Muneeb Ali has lived more than a decade in New York City, becoming a feted Web 3.0 entrepreneur in that time and the beneficiary of millions in startup funding. But it hasn’t gone to his head.
While some of his peers have developed large egos and bought Lambos to match, he still retains humility and a hard-work ethic. At heart, the cofounder of Blockstack – one of the most important Web 3.0 startups – remains a driven computer programmer. He’s happiest finding bugs in software and would rather sit alone in his office than give interviews to inquiring journalists.
When we connected recently at the National Museum of Mathematics, in NYC, he radiates a sense of confidence and calm. He smiles easily as he arrives a little late for our meeting. He presents as a seasoned New York businessman. You wouldn’t think he’s a shy person, someone who would have trouble speaking about his achievements or those of his own company.
But Ali says geniality doesn’t come naturally to him. He would prefer to hang out with other geeks and talk about code.
“We’re a bunch of computer scientists at Blockstack. We don’t feel comfortable doing media interviews. I had to work on myself and convince myself these things are important,” he said.
Ali grew up in humble circumstances in Pakistan. His parents were not flashy with money either, because they didn’t have much.
“My dad was working in the army. In Pakistan, they provide you with a lot of subsidies for your rent, but you don’t earn a lot of cash,” he said. “They’re very humble people. They don’t want to brag. They go to the opposite extreme of where they don’t share anything. Some of that translates to me as well.”
There wasn’t much for frivolous things, but Ali’s parents did have the foresight to buy Muneeb and his brother a computer in 1997 at a time when no other kid in his neighborhood had one. That changed his life in several ways.
“I experienced state-controlled media first hand. We used to have a single TV channel where we’d see state-controlled information. When I got access to a computer, I started realizing even the version of history taught in school was wrong,” Ali said. “Some of those personal experiences play a part in me trying to support an open internet.”
Ali set up Blockstack, a “decentralized computing network and app ecosystem,” in 2013. The goal was nothing less than building “the missing link in the internet,” according to Brittany Laughlin, the group’s head of investor relations. Laughlin helped incubate the company during its early phases when she worked at Union Square Ventures, a VC firm known for its early investments in startups like Twitter, Etsy and Coinbase.
“With Blockstack, there’s a belief that identity is a core component of the internet,” Laughlin said. “We use email and all these centralized providers, but there’s no universal protocol across all these for identity.”
The current dynamics of the internet force users to log in to applications with IDs owned and created by centralized companies. For example, using Facebook requires a Facebook-specific username and password that you can’t use to access, say, Gmail. The “missing link” is a universally-recognized and independently-owned identity, according to Laughlin and others in the Web 3.0 space.
With a Blockstack ID, users can access any application on the network without having to create multiple usernames and passwords. In addition, through their Blockstack ID, they can authorize, or deauthorize, other applications from leveraging their personal data.
Since late 2018, the Blockstack ecosystem has been live on mainnet and presently hosts more than 270 different decentralized applications (dapps) reaching about 150,000 end-users daily, according to Laughlin.
No longer just an identity application, Blockstack has evolved into creating a whole suite of decentralized web products for smart contract development, execution and data storage. The startup is one of the most ambitious projects in the blockchain industry today, developing tools that could advance the “Web 3” movement, where individuals have control over their data and the internet is decentralized away from mega-corporations.
“Pursuing a fully decentralized web is an audacious goal, so it will take a mission-driven founder to make it a reality,” said Anthony Pompliano, founder of investment firm Morgan Creek Digital. “Half the battle for a project this ambitious is to convince people they should care about the effort. Blockstack has done this better than almost anyone else in the Web 3 movement.”
The first Reg A+ offering
Blockstack stood out for another big innovation in 2019: a $23 million token offering that was fully compliant with existing securities laws.
Of the more than 500 token offerings that launched this year, only Blockstack’s received the blessing of the U.S Securities and Exchange Commission (SEC) under the Reg A+ exemption and then went ahead with a sale. Regulation A+, which was introduced as part of the 2012 JOBS Act, allows companies to sell securities to non-accredited investors.
Blockstack received approval in July, eventually selling its Stacks utility token to more than 4,500 individuals and entities, according to the company. (Props, a token for streaming platforms like YouNow and XSplit, also received approval for a Reg A+ offering this year, but it has not raised any money under Reg A+ yet.)
Ali had to work hard to win over the SEC. The Wall Street Journal reported that his team spent 10 months and $2 million dollars to launch the fourth Stacks token offering (Blockstack had a $52 million ICO in late-2017). According to New-York based securities lawyer Louis Taubman, roughly a dozen other companies outside of Blockstack have applied for Reg A status for token offerings since 2017. Reg A+ allows companies to sell tokens as securities not only to U.S. accredited investors but retail investors as well. Normally, such offerings are prohibited for the sake of protecting retail investors from undisclosed risk and fraud.
“This means the SEC was satisfied that Blockstack gave full and fair disclosure of their product and they felt comfortable that investors would be able to read Blockstack’s offering statement and make an informed investment decision based on it,” Taubman said. “It’s a huge milestone for the industry. This will hopefully allow other companies to not spend as much time and money to accomplish a similar result.”
This year, the SEC continued to crack down hard on blockchain companies for conducting unregistered token offerings. In September, the SEC fined EOS blockchain creator Block.one for $24 million. Back in 2018, Block.one conducted the world’s largest token offering in history raising a combined total of $4.1 billion. In October, the SEC issued an emergency restraining order against messaging app Telegram over its proposed $1.7 billion token sale.
After the ICO run-up of 2017 and 2018, regulators treated the cryptocurrency and blockchain industry with utmost caution in 2019. In this context, securing approval for a Reg A+ offering was an achievement for Blockstack, Taubman said. In recent years, many other blockchain companies have given up trying to satisfy U.S. regulators, instead moving operations to more jurisdictions with looser requirements.
For all the time, money and effort Blockstack went into launching its Reg A token offering, you might expect Ali to be rather peeved with the SEC. Instead, he feels something like sympathy.
“I do think the SEC’s concerns are valid. They have to be very careful because they know the entire world is watching them and whatever they do is going to have consequences not just in the U.S., but abroad as well,” he said.
Ali is happy to play the long game both on the regulatory front and in developing Blockstack’s software suite. The startup took more than five years to launch its main network, a relative lifetime compared with most blockchain companies. The entrepreneur said he learned caution and persistence from his parents.
Tricks of the trade
I’m interested in how Ali deals with the stress of being a startup founder in New York City. He says he sits for ten minutes of meditation every morning, helping calm his nerves and orient his mind to the tasks lying ahead. Impressed, I scribble this life hack down into my notebook as a personal reminder.
Ali teaches me several effective techniques for getting work done as a CEO. When he’s trying to solve a problem, he starts with a completely blank piece of paper, so he’s not distracted by competing facts. Other times, looking to recharge his brain, he takes a 20 minute nap in the middle of the day. Sometimes you can solve problems subconsciously, he said.
Ali took up such techniques when he was pursuing his masters and PhD in computer science at Princeton. Well before starting Blockstack with his friend Ryan Shea, he was already focused on big, seemingly intractable, problems.
“When he was applying to grad school, Ali was very interested in technology to assist the developing world,” said Michael Freedman, his thesis advisor at Princeton who later became a technical advisor to Blockstack.
“Muneeb was more interested in the big picture of the potential impacts to an industry that research could have, as opposed to every little detail about a technical result,” he added. “Even when he was a student, he was always extremely well-spoken. He doesn’t look and strike you as an engineer that sits in front of his computer 12 hours a day.”
Ali doesn’t code as much as he used to in those early years, especially now that Blockstack is no longer in an exclusively R&D phase. Moving through the puzzles and activities at the math museum, Ali seems wistful about his years as a student and the early days of his company when it used to be all about the tech.
“The core R&D infrastructure, that’s my area of expertise. I felt a lot more comfortable there. We went from a R&D stage to infrastructure building to [getting] developer traction. What matters most now is our user and developer experience,” he said. “I don’t have expertise there. I’m learning from my team and I’m trying to hire the right people. I would say that part is very challenging. The earlier tech part was easier for me.”
Much of the blockchain industry is at the same stage as Blockstack: looking to move on from infrastructure development to tools and interfaces that individuals and companies can use painlessly.
Walking back to Blockstack’s offices from MoMath, Ali talks about the history of mathematics, its greatest thinkers, and what recent developments have been made in the academic field. “If I wasn’t working on Blockstack, I would just be studying quantum computing,” he said. “When math, computer science and physics all become the same thing, that’s going to be ultimate subject to study.”
The road ahead
Ali’s trials with the SEC and U.S. securities law are not over.
Having obtained regulatory clearance for a Reg A+ offering, Blockstack now needs to win additional SEC approval allowing miners to mint tokens in a process akin to how miners create bitcoin on that blockchain.
At present, tokens are issued on the Blockstack blockchain through “app mining” where application developers are rewarded for building programs and tools on the platform. In 2020, it wants the members of the public to process and validate transactions, winning tokens for their trouble.
However, issuing tokens through a process of general mining, as opposed to app mining, may require a new set of approvals from U.S. regulators. According to Ali, the Reg A+ offering won this year does not automatically support the issuance of new tokens on the Blockstack network. This is mainly due to a fixed $50 million raise limit for such issuances. At the same time it doesn’t want to apply for a broker-dealer license to issue normal types of stocks.
“Whether a [general] miner needs to be registered as a broker-dealer is an open question,” said blockchain lawyer Matthew E Kohen. “I completely agree with Blockstack’s position that it would be insane and unworkable to have miners registered as broker-dealers. But that’s a material risk out there that would certainly complicate things.”
Ali said lawmakers ultimately may have to decide on the issue, as existing law was set up in a different world entirely.
“The issuance of new tokens, that is the main issue here. If new tokens are being minted by the protocol and released in the ecosystem, we need a [new] legal framework for it, especially in the U.S.,” he said.
At the moment, Blockstack’s US token holders are not yet able to trade their holdings on U.S.-based exchanges. Stacks (STX) trades exclusively on exchanges like Binance and HashKey Pro, which operate outside of the U.S.
“We’ve just figured out the primary issuance of tokens [in the U.S.] … but that’s just step one. Step two is, ‘If I buy these tokens and I want to trade them, I don’t have any place that I can trade them in,’ particularly if I’m a U.S. person,” Taubman said. “There’s no place for U.S. investors to meet and exchange these tokens.”
Ali has sympathy for the SEC’s conservative approach, but it might have moved more swiftly to give “clarity on the ecosystem” and set a direction, he said. Still Blockstack plans to stay within the lanes of whatever U.S. regulators require and wait out the uncertainty.
“What I love about Muneeb and his team is that they’re not caught in the short-term hype cycle,” said Zavain Dar, who invested in Blockstack in 2016. Such an approach will pay off in the long-run. “When the first U.S. cryptocurrency exchange gets licensed, Blockstack will happily list their token, but until that happens, they want to do things the proper way.”
Arriving at Blockstack HQ located in the Flatiron District, Ali and I immediately have to lower our voices. Employees at their desks look ultra-focused and we don’t want to disturb them. No one shows any acknowledgement of our arrival, even though the office is open-plan and we have no hiding place.
A quiet workspace is part of the company culture, according to Thao-Nguyen Le, Blockstack’s people and operations partner.
“Forty to 45 percent of our workforce is distributed. We communicate a lot via Slack. We do that because we want the remote folks to feel included. There are no water cooler conversations they’re not a part of,” she said.
Ali emphasizes that Blockstack has a very “serious engineering team.” Blockstack is not a freewheeling blockchain project where everyone does what they like, when they want. “When I’m hiring people, I tell them to think of us as more of a traditional Silicon Valley startup that happens to operate in crypto. We don’t have an army of loosely connected open source developers who may or may not work,” he said.
After all, the fate of the Blockstack network rests in their hands. But not for long. The ultimate plan is to turn over the reins to token holders. Now sitting in Ali’s private office, I’m curious to know how he plans to decentralize the Blockstack network, such that it will operate independently of the startup.
Ali told me Blockstack as a company won’t be earning rewards on the network as a miner. Normally, in a proof-of-work based blockchain like Blockstack, those with the largest amount of computing resources have the most say in what blocks are created and what transactions get validated. Removing Blockstack, the company, from this equation allows computing power for the network to be sourced from a grass-roots network of individuals and entities from around the world, he said.
Furthermore, part of Ali’s motivation for pursuing a public Reg A+ token offering was to decentralize participation to a broader range of individuals. It wasn’t just to generate more funds; a private placement might have raised more money. The 2017 offering involved only about 800 different qualifying investors and institutions around the world.
“Blockstack did this offering so people in the U.S. who have been long-time supporters of the project are able to participate and be issued tokens,” said Albert Wenger, managing partner at Union Square Ventures.
“There’s a lot of people in the U.S. that are interested in Blockstack. It would have been doing them a disservice by not going to the effort to allow them to be included,” said Jude Nelson, an engineering partner at Blockstack.
Such talk aside, Blockstack is still a centralized entity building a decentralized product. Participants in the blockchain need to trust that Blockstack the startup will continue to pursue a decentralized roadmap in building Blockstack the network. The answer lies in Blockstack’s motto, “Can’t be evil,” a play on Google’s original mission statement, “Don’t be evil” (which it quietly dropped in 2018). Blockstack can’t be evil, according to Blockstack, because while its engineering and community-building efforts are centralized, the technology itself is not. The community owns the network through the token dispersals.
As such, Blockstack aims to be more like Linux, developed by Finnish computer scientist Linus Torvalds in the 1990s, than a Silicon Valley-type company. Ali sees Blockstack as an open source and decentralized alternative to today’s centralized internet, not another lumbering unicorn.
In other words, the current centralization of Blockstack is meant to ensure eventual decentralization. Blockstack the company exists for “an initial couple of years” on a “50 to 100 year journey” towards community control, Ali said.