Unchained - Why Beam Thinks Businesses Will Use Its Cryptocurrency - Ep.115

Episode Date: April 16, 2019

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/sites/laurashin/2019/04/16/how-businesses-might-one-day-use-cryptocurrency/ 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/workshops/virtues-of-the-crypto-revolution Thank you to our sponsor! CipherTrace: http://ciphertrace.com/unchained Episode links: Beam: https://www.beam.mw Medium: https://medium.com/beam-mw Overviews of Grin vs. Beam: https://bitcoinmagazine.com/articles/battle-privacycoins-what-we-know-about-grin-and-beams-mimblewimble/ https://www.coindesk.com/grin-and-beam-a-tale-of-two-coins-being-built-on-mimblewimble Comparisons of Beam to Zcash and Monero: https://medium.com/beam-mw/whats-the-difference-between-monero-zcash-and-beam-953eafd89354 Beam Roadmap: https://medium.com/beam-mw/mimblewimble-beam-roadmap-2019-b2c7f38fc106 Beam emission schedule: https://medium.com/beam-mw/mimblewimble-emission-schedule-215551948259 Beam FAQ: https://www.beam.mw/faq The Block on Mimblewimble: https://www.theblockcrypto.com/2019/01/08/mimblewimble-history-technology-and-the-mining-industry/ Wallet vulnerability: https://medium.com/beam-mw/mimblewimble-wallet-vulnerability-report-7b8e88dc7e Blockchain stoppage: https://www.coindesk.com/beam-cryptocurrency-experiences-brief-blockchain-stoppage Learn more about your ad choices. Visit megaphone.fm/adchoices

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 dialogue, and there's a fantastic opportunity coming up. Meltem to mirrors of coin shares and Jalach Jobun Poutra of Future Perfect Ventures and I are all teaching a crypto workshop at Omega Institute in Rinebeck, New York from September 20th to the 22nd. It'll 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 with 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-Hive resource for all things crypto. I'm your host, Laura Schitt. Unchained is now on YouTube. You've got to can find the most recent episodes there are 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. CipherTrace 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 crypto economy by keeping it safe and secure.

My guest today is Alexander Zidelson, CEO of Beam, a cryptocurrency based on the Mimble Wimble protocol. Welcome, Alexander. Thanks, Laura. Really excited to be here. Love your podcast. And I expect a very interesting conversation. 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 Mimble Wimble Protocol. but since this is complex technology and it's always useful to hear different explanations. Can you describe the Mimble Wimble Protocol? Yeah, absolutely. So Mimble Wimble 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, you know, Bitcoin and all the relate protocols. So the key thing, I would say, is that in Memble-Wimble, 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 mention that as a save deposit box with coins. Unspend transaction output for people who don't know what that is. Unspent transaction output. That's correct. So the blockchain, if you look at it, it actually holds a set of all those save deposit boxes.

All of the save deposit boxes look exactly the same from the outside, like exactly like same kind of gibberish, right? You cannot tell anything. Just see that there is a lot of those saved 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 the input save deposit boxes and the output save deposit boxes is signed by both parties and then is sent to the blockchain for validation. Now, the miners, the validators, they don't know neither 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 eventually this new state of the blockchain becomes known to everyone.

Right. So the transaction is actually a transition from one set of save deposit boxes to another one. So that's been doable. And when you said that it's important that all the values are positive, can you just walk us through like why that is? Absolutely. Yeah, one was negative. Absolutely. So as I mentioned, if me, Alex, I want to send to you, Laura, let's say 50B, I would take a save deposit box of 80, for example.

Let's say that's what I had because I just mined it. So I would divide it. We would, in this transaction, our input would be 80 and one output would be 50 and the other one, the change from myself, would be 30. And then, you know, we validate the input, 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 the inputs would still equal the sum of the outputs, right? Because 80 equals 180 plus minus 100, right? It's 80 on both sides. But here, we would actually print money, right? You would get, we would take 80, create 180 for you,

and that 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 bullet proofs that actually validate that all the numbers are. in a certain range between zero, range between zero and a very large number. Again, without the validators seeing the actual values.

How did you come to hear about the Mimble Wimble Protocol and then launch Beam? 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 grantee. 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 all, in the team, we 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 the private people and definitely not businesses.

So if we hope to realize that crypto dream of cryptocurrency is being used meaningfully as money, whether it's store of value, means of exchange or a combination of that, that needs confidentiality. And the Mimble Womble protocol actually is the first protocol that the first architecture that allows confidentiality has built in from the ground up and has also no scalability penalty. Other implementation of privacy coins like C-Cash, Monero and others, they do provide privacy, but at the price of a very large blockchain. The transaction sizes are much bigger because you have to hide stuff. While in Mimble Wimble, all the protocols live 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. And how much lighter do you project it will be than those blockchains, like maybe per transaction or per some unit? Yeah. So our calculation suggests.

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, very small transactions, you know, breaking down each of the UTXOs into like millions of people, then blockchain would grow in one way. But if we use 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, you know, the blocks are still not full, so we cannot say that the, you know, it's been just three, four months. so we'll be continuing to monitor that, and eventually it will become much smaller for transaction. And then compared to Monero and Zcash, do you have a projection? So in our research, we saw, and we did some calculations, and we published an article in that in our media post,

just looking at officially published to stats of blockchain sizes and transaction counts. So Zcash was like nine times or ten times bigger for transaction than Bitcoin. and Monaro before the latest upgrade was like was I think 25 times bigger than Bitcoin and now it's just five times bigger than Bitcoin per transaction after the new upgrade. So. And for Zcash, were those numbers based on the shielded transactions or all transactions like including? Everyone. Oh, okay. Everyone.

So probably a shielded transaction is, you know, even much bigger. Okay. And what were you doing before you launched Beam? So myself, I have a background in software development, entrepreneurship. I started my first company in 2005. I co-founded a company called Marius, and we were doing a lot of things in peer-to-peer file sharing networks that were super popular back then.

You might remember, Emili Donkey. So we were doing now I would say 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 now when I'm looking at the blockchain, I'm seeing that blockchain solved some of the technology problems that were inherent in those P2-P file sharing networks

where, as I mentioned, an actor that was, you know, whose purpose was not exactly to share free content, but say to monitor the network could, you know, easily do that or even push content that was, you know, paid, which in looking, looking back, it was kind of a stupid idea because obviously very few people wanted to pay us to buy songs on email. But, you know, we did that as well. We did, you know, also kind of social networking, file sharing on, 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 single-handedly 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, dictionary, videos or pictures describing that notion. That was like a very nice little startup, which was eventually acquired by a large Israeli conglomerate. it. Then I did a lot of product management that worked for a company called WEFI. We're doing big data analytics of networking traffic and that 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 late stage, growth in late stage companies in various areas, from, you know, semiconductors to software, to, 3D printing and such. So a pretty diverse background. And to add to that, my, like, my MA is an applied linguistics. So, so I kind of, and I think it's, it's an advantage, you know, I like to think that it's good to have like a broader view on different technologies and, you know, different things in general. I saw on your FAQ that some people asked why, if you like the Mimble Wimble technology, you didn't just join the Grin team since they had started working on an implementation of the Mimbo WOMO protocol back in the fall of 2016. And you guys got started in March 2018.

So why did, why not just join Grin? So, you know, we, we believe in this funded startup mentality. And we believe that a dedicated team that gets paid can 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, you know, traveling to conferences to hiring a very good development team and paying salaries and a lot of other stuff. So most, from what, you know, from my experience and, I mean, if we look around, 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 a 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.

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? So, well, right now the customers are, you know, Beam is, let's take a step back. So Beam is a confidential cryptocurrency trying to be best in class confidential cryptocurrency, both in terms of performance, privacy, usability, everything.

So right now, our customers are, you know, crypto enthusiasts, miners, traders, who are, you know, 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 processors 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. Yeah, can you walk through what that would look like then? So maybe there's a business, and you give you.

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? Yeah, that's what I mean. That's a use case that 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, it's a perfect match. But other stuff as well, of course. Other stuff as well. And when you were talking about KYC, like what's an example of a

company that would do that or with auditing, et cetera? So the KIC is much later down the road. The division is that, you know, imagine a department store or an online merchant that is like Amazon, right, or another country just imagine a web store that sells, you know, books or stuff. Or, you know what, let's just imagine a regulated exchange, right? I think the sponsors of this show are exactly talking about ML. 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 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 to pass the ML tests while still being fully confidential 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't accept it. So how do you persuade businesses to use BIME? Is it going to be done with a typical sales team who got pitching this cryptocurrency to businesses?

and how will that work when both the merchant and then their supplier or whoever, you know, when both sides need to agree to use beam? Like how are you going to convince, do you convince both sides or how does that part work? Well, so I, first of all, businesses do realize and will realize more that using a non-confidential cryptocurrency is a problem, right? We don't need to really go door to door and try to sell them on that. that. We'll do the through partnerships, you know, with the 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 can't have just exposed 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, you know, 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. 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 a more traditional currency that we transact in, such as the dollar. 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, stable coin? 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 stable points.

Right. So we're now actively thinking about building bridges to Ethereum so that people could lock certain assets. assets on Ethereum, for example, stable coin and issue its exact representation on Beam and then trade in full confidentiality. 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. Wait, so I didn't follow. So you're saying now that like businesses won't actually use Beam, that Beam will be used to issue other coins that businesses will use? We will offer both possibilities, right? So in time, cryptocurrencies might become more stable in terms of their value, or even now, if we think, if we look at Bitcoin or even Beam for that matter, but we don't have such 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 they 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 fully confidential way, or use stable coins issued on the Beam network, not by us, most likely. We'll just create those bridges and allow confidential trading of stable coins on Beam. 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? So actually, most of the work in 2019 will be based on BeamCore. And BeamCore is just building the best in class privacy coin and an ecosystem around it. Right. So that includes wallets, you know, we have a very nice desktop wallet, very easy to use. Now we've just released an Android-Manet 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 blockchain researching, maybe additional consensus methods, improving privacy as we can.

So all this is BeamCore. And Beam Compliance is a longer-term project where we're now researching the ways of making it possible. for a confidential point to also be opt-in compliant. And from what I've read, you've said that this will enable or that there will be like a compliance suite that you've described as, quote, a complex piece of software incorporating various use cases 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? So I'll give you an example. Imagine a company that wants to accept Beam for payments 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 to a 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 then, you know, once they click OK, 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. We're going to discuss the consensus algorithm and their raise in venture capital after the break.

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Back to my conversation about being with Alexander Zidelson. So we discussed this briefly, you know, the differences, between Beam and other existing privacy coins such as Zcash Manero. And you talked about how this, you know, you perceive to be more scalable. But those are already kind of like in use. So why at this point would someone choose to use Beam versus one of the other privacy coins? Better usability and better scalability, right? better scalability allows more people to use it

and better usability as we're building now all those wallets and all the user-friendly features it just makes it easy to use and I think our old space is very nascent, is very small so there are so many people who will be coming into the crypto space in the coming years that 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 B will be there. And also, again, our longer term vision of making the currency business friendly will attract eventually more people. 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?

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 thing up and running. So, and that's where people, or Moneros is, I think, 20 gigs. and it also takes like tons of time to download it and set it up and running. 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 note, potentially on a mobile phone, which open. So you're saying that businesses that will use this for payments, they'll also run their own notes? I think so. I think eventually most of the people will choose to run their own note. 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 note. 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? So. Because, you know, that has the same properties of scalability and privacy. That's right.

The scalability is privacy is arguably the same, although we have somewhat, yeah, we have a little bit better implementation of Dendaline with a little bit more detail, decoys. So a better privacy there. We are more usable right now. So, you know, for green, you know, the, 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 non-technical person. Command line interface. Yes, command line interface. That's correct.

That, you know, most untechnical people just have no idea what to do with. And we right now are completing the set of wallets for all the platforms out there. We are also doing a lot of innovation. And one of the limitation of Mimble Wimble is that the two wallets have to talk, right, in order to set up a transaction, meaning that you have to be online. With Beam, we are solving, we're actually hiding all of this complexity using a messaging subsystem that we call this SBBS secure bulletin board system, which is distributed and run by all the nodes, which actually allows the two wallace to communicate without the user needing

to even know that these things happen, but they still have to be online. We're soon adding something we call one-sided payment. 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 to pay to those UTXOs without the recipient wallet being online at all. So it will be much more convenient. we're working again and I mentioned another 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. 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%, but in the blog post about that allocation, I calculated it to 25%. So which one is it? It's 20. It's 20% exactly. Oh, okay. Yeah, I'm not sure. I'm not sure which blog post. 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 coins will go to the treasury.

And then when it's 40, then 10. Yeah, that, you know, it depends on. No, it's 25%. Well, if 20 divided by 80 is 25%. You can look at it as like the total block reward is 100 and 20% of that go. Like for every block, 100 coins are mentioned. Oh, so it's 20 out of 100? Yeah.

Wait, it's 20 out of 100, not 20 out of 80? 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. Oh, now I get it. Okay. Sorry.

Okay. Right, right, right. Right. Okay. Okay, good. No wonder. I was like, why is it say 20 everywhere else? Yeah, yeah.

It's just the different ways to look at those percentages. Yeah, I understand where, yeah. So you got the impression that the 20 were taken out of the 80. Yeah. Yeah. Right. So I'll need to revisit that article and maybe make it make it close. clear there because, yeah, I understand. Okay. Okay. Yeah, I think I was confusing the minor reward with

like the Coinbase emission. Yeah, yeah. Okay. So, and then also how much did you raise in venture capital? So we raised a little bit over $5 million. I'm sorry, you said $5 million? Yep, $5 million. Okay. So back to this question about Beam versus Grin. So obviously, you know, we talked about how, 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, 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 might 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? Well, I think in 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 and we see today

people are mining and buying beam and they're mining and buying mining and buying grin in a similar fashion you know two projects are not too far from each other in terms of you know the price and the mining power Green 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 how exactly it is funded or not. And we've been always very transparent about that. And 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 it's fine other people would prefer being because they would feel that there is a funded team here that will develop the protocol more and more and more I will not need to ask for donation and rely on you know benevolence of some donors and also that the project the treasury has set aside to find for the foundation that will continue the support of the project and that will be, that will ensure that, you know, people are incentivized to build on top of the,

on top of the protocol, even when the initial funds are out. 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? So there was no negative impact whatsoever. it was just a you know a beginning of feature that was not

eventually developed that was kind of left left hanging by our developers you know we just discovered that during some routine in a review of the code fixed it pretty quickly unfortunately because

it's allowed potentially in a certain scenario this thing allowed stealing the funds we couldn't we didn't want to like immediately you 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 a 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. And shortly after that, your blockchain also experienced a

stoppage of about two and a half hours. What happened there? So what happened there was an interesting case of collision of two UTXOs. There were cases where people were running and still are running like the same wallet with the same seed, right, wallets with the same seed on two different machines. right and and this in certain scenario 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 this halt okay and it took us some time to find the situation and then we just issued a fix It was 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. You started Beam in March 2018 and launched in January 2019. Grin started development in fall 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? That might be.

That might be the case, although, you know, as we see, software has bugs, regardless of how much you write it, how much you tested. We see projects like Zcash discovering bugs years after the 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. 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. And so the wallet vulnerability presumably could have been found a little bit, you know, if you would wait it maybe a little bit longer to launch. And same perhaps with the blockchain stoppage. Wouldn't you say so that, you know, it's, it's, one, like in a way maybe those are more, they should have been perhaps more obvious problems if

they happen so soon after launch? 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 that, you know, if we had waited for several more months, maybe we wouldn't have those bucks, but maybe not. Because until you launch something, there are some things that you just cannot test in the lab. So it's kind of hard to answer here. How is Beam being governed? Beam is being governed by the team. So we have the core team of the project, and we're creating our roadmaps.

We're having 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 we want to build, and then we just go and build it. Let's talk about the Beam Foundation. How will that function? So that foundation will have Beamcoins set aside.

and it's 20% of the treasury, right, is set aside for the foundation. The foundation will be run by a board of directors, which will, you know, once we have it set up, we'll start going out and looking and offering people to join the board of directors. And the 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 a Zcatch Foundation does and maybe some others. And where will it be based? Hopefully in Switzerland.

We're working to set up in Switzerland. Okay. When do you expect it to be launched? Well, it should be like in a couple of months from now, we started the process already. It just not very transparent. Unfortunately, with the authorities, things take time. So we are working on that. That's what I can say.

And you plan not to have anyone from the company on the foundation board, correct? No, there may be somebody from the company, at least in the beginning, because we have to set it up. But later on we'll probably fade out or maybe have like one seat out of a larger number of five or seven. Okay, yeah, I was going to ask if after seeing what happened with Tazos, 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 was giving you pause about not putting any company team members on the board. But it sounds like you plan to do that.

No, we're still not, we're not 100% 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 just 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.

All right. Let's talk about your mining algorithm. You chose the Equahash mining algorithm. Why? 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 Equally-Hash was there.

So we modified the parameters and started using it. And for listeners who are familiar with proof of work and proof of stake, but maybe not Equahash, can you describe how that works? 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 in this format. I'm not an expert in how exactly AgriHash works. But basically, the idea is to say it's like meaningless cryptographic puzzles

that are being solved by going through huge amounts of numbers and just trying each of them one by one. In recent months, a number of coins using the Equahash mining algorithm where 51% attacked, such as Zencash, now called Horizon, and Bitcoin Gold, why did you choose Equahash anyway, despiteing this seeming vulnerability? I think that would be true for any GPU mined algorithm, Equahash or not. The algorithm itself is not, just not have anything specific that makes it easier or more difficult to attack. Okay, despite the track record? 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% attack,

the possibility of this attack is because people can take all of GPUs and just turn them onto a specific protocol and try to manage such kind of an attack. And it doesn't matter which algorithm, which specific algorithms being used. It's not like Equahash is more vulnerable than any other algorithm that runs on GPUs. And so are you aiming to move off GPU mining? 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 announced the second one and we announced the exact algorithm, that will be used if you will be able to start preparing their aces. And meaning that somewhere in the middle of 2020, there will be ASICs on the market, and that will be used for mining rather than the GPCA use. 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-ded network, then you'll have more A-6? Is that the thinking there? Yeah, 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 A-6 now. Okay, because if I were to say the exact algorithm

that will be there in December, you know, people will start spending money. Probably. I mean, at least they would have like 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 like 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 to make it worthwhile for people to develop ASICs. right because you don't want to be in a situation where there's a very very small number of basics because the network is small so it only makes sense to people to buy like 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. Yeah, I think that's one way in which actually your philosophy is similar to Grins because there's right. They're doing something. Yeah, we're there 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? Well, first of all, you know, we are in good relationship with them. And specifically, you know, we wanted to help out, you know, just out of, you know, being friends. But also, we, we. both both projects are doing Mimble Wimble, right? And if there is like a big security hole in Mimble Wimble, then it's not good for either of us, right?

So that's why we felt it was like it made perfect sense, you know, to donate money to this particular purpose. And, you know, I think it was, well, very well received. Yeah, I wonder what, you know, I don't think you ask them about that, But I think they would, I mean, they were grateful. And I think we understood that it kind of makes sense because, you know, we are both doing the same protocol. 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. Yeah. 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, 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? Okay. So we just released something we call payment confirmation,

which is an important feature and in some way 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 of the blockchain, that I did send you this exact amount. It's an important thing because in theory, I could send you a thousand beam, but then you could deny that.

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 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, you know, some set of recipients UTXOs actually, and allow other people to send money to that place without the need for, 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 we have Android iOS is on its way.

Now we have the test net 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. where yeah and that's where scalability comes in right so in theory is possible

and this would give like more more security right and more democratized network right because if I today and most global wallets just talk to a specific to some random or non-randing node and it means that somebody else is

kind of securing your funds if you have your own node 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 claims about potential linkability. of UTXOs and Membo Wimbo. So we want to do something along those lines as well. Atomic swaps in the coming days will 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 we just did a survey of our community. And this is like the most desired feature. It turned turned out to be the most desired feature creating this atomic swap because people want to be able to, you know, buy and sell being for Bitcoin without even, you know, registering on an exchange or doing business with any exchange. 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?

So it's sort of a dex, but right now we're not going to building a full-fledged decks that think just up a board where people post a gate. I want to buy 500 beam for whatever. Kind of like a local bitcoin or something. Yeah. Yeah. Yeah. Something like that that's distributed.

Right. But we'll see. But we'll see how exactly will work. But the idea is to provide a place for people to post those. buy and sell orders, right, not in a full-fledged ways like you have it on exchanges, but in a simpler fashion, at least in the beginning. Later on, we'll be looking to add at Dex as well. Now, in terms of building the platform that I mentioned a couple of times,

and expending from just using one coin to, you know, having just 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. So what would that look like exactly? I don't know if I fully follow that. You have some kind of ERC20 token and then when you say a bridge. So let's say you have people. Yeah, so let's say you have a die coins, right?

And you want to, 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 die coins and issues their representation, let's call them B-dye. beam die 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 exactly with 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-dye and take the necessary amount or the corresponding amount of die from the smart wallet to your Ethereum wallet. 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? So our main place is our website, Beam.m.m.m. 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, we, the community is very open. We are always there to answer any questions. We really welcome any questions, any criticism, any ideas.

So the more, the merrier. Great. Well, thanks so much for coming on Unchained. Thanks, Laura. It was a pleasure. Thank you so much. Thanks so much for joining us today. So learn more about Beam and Alexander.

Check out the show notes inside your podcast player. If you are not yet sign up from 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 Rayling Gala Polly, for us from recording, Jenny Josephson, Daniel Ness, and Rich Struffelino. Thanks for listening.