utility," he says, to devoting any brainpower to questions of fashion. Years ago he decided that he liked the comfort and styling of plaid shirts, so now he has a closet full of them. It's the same thing with his shoes, he says, pointing down at a pair of newish-looking Brooks Adrenaline GTX sneakers. After doing extensive research, Nazarov concluded that the GTX was the best shoe for ensuring the overall health of his feet. He's now on his eighth consecutive pair.

Nazarov explains all this with a slightly quizzical look on his face. He's been interviewed many times about his efforts to build a secure, decentralized network of oracles that will connect the on-chain world of blockchain-based smart contracts with the off-chain "real world" where actual stuff that doesn't involve crypto tokens happens. But he's never been profiled before, and he's not sure he sees the relevance of questions about shirts.

But the interview has hardly started and he's already revealed some useful insights about himself ― he's a driven personality dedicated to maximizing efficiency, removing sources of friction, and figuring out what works best. It's not that big of a leap to connect those qualities to his work on smart contracts and oracles. If you believe, as he does, that blockchain offers the world a better way to organize society, that it is an infrastructure for helping "people to make their own thoughtful decisions about their life and their economic self-determination," and you are the kind of person who approaches even the most humdrum aspects of life with relentless logic, then maybe it isn't that big a surprise that he has devoted his life to addressing the main obstacle to blockchain ascendance ― the challenge of connecting on-chain transparency with the murky world of off-chain humanity.

There are scores of blockchain startups that, like Chainlink, struck gold during the ICO bubble of 2017 and proceeded to dedicate themselves to building various parts of blockchain ecosystem. But Chainlink has separated itself out from many of its colleagues by building partnerships with tech titans like Google and Oracle and the inter-bank money transfer alliance SWIFT. Throughout 2019, the steady drumbeat of announcements about those partnerships made Chainlink's ethereum token, LINK, one of the best performing tokens of the year, providing the startup with useful liquidity. Chainlink also has close relationships with some of the more prominent academic researchers in the nascent field of smart contracts ― namely, Cornell Tech's Ari Juels, the founder and co-director of Cornell's Initiative for Crypto-Currencies and Contracts (IC3). The details of what Chainlink is doing, in Nazarov's own words, aren't particularly sexy. He calls Chainlink's technology back-end "middleware" infrastructure designed, in theory, never even to be noticed by end-users. But if it ends up working ― if Chainlink's technology builds a bridge between the new world of blockchain and the old world establishment of insurance and finance and anything else humans have figured out to do with data ― it could be transformative.

Sergey Narazov is the 31-year-old son of Russian immigrants who moved to New York in the early '90s. Both of his parents were engineers and they weaned him on computers from an early age. He recalls being only around five years old when he first sat in front of a keyboard. He was reading programming manuals in middle school. Growing up, he remembers being obsessed with Legos, taking old cathode-ray televisions apart to see what made them tick, and playing a lot of real-time strategy video games. As a student at New York University, he majored in Philosophy & Management ― but it was clear to him early on that he wanted to be an entrepreneur. In 2010, he served as a teaching assistant to NYU Professor Lawrence Lenihan, the founder of the early-stage investment company Firstmark Capital, and he followed that up with a six-month stint at Firstmark doing technical due diligence on technology startups.

"The reason I took that job over other jobs," says Nazarov, "was because I wanted to learn how people build technology companies."

This portrait was painted by Trevor Jones
This portrait was painted by Trevor Jones

"He was the most curious kid I ever taught," recalled Lenihan. "Relentlessly questioning. If he didn't understand anything he would corner you and pummel you until it was clear. And usually the reason it wasn't clear to him was because there was a fault in the original explanation."

Lenihan chuckles. "I decided pretty much after the first day that either I was going to love this kid forever or I was literally going to beat the shit out of him in my class. Fortunately it was the former not the latter."

Nazarov left Firstmark to return to Russia with what he describes as a "very small" investment fund targeting highly technical R&D teams. At the same time he was running his own boutique web development shop and playing around with bitcoin.

"I was at this stage that people are sometimes where they are figuring out what they want to do," says Nazarov. "What is my career going to be about? What am I am going to devote decades of my life to? And obviously blockchains won out."

"I think it is important to note," Nazarov added, "that this happened before all of this was cool."

In the early 2010s, Nazarov's self-described "dabbling" in bitcoin included regular calls to commercial cloud-computing providers from whom he would rent GPUs to run bitcoin mining software. On a three-month-long contract, he says, he could cover the costs of the rentals in the first week and everything after that was profit. Not for him the hassle of crunching the bitcoin algorithm on a bunch of over-clocked PCs in a crowded hot apartment. He went directly to the cloud.

At first it seemed like just another game, a diverting way to make some money out of nothing. But he gradually started to see a philosophic alignment between his own libertarian values and the underlying ideology of bitcoin. The transparency and built-in certainty of blockchain, says Nazarov, are particularly attractive to people, like him, who originally came from countries with corrupt or fragile economic systems.

Blockchains and smart contracts, says Nazarov, "enable a parallel, technically enforced legal system." But as he surveyed the crypto-economy, in which the vast majority of activity focused on trading or speculating in tokens, he zeroed in on a critical problem. How do you connect the guaranteed certainty and transparency of smart contracts with the chaos and anarchy of "the real world"?

"I think what Sergey recognized early on," says Ari Juels, "is that smart contracts are not going to be able to do anything interesting and are unlikely to achieve fruition unless we have robust oracle systems."

An oracle, in blockchain-speak, is an entity that validates and transmits real world data ― weather conditions, economic indicators, stock prices ― to blockchain. For a meaningful smart contract to work, it must have access to data that indicates whether the conditions of that contract have or have not been met. If you are just trying to determine the price of an ethereum token at any given point of time, no problem ― all that data is "on-chain." But as soon as you leave blockchain and go "off-chain" you also leave behind the solid-state transparency that is one blockchain's main selling points. You need a trusted source of information ― an oracle. But how do you trust something that is off the chain, and amenable to the corruption and manipulation rampant in human-centered systems?

Chainlink has a complicated set of answers to that question. The point of a decentralized network of oracles means that no smart contract will be dependent on a single source of information for an answer. "Node operators" who run oracles will be penalized, both in terms of reputation, and with actual financial penalties, if they transmit inaccurate data Specialized hardware will add further layers of reliability.

sergey-chainlink.jpg

"We make open source software that provides security to an oracle mechanism," says Nazarov, "and provides the economic framework through which the usage of that oracle mechanism has crypto-economic guarantees. We extend that software to multiple environments, many different blockchains, many different data providers, and many different payment providers, providing a large collection of inputs and outputs."

There are a lot of moving pieces, and the devil is certainly in the details, but the vision is clear.

"Really, we're a security company," says Nazarov.

"What I liked and continue to like about Chainlink," says Ari Juels, "is their understated approach to product development. Even in the heady days of the ICO bubble they were not making hyperbolic claims about the platform they were building. They take a very direct and pragmatic and tempered approach to relaying information to the community."

Such an approach may explain how Chainlink has been able to work with companies like Google and Oracle. Chainlink offers a value proposition that has little to do with crypto-speculation. Google, for example, is in the business of providing data. People creating on-chain smart contracts that connect to off-chain data need a way to access that Google data. Chainlink is the middleman ― the connecting point between buyers and sellers.

"One of the things that I showcased in my Devcon presentation was a blockchain company that built a way to incentivize people to generate map data. But the map data they generate can't live on-chain ― there's just too much of it. So the map data lives on a BigQuery table in Google Cloud, and a Chainlink oracle validates that a participant has generated useful map data, calculates the bounty that that participant should be paid and then triggers the smart contract to pay the bounty."

"In the ad business, says Nazarov," if you can prove that somebody actually clicked on something you can eliminate billions in fraud. If you can prove that a market event occurred, you can make a financial product work more efficiently. In an efficient system those savings always flow down to users. I think one of the big problems that sometimes happen in our space is that people try to reason about smart contracts from a consumer front-end point of view. The Internet gave me the PC, and I bought some books. The mobile phone gave me Uber and I got a car. They are like, with blockchain ― where is the button? It takes some time to get past this, to realize that there is no new interface, there is no new consumer experience. It's a back end innovation, and what that means is you have to understand the back end problems. The important thing is that the solving of these back end problems does flow back to people, it either flows back to people in better prices, or it flows back to people in the existence of services they didn't ever have before."

Ideally, Nazarov suggests, the infrastructure built by Chainlink might end up providing so much value to the larger world that it could become a kind of "public good" ― like an interstate system or a federal postal system.

"I think the pinnacle, the absolute fucking pinnacle of success for somebody building this type of infrastructure is that they build something that becomes a public good that is important to how society functions properly."

In college, Nazarov was drawn to the school of analytical philosophy, which he describes as being focused on logic, and concepts like "validity, soundness, and cogency," in contrast to the "continental philosophers" who "studied metaphysics and all these absolutely vague, undefined things."

The congruency of analytical philosophy with the diamond-hard construct of blockchain is easy to see. But when combined with one of the key lessons that Nazarov says he learned while studying and working with Lenihan, you can also start to see how Nazarov's overall framework for life pointed him towards the problem that Chainlink is dedicated to solving.

"Whatever you make to has to be useful," says Nazarov. "And you have to understand who is going to use it, how they are going to use it, why they are going to use it, and how that usage is going to evolve. This is especially important if you are building infrastructure. You can't just have a general understanding. You have to really understand what is going on at a deep deep level."

As an example, Nazarov cites the Byzantine Generals Problem, a classic conundrum for distributed computing systems that describes the paradox of attempting to come up with a trustworthy consensus when bad actors are operating. (Needless to say, being able to defend against the Byzantine Generals Problem is crucial for a decentralized network of oracles.)

"When I started looking into bitcoin," said Nazarov. "I didn't know what the Byzantine Generals Problem was and I didn't know what a Byzantine consensus was, but I decided I had to understand it, just as I had to understand why these shoes function to make sure that I have the right stride."

I stare down at Nazarov's GTXs and realize that he just connected my initial question about his plaid shirt to his choice of sneakers to the problem of extracting truth from a world of uncertainty. And I have to admit that I'm impressed. This might be the first time Sergey Nazarov has been interviewed for a profile, but I have a pretty strong feeling that it won't be the last.

Lawrence Lenihan’s name has been corrected.

The paintings in this article were commissioned from Trevor Jones, an artist based in Edinburgh, Scotland. Trevor became fascinated with art and tech collaboration soon after graduating from university in 2008. He was one of the first professional painters to incorporate augmented reality. Since 2017, his work has concentrated on cryptocurrency. These original oil paintings will be auctioned by the artist at Bitify.com, with 20% of the sales being donated to two worthy charities, BitGive and the Manny Pacquiao Foundation. Contact Trevor at trevorjonesart.com / @trevorjonesart for more information.

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