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The future of crypto investing
09.06.2019
Q&A With Steven McKie, Founding Partner of Amentum, Technical Advisor to Cent, Connext: On The State of Blockchain Infrastructure, Project Culture, Decentralized Web
ANDREW LEE
@alee

I had the opportunity to sit down and chat with Steven McKie, founding partner of Amentum Capital, and technical advisor to Connext, Cent and SpankChain. Steven shared some insights into the trends of blockchain use cases, how to think about blockchain infrastructure, and dived into his ideas on what he calls the “machine theory.” It was a great chance to sit-down and learn from Steven, and the complete audio and transcript is shared below. – Andrew Lee

Full audio: https://youtu.be/poceuZBzd6U
Follow Steven on Twitter at https://twitter.com/Steven_McKie!

Some highlights from the interview below:

• On infrastructure: “Everyone is understanding that it’s not just scalability, but it’s also like methodology, how we are deploying contracts, how we are interacting with things on-chain, whether or not you should use things off-chain, which flavor of off-chain technology should be used to scale your thing.. we’re all learning a lot, and so as these applications tell us what we need to build in order to like keep trending towards the direction we want, things could keep getting better.”

• On use cases: “You have certain use cases where you want to store things on-chain some, some use cases you don’t. Some you don’t only need to interact with Layer 2 technologies like state channels. Some you might want to have like a full EVM and you want to have an on-chain root that everyone can share so you need something like plasma. Maybe you want to have your own proof of work or you want to focus on like zero knowledge proofs and things like that so you maybe want to focus on interesting side-chain models. It all depends on what your use case is, and what your tradeoffs are.”

• On leveraging standards and pre-existing tools: “So, really it’s just like holistically looking at what is my what is my use case, what tools are already built for me so I don’t have to reinvent the wheel, and can get me up and going and in what standards, like you know ERC standards are already present that I can leverage and take advantage of those primitives to maybe like creatively combine them into other different interesting use cases where you already have the security the integrity of already audited code and instead of again reinventing the wheel you just sort of take in things and reimagine what to do with them and that’s a safe way like experiment with these different technologies”

• On the subject of a decentralized web: “What people don’t understand is everything is playing a role in building a big basically an amalgamation of different parts that form like a machine that kind of do everything that we need it to do that sort of takes over the place on the Internet. The concept is it to replace the web. It’s like replacing the concept of production, coordination, governance, money and systems all at once.”

Transcript

Andrew Lee: So what wakes you up in the morning, what are you most passionate about?

Steven: I think one of most things I’m passionate about is just trying to get more diversity of thought into the space. So, there’s a lot of really hard problems that can be solved in crypto, things that aren’t just like computer science related or economic related, or just like distributed systems related,  there’s a lot of complexity that comes with just like, social behaviorism, and how you interact with governance, how these different systems interact with people, how these systems that we’re building eventually will interact in the real world and what sort of second order effects and things like that will come from that. And so for me, it’s important, as I’m continuing to stay on top of learning about all these systems that are evolving in or operating and working together, it allows me to work with these entrepreneurs, work with you know a lot of these like developer communities, to just sort of hone in on what their individual comparative advantage are, how they can contribute to the positive movement forward for like crypto ensuring that we have some of these initial use cases. Things like social income networks where you’re earning money fairly, you know, limiting the cost of payments for like micro payments, bridging like emerging markets more and more, how to speak to those communities, how to educate those communities, and by working together collaboratively we can more so refine that messaging but also to ensure that the information that we’re distilling  and hopefully disseminating, is easier to grok, you know, better for mass audiences to be able to like pick up relatively quickly, because there’s a steep learning curve you can’t really get over, but you want to try to make that as easy as possible and not too steep. So, I guess what’s really excites me is just like, the complexity of all that right how it all interacts with each other, with all these different complex entities, with all their different you know incentives on how they are in the space, whether you’re a speculator, or a builder, or an exchange owner, or just a passive person on the outside just looking and trying to see where they’re going to be getting interested in crypto. All those all those people matter, and so it’s just all about what are they seeing when they’re looking into crypto and learning about it and like what’s their perspective and how can we make sure that everyone is aligned and sees the same vision going forward.

Andrew Lee:  You’ve been behind a lot of really frontier projects that are pushing the boundaries of what I would say themes of decentralization and how that impacts real world use cases, like Cent, Handshake, Spankchain, and you know crypto is heavily fueled by a lot of speculation and a lot of adoption and dapps, that’s going back and forth. What are your ideas in terms of adoption and where do you think it’s going to happen?

Steven: So, I mean for me it’s just like building and focusing on the right projects for the right technologies at the right time, as these different applications and use cases are refined and folks are trying out new and interesting things, we’re learning that we have different sort of needs infrastructure wise. Everyone is understanding that it’s not just scalability, but it’s also methodology, how we are deploying contracts, how we are interacting with things on-chain, whether or not you should use things off-chain, which flavor of off-chain technology should be used to scale your thing, we’re all learning a lot, and so as these applications tell us what we need to build in order to like keep trending towards the direction we want, things could keep getting better. We had crypto kitties came out and then everyone was like cool, another use case with games now fungible tokens, cool we get that. Yeah, there’s a lot of on chain transactions but we got something going here, and that sort of like helped refine the messaging around, off chain transactions etc., and then pointing folks towards not hitting the chain as often to reduce congestion and focusing more advanced layer 2 mechanisms, and that’s cool, so the technology over time calls for us to innovate, and then so when you have things like Spankchain, it’s like cool we have layer 2 technologies. What’s something that people that can easily be drawn into, like the adult entertainment industry and initially, as it has always been one of the earlier adopters of newer technology especially is it can really benefit those ecosystems. And so like that being said it’s like a no brainer like put our focus there, right, because we’re just trying to grow the pie of folks not only investing and speculating but also interest and dependent on these different technologies. And then we have stuff like Handshake which is trying to really use blockchains in interesting ways to solve really hard problems like web censorship and things of that nature and ensuring that the dissemination of information continues to be fluid and you know draconian like regulation and things like that that would seek to like constrict the web and keep us from spreading and growing this pie larger more easily, those folks don’t hold any power, and their projects like you know, Connext who’s been who has partnered with SpankChain to build out there layer 2 non-custodial hubs and stuff. You know, they’re focused on getting super fast like throughput and finality and payments in as many applications as they can. They recently partnered with Ujo so you can do streaming dollar payments with Dai which is a really awesome use case, so it’s just like as time makes sense, modulizing and making sure we’re focusing on one thing that works and then over time like grow the pie, build the right partnerships, pull someone else up so they don’t have to make all the mistakes, open source technologies, let folks use it, and it makes things just go that much real quickly and it’s just not bringing the right people, right builders and the people and the right people in the right mindsets together, with capital. And just like letting folks work.

Andrew Lee: What’s your snapshot of the infrastructure of building that snap like layer two, or layer one?  

Steven: Lets use Ethereum as an example. It’s like you know your your route anchor where you know that’s going to be like your judge and jury like your Supreme Court and so obviously you have certain use cases where you want to store things on-chain some, some some use cases you don’t. Some you don’t only need to interact with like Layer 2 technologies like state channels. Some you might want to have a full EVM and you want to have like an on-chain root that everyone can share so you need something like plasma, maybe you want to have your own like proof of work or you know you want to focus on like zero knowledge proofs and things like that so you maybe want to focus on like interesting side-chain models. It all depends on what your use case is, and what your tradeoffs are, and then on top of that the stack is also like what sort of tools are using to test your contracts before they’re deployed on-chain you know making sure that any known potential frequently used vulnerabilities and things like that are like already accounted for or someone else is already like managing those libraries and like best practices and so you not like making the same mistakes that other people have over and over again on, focusing on the types of payments and stuff you’re going to integrate into your stack. So, if you’re just looking into crypto only for payments, it’s like are you just need do need ETH, or need something like a stablecoin like Dai. Do you need fast throughput, so therefore like what sort of like off-chain on-chain mechanisms do I might need. So, really it’s just like holistically looking at what is my use case, what tools are already built for me so I don’t have to reinvent the wheel, and can like get me up and going and like in what standards like you know ERC standards are already present that I can leverage and take advantage of those primitives to maybe like creatively combine them into other different interesting use cases where you already have the security the integrity of already audited code and instead of again reinventing the wheel you just sort of take in things and reimagine what to do with them and that’s a safe way to experiment with these different technologies. So, I think all the tools are really there, and with lightning and things of that nature they become need to become more mature and like UTXO base chains and them experimenting with other use cases outside of just direct payments. So, I think all the pieces are there for experimentation is more so in the infrastructure of sound. It’s like just a year of building and then like refining that infrastructure too.

Andrew Lee: What’s the best way for developers to learn about each tools, like best practices  and to network around them.

Steven: Yeah, so we do a lot of explainers through blockchain also. We have a state channel series called State Channels for Dummies. We have one for lighting that we just released, like a lightning series. We explain like crypto economic mechanisms and things like that there. If you want to learn about state channels on your own there’s learnchannels.org which has a whole series of like resources and stuff. You want to learn about plasma there’s learnplasma.org. There’s also Karl and Jing and them’s initiative through plasma group which is cryptoeconomics.study I believe is the website, and they have a whole bunch of lesson on like mechanism design like briefing all that sort of stuff and how that good stuff works which is really cool. So, definitely some good stuff to check out and you know we you know we constantly put out new stuff for our personal blog through through Amentum from all of our GPs so you know we have a lot of educational content coming out of there from my algorithmic trading and crypto and commoditizing public infrastructure and like tokening those things, just a lot of like you know interesting thought to really get you about how get you to understanding how a lot of this stuff can work together. Probably one of the best places to start if you’re just trying to understand what the technologies do and then you can start considering where else going to be reapply.

Andrew Lee: Thank you. I haven’t heard of all those resources. What’s your input on the community around protocols and how that has an impact.

Steven: Yeah, I wrote an article about this called Emergent Governance with another one of my friends and partners Matt Prewitt who’s also the co-leader of the RaxicalxChange and basically in it we described like a spectrum of like conservative far left which would we include in the bucket of like Bitcoin like moderate centrists which our example in the post is ZCash and like progressive liberal on the far right which is like a Ethereum. So, basically explaining like how the different camps you know come to have like certain levels or certain types of culture depending on the types of clients, libraries and full no daemons that are available like day one when the system launches. Like how different software, engineering focus and like folks that focus on specific type of like programming language like C++, node, rust, go all have that kind of  like different cultures which kind of like also make up the chains they make up and then focus on whether or not there’s an anonymity between the founders and things like that and that forms like the initial community for cryptocurrency. So, I mean that’s outlined in there like very well and then also like how subsequently that formulates what the government governance will look like and whether that will be more loose and liberal like Ethereum or like will it be more conservative about changes they go into its code base because of the limited amount of subject matter experts or kind of just like to call authority around whatever programming languages is the main like C++ so it’s kind of an interesting way to really look at it but it’s kind of how you have to look at it because there is tribalism around software engineering programming language but also around the different crypto currencies themselves and they all compound and so unless you’re looking at all of those like different layers then you’re not really getting the full picture.

Andrew Lee: Yeah, that’s cool, I would love to open the discussion to anything else that you’re thinking about or what’s important to you. I don’t want to pigeon hole the conversation to something you’re not interested in.

Steven: Oh no, I guess I got to just leave it with this thought of like how I’m currently looking about space now. So, I started to look at the overall space as like I kind of I call it like, I haven’t really talked about this but I’ll just I’ll say it right now but I caught like the machine theory. So, basically it’s like everyone’s trying to develop the most generalizable decentralized platform to do as much things as possible that will power this like for sort of like future utopian ideal to be able to deliver value and capital where it needs to be and incentivized people with mechanisms to do certain good things whether they’re bad, whether they’re positive or negative and you know everyone is like trying to pick like a horse in the race that’s going to be a winner, whether it’s Bitcoin whether it’s Ethereum. What people don’t understand is everything everything is playing a role in building a big basically an amalgamation of different parts that form like a machine that kind of do everything that we need it to do that sort of takes over the place on the Internet. The concept is it to replace the web. It’s kind of like to replace the concept of like production, coordination, governance, money and systems all at once and so we started with bitcoin which was the idea was like decentralized payments using triple entry accountancy and like proof of work as a civil control mechanism to allow like to solve, to help solve the double spend problem and to help solve the Byzantine Generals Problem so we could have real digital money that was cool, that was bitcoin in that mean an ideal city for stay and that’s kind of the core eaters of the space you know and then from there we you know derive the concept of like a multi-coin world verse where we saw forks pop out all over the place and that became the core part of the narrative and then we had things like Ethereum come about in the general market and that was like a world computer, something that like does computation at scale and has some sort of like a reward mechanism in it that allows it to be sustainable and so that kind of takes the form of like a CPU and now we have the rise of so bitcoin general payment rails, Ethereum is CPU, we see the rise of Layer 2 mechanisms which allowed throughput and finality to increase to increase the short term memory in output of the system in the CPU where it is limited, right. So, that’s like RAM. We have things like Filecoin and Swarm and things like that which are going to take the branch of like you know decentralized file storage. We have Handshake which will take the form of like you know a network router sending packets and information. We’ll eventually see the creation of like large scale like GPU compute systems. I think that’s kind of like the next evolution and it will take the form of like GPU so whether it’s like blockchains that take advantage of like proof of useful work where you’re like crunching numbers like kind of like machine learning AI at scale and utilizing A6 to also do that, and then so essentially you’ve got your CPU, you’ve got your network router, you’ve got your system storage or your G.P.U., you have money. They kind of like going through your systems you have. Basically, you’re building a computer and then eventually like computer will run everything but everyone who keeps looking at it is like one thing is it and they’re idiots because they don’t see that it all plays a part until a new thing. So, that’s kind of just like my thesis on that.

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