World will eventually move away from paper towards digital currency
Muneeb Ali is a Pakistani-American computer scientist and internet entrepreneur. He studied Computer Science at LUMS and received his PhD in Computer Science from Princeton University in 2017. In 2013, Muneeb Ali and Ryan Shea founded what would eventually become the Stacks project at the Princeton Computer Science department to solve the underlying problems of current web and mobile apps. Muneeb’s Ph.D. thesis was also on Blockstack. The two led their new startup through the Y Combinator accelerator in the summer of 2014, and upon completion, raised a seed round led by Union Square Ventures (USV), with participation from Naval Ravikant, SV Angel, and others.
After launching a blockchain-based decentralized identity (DID) system in 2014, the team released the initial design for the Blockstack platform in 2015. The R&D phase lasted through 2017 and concluded with Blockstack releasing an alpha version of its developer platform, which included a developer release of the Blockstack Browser and a decentralized storage system. By the end of 2017, the company also secured two additional funding rounds via a Series A, led by USV, with participation from Lux Capital, Digital Currency Group, and others. In July 2019, Blockstack received the green light from the SEC to conduct a token sale in the U.S under Regulation A+, the first such token offering of its kind. Blockstack PBC has now raised over $75 million from equity investments and token offerings for the Stacks ecosystem.
Following are the edited transcripts of the conversation BR Research had with Muneeb Ali that revolved around the opportunities and possibilities of blockchain technology in Pakistan including the country’s very own cryptocurrency:
BR Research: Could you explain what exactly is blockchain technology?
Muneeb Ali: What happened with internet or even mobile phone is that a lot of people got connected with each other. There was basically faster information exchange that opened up a lot of opportunities. What’s happening with blockchain effectively is similar to what happened in the early 90s to the internet; systems that were previously a black box or under control of certain parties opened up and became more transparent. Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. For example, there is a tracking system for who owns property maintained by a single company or even government. Sometimes records are not properly maintained due to disputes and distrust of people involved. However, if you make it transparent using blockchain, especially the public blockchains such as bitcoins that are very hard to change, you get a record of every transaction with a mathematical guarantee that they do not change. Everyone can see, verify, and agree with the information as it is very transparent. That’s basically the fundamental shift between more closed systems that rely on companies or individuals versus open networks that are powered by blockchains.
BRR: We have heard that blockchain technology can be leveraged to solve e-governance problems. What kind of application could blockchain technology have in Pakistan in that sense?
MA: I would categorize the applications into different buckets. One would be a broad category of verifiable digitization; there is a lot of discussion in Pakistan around the need to digitize the systems to address many issues including corruption, and blockchain technology can take that to the next level as not only you’ll be digitizing systems but would also be making them extremely transparent and verifiable. These systems can then be applied through multiple and wide-ranging areas for corruption, check and balance etc.
Other application of blockchain technology is on the gold 2.0 and currency exchange side. Right now, the government of Pakistan seems against cryptocurrency. But there are some signs of change, for example, the KP government recently passed a legislation saying that bitcoin mining and cryptocurrency should be legal. If the government becomes more friendly to these technologies and start building reserves of bitcoin as well as allowing people to do that for themselves just like any other store of value, hard asset or investment avenue, Pakistan would still be a country that is early in this technology. Even at this point when the price of a bitcoin has crossed $29,000, it is still only three percent of gold’s market capitalization.
Another interesting thing that is happening is that bitcoin is kind of like gold, but you can have digital government-backed currency as well. The thing with these digital currencies is that they are much more efficient to trade and transact in. Having a digital currency would mean that you have leapfrogged into the next generation technical architecture where transactions are very cheap, and people can send money back home within minutes. The writing is on the wall: we are eventually going to move away from paper currency towards digital currency at some point, but why not be early adopters when we easily can. Since not a lot of countries have done it yet, Pakistan Rupee would be at the forefront if the government adopts this innovation, which can bring in a lot of positive association to the country and help entrepreneurs here as well. It’s not only these types of new cryptocurrencies, but the government-backed currencies can also be represented in these digital formats.
The third category would actually be the security-focused and privacy-focused applications. If you want to protect critical infrastructure, personal information and data, or some sensitive information related to e.g., national defense, then you need to move away from the centralized companies towards decentralized applications that give you mathematical guarantee of no security breaches. Decentralized applications are more safe and secure as there is a lack of centralization, so data breaches are less likely to occur. As there is no centralized control, so dApps are completely censorship proof, and there is no single point of failure. Unlike traditional applications, data is not stored at one location, so the probability of a downtime or data loss is almost zero. As dApps are not owned by a single entity, users have more trust and confidence that their data will not be stolen or manipulated. Pravica is one such private messaging system – an Egyptian startup using blockchain technology and working with the local government to empower user privacy and security with no data breaches, privacy scandals, and unwanted marketing.
BRR: How does the traceability of cryptocurrencies work?
MA: In terms of the traceability, there are ways where you can make cryptocurrency less traceable, but those ways are actually pretty hard. In general, when a regular person buys a bitcoin or a cryptocurrency, they are actually making themselves more traceable because of the public ledger. There are now companies such as ‘Chainalysis’ that track movement on the blockchain for various addresses, helping governments agencies, crypto businesses and financial institutions engage with cryptocurrency. Since there is more publicly verifiable information available – which is not the case with cash – it is much more traceable.
However, interestingly there are new types of blockchains that do encrypted transactions where it is mathematically impossible to track and trace how the money is moving. But such kind of encrypted cryptocurrencies are less supported on major exchanges; and there are more restrictions around these encrypted cryptocurrencies.
BRR: So how can we form a Pakistan based cryptocurrency, and what are its advantages?
MA: That I think might be one of the first things that should happen, and we are trying to move things forward. We established our Pakistan Chapter of project Stacks; and we are talking to local investors and teams to building these things. How this works is for example, USDC, which is a digital Dollar not issued by US Government but by a group of companies. They effectively keep the same amount of dollars in their bank accounts when they are issuing its digital format, which means that the company controls the supply or issuance of the new digital currency, and the company then shows the audited financials where they are transforming the money sitting in their bank accounts to digital money on a blockchain. Once it is on the blockchain, the money starts to trade and change hands. There are already very high trading volumes for USDC and instead of trading bitcoins against regular dollars, people have started trading them against these digital dollars because these are much easier and flexible to use. The company charges a fee for the transactions, and it’s actually a pretty lucrative business model.
That’s the way to do it; you need a company in Pakistan that has bank account at a local bank, has audits for the amount of money in its account and has the regulatory approvals to issue that amount in a digital format on a blockchain. Ideally, State Bank of Pakistan should take it up.
BRR: What would you advise SBP to do?
MA: It is happening both in the US and China; and India has started looking into it. So, I think they should really think hard about how quickly they want to do it here in Pakistan. I would start with a small experiment like even with a million dollars. For example, issuing a million US dollar worth of Pakistani Rupees in a digital format and then see how people are using it. I think it is actually going to be a big deal around the world because no large government has done it; only very few small islands have done it. Also, if Pakistan goes ahead with that kind of experiment, it can assess the demand for digital currencies in the country.
BRR: How stable the value of that currency would be? We have seen quite some volatility in bitcoin.
MA: So, the digital currencies trade at the same rate as the native currencies, because it is not a new currency but a digital representation of the same currency. It doesn’t go up and down like bitcoin and some of the other cryptocurrencies. Another way to look at it is that you are buying a part of a bitcoin technology, because there can only be 21 million bitcoins that can be mined in total.
BRR: Tell us about your Blockstack?
MA: Blockstack is a decentralized computing platform that provides user-controlled login and storage solutions on cloud sites. It is the first implementation of a decentralized DNS system on top of the Bitcoin blockchain. It is an open-source effort to design a network with the security of Bitcoin with the expressivity required for developing decentralized applications. It’s the easiest way to build decentralized apps that can scale. Blockstack enables developers to build secure, privacy-focused applications in which users are in control of their data instead of storing it with large tech companies. It inherits Bitcoin’s security through Proof of Transfer, enables you to write secure smart contracts with clarity, and brings it all together in one decentralized network maintained by developers from all over the world. Concerns around internet privacy, security, and data breaches brought attention to Blockstack. Software developers have used Blockstack to build decentralized alternatives to popular services. More than 500 teams are already building on Blockstack
BRR: Do you have any message for our readers?
MA: Today, there is already so much capital flowing through cryptocurrency. Our company alone has raised around $75 million over the last couple of years and our market cap went from around $100 million four months ago to $400 million. More resources and capital are being dedicated to cryptocurrencies, and while we are still at a very early stage with this technology, there are tons of opportunities in this space. My message would be that there are new types of programming languages for how to program the smart contracts, and the entrepreneurs and engineers in Pakistan should pay attention. It is like living through the internet revolution all over again; only this time you can fully be a part of this global movement.
This content was originally published here.