Rob is a physicist-mathematician, who decided to do his PhD in finance. He wanted to get a deeper understanding of financial economics, game theory and asset pricing. Furthermore, Rob had his fair share of contribution as a thought leader, by teaching a course about Bitcoin and Blockchain at the University of South Carolina. I must admit, it came to me as a surprise, since back then, the entire topic of blockchain was quite a taboo, only a handful of people had the knowledge and few of them were actually involved.
However, as he puts it, Rob was “lucky to have a great academic department”, that allowed him to study Bitcoin and blockchain, he even got to choose Bitcoin asset pricing for his thesis subject.
“I started my PhD in 2014, back then it was more of a taboo, but I had a very nice academic department, that allowed me to study Bitcoin, so my topic for the thesis was studying Bitcoin asset pricing. When they realized Bitcoin and blockchain were becoming more popular, they asked me to teach a course every spring semester on Bitcoin and blockchain applications in finance.”
Rob’s first exposure to blockchain happened much earlier, to be more precise in the year 2010. The foundation of it was an idea, discussed by libertarians, to separate money from the state and make it a peer-to-peer mechanism. This was the idea that got Rob interested in the blockchain because he got fascinated by the concept itself. For the person that has been studying financial economics of the traditional world, which was recovering from the global financial crisis, the idea of decentralization must have sounded like the solution the world needed.
In 2011 he started getting more involved in the blockchain space. He describes getting involved in it as “natural next step” since his interest was based on the philosophy of Bitcoin and what blockchain stood for. He was excited by the idea of decentralized finance, a decentralized marketplace and decided to start working in this field.
“I first joined the industry officially, working for a start-up company called BlockPay in Munich, Germany. We were trying to help merchants accept cryptocurrencies, but what I realized was that it was a few years too early. Unfortunately, the company itself did not do so well because it was really difficult to convince merchants to accept cryptocurrency, because of its volatility.”
Nevertheless, Rob managed to turn this unfortunate experience in his advantage and decided to use the entrepreneurial experience and knowledge he gained, to tackle the challenges within the blockchain field. He identified that the product wasn’t easy to use for the participants within the ecosystem, thus they needed to improve the entire structure to make it easy to use and more user-friendly. That is why the core of the Horizen, the project that Rob co-founded, is usability.
It is only fair that from there we elaborate on Horizen, which you might know by its previous name ZenCash. Despite Rob’s love for Bitcoin and what it brought to the market, there was still a lot to improve. Especially the scalability could be improved, and one of the ways to do that, he thought to be the privacy. That is why he was fascinated by Zcash and zero-knowledge proof cryptography and what it brought to the market in terms of privacy, but he also saw the need for improvement in the department of economics and fortunately, that was exactly his background. The main objective was to create a sustainable economic model that could scale and that’s how ZenCash came into fruition.
“All of those things from the heritage of Bitcoin to the privacy of Zcash, our innovation can initially be seen through getting better economics, in little things like carving out different stakeholder groups. In Bitcoin, the only stakeholder group that matters is miners, so what we realized is that the perfect theoretical constructs for how you would want to incentivize people through block rewards, would be to compensate people, according to their marginal contribution to the system.”
Rob describes this as a theoretical framework, which is impossible to implement precisely, but it is possible to start approximating. How they did it was by creating different stakeholder groups, like secure node stakeholder group, supernode stakeholder group and as they are planning to implement voting system soon, we will most likely see voters as stakeholder group as well.
Rob envisions a different variety of stakeholders groups to exist in the future, within this variety of groups, he personally finds especially merchants interesting. He mentions that merchants are the people that actually use the ecosystem and the currency, but none of the systems rewards them. However, they are a very viable stakeholder group. Rob is talking about going even further than that and keep defining different stakeholder groups. ZenCash, now known as Horizen, was just a first step. He is hoping that others will improve upon this concept and identify different varieties of stakeholder groups.
Despite the fact where Horizen is right now, the road has not been an easy one. They also had to overcome great obstacles, ups, and downs; it is familiar for everyone that has been involved in a blockchain space. Apart from clear jurisdictional and legal obstacles, the market plays a big role as well.
The “Red market” is hard on blockchain projects, but it was especially hard for Horizen since they have their funds in ZEN, their cryptocurrency. They have built up a great team, planned projects and each project requires resources, so when all of a sudden the market goes down by 50%, it is quite difficult to make plans and follow the roadmap, despite them being very conservative about budget planning. Normally, you plan your budget for an expected revenue, but Rob and his team planned their budget to the ⅓ of their expected revenue and hired the team accordingly.
“We’ve built up our team about ⅓ of our budget and then our budget went down by 80% in the market over the last year. We had to do 4 different rounds of layoffs because we couldn’t afford them. We had to cut down all of our discretionary expenditures, conferences, sponsorships, different advertising, marketing venues we were funding, we had to cut our budget and scale down on the things that we were actually delivering on the marketplace.”
What Rob mentioned above is not even a complete list of the damage that the volatile market brought to their project. Nonetheless, this experience was educational since their team learned to do more with fewer resources and the current team is the best of the best. They deliver things with great efficiency, speed and despite all the difficulties, they are still on track with the roadmap. The team came out even stronger from this challenging experience.
Towards the end of the conversation, Rob spoke about the future and his optimistic vision of it. He starts off by saying that blockchain, cryptocurrencies, and crypto assets are going to be a huge part of the economy in the future and that it is going to enable egalitarian peer-to-peer economics. This permissionless system will itself tackle the problems of corruption since you no longer require the approval of some corrupt official, in order to do something. But the biggest advantage that Rob mentioned is opening up the markets around the world and connecting people from different parts of the world, to join the global economy in a more efficient way.
He envisions the world, where almost all the assets are tokenized because tokenization is a much more efficient way to represent an asset than a piece of paper that is held in the geographically restricted, individual database. Rob thinks that in 20 years the world is going to be so much different and so much better, services like AWS (Amazon Web Services) will be replaced with distributed ledger technology. It will make things much easier for companies and for developers to work since they can leverage, these always available, reliable systems.
“ if we have public blockchain systems where we can leverage these types of persistent, always available, reliable services that make things fundamentally cheaper and therefore fairer because now you have almost the same ability to compete. If you are a young poor developer in Vietnam, you will have some of the same competitive abilities as someone who comes from Silicon Valley in California, because you will be able to plug in into the same public infrastructure in a very low-cost way.”
In conclusion, the future Rob sees is very bright and there are a lot of reasons to be optimistic. Sure, there is chaos on the market and discussion about all the flaws with the system, but he thinks that it is totally alright since we are still at a very early stage of a very important industry. After all, Rome was not built in a day, was it?