bloXroute – Layer-0 Scaling with the Blockchain Distribution Network
Until now, proposals to improve blockchain scalability have addressed the problem in one of two ways. One seeks to increase efficiency by optimizing the blockchain or improving the consensus algorithm. The other comes in the forms of layer-2 solutions such as payment channels or side chains.
However, none have addressed the core bottleneck to scalability: TCP/IP network limitations. Improving the speed at which blocks propagate through the network is the layer-0 problem few people consider when thinking about scaling.
Fundamentally, network bottlenecks are what prevent blockchains from increasing their transaction throughput. Raising the block size or reducing the time between blocks has devastating effects on usability as the probability of a fork increases. At a certain point, the blockchain simply breaks as forks occur faster than blocks can propagate to all validators.
Remarkably, the web figured out how to scale decades ago with the invention of Content Distributions Networks, or CDN. This is what enables platforms like YouTube to steam thousands of hours of video to hundreds of thousands of people every second. However, traditional centralized scaling solutions lack the privacy and censorship resistance necessary to serve the decentralized web.
We’re joined by Uri Klarman, CEO of bloXroute. Founded by a team of researchers and systems designers from Northwestern and Cornel University, including Emin Gün Sirer, bloXroute allows practically every blockchain network to “scale today.”
As a scalability infrastructure service, their Blockchain Distribution Network, or BDN, sits underneath blockchain networks. Anyone operating a miner can use the BDN without any changes to their consensus algorithm or protocol. By simply pointing their software to a bloXroute node, miners immediately benefit from propagation speeds orders of magnitude higher than the time which is currently required for blocks to be seen by all validators. This global network of servers is optimized to receive and stream massive amounts of transaction data to vast networks of nodes and miners.
While bloXroute relies on some level of centralization, it is provably neutral and cannot discriminate based on the contents, provenance or destination of a block. It also includes clever redundancy mechanisms which ensure availability in the event of an attack on the network.
Topics discussed in the episode
- Uri’s journey as an academic working in the field of networking
- Defining the blockchain scalability problem as a networking problem
- Past work and attempts to scale blockchains
- The vision behind bloXroute and the problem it aims to solve
- The Blockchain Distribution Network (BDN) and its technical architecture
- How the BDN optimizes blocks and achieves 1,000x faster propagation times
- How bloXroute archives provable neutrality and ensures network resiliency
- The BLXR token and incentive mechanisms
- The project’s goals, milestones, and product roadmap
Meher Roy: Today, our episode is themed around bloXroute. bloXroute is building a Blockchain distribution network which will allow miners and other validators to communicate blocks much faster to each other that is by increasing the scalability of current Blockchain networks. On our show is Uri Klarman who is the CEO and co-founder of bloXroute Labs.
Uri Clarman: Thank you so much. Thank you for having me.
Meher Roy: So we are going to dive into what you’re building. It’s a very cool project bloXroute. But prior to that, we are interested in knowing your background and how you came to be interested in the Blockchain industry.
Uri Klarman: So I’m at heart, before being a crypto guy, I’m a networking guy, a computer network. So I’m now finishing up my PhD in Computer Networks at Northwestern University. And I was kind of lucky to stumble into the crypto space through a research project that we have. We build our project and we did one thing with it and another. And eventually just because it made sense from it was a cool project, we created a new cryptocurrency with rather than doing computational power, we were using networking resources. So it has nothing to do with bloXroute but we kind of, like, started to look so that’s kind of like how I stumbled into this area.
Meher Roy: And so your PhD was at the Northwestern University.
Uri Klarman: So technically is because I haven’t gotten my dissertation defense yet.
Meher Roy: When I look at the list of co-founders in this project, this project seems to have a strong Cornell flavor. So how is it that, like, presumably you worked a lot of your time in northwestern and with the community there, how did you get to be involved with the Cornell community?
Uri Klarman: So when we started with this idea then we realized this is all sane in a few minutes. The scalability problem is actually a networking problem, which got us very excited about it. We started . . . we come up with ideas how to do that, but the starting point of bloXroute is the Falcon network created by Soumya Basu at Cornell and Professor Emin Gun Sirer. So we immediately, we got together, so my . . . all co-founders. So myself, Professor Emin Gun Sirer, Soumya Basu, and Professor Aleks Kuzmanovic, who’s net neutrality expert. And we sat down and we started, like, exploring this. And we realized we need all our strengths to make this happen. So we said, okay, we came in as equal partners, we started this like, okay, anything that needs doing require a lot . . . like one of us will have to do. So Gun’s expertise in crypto is almost unmatched by anybody else.
We needed that. Soumya is the guy who actually build founder. So taking that and taking the idea from there in building bloXroute, he had the expertise for that. We brought in the net neutrality expertise and kind of, like, the vision for that. So that’s kind of it became a Northwestern/Cornell project.
Sebastien Couture: Of course. Anyway, we had Gun on the show quite a few times to talk about, you know, topics around scalability but also in the wake of the DAO and the writing that you did around that time. So on topic of scalability, could you describe it the way that you see? You mentioned that it was a networking problem and that’s kind of the unique way to put it. How do you describe the scalability issue in Blockchain? Sure. That’s like one of my best pastime to talk with people about the scalability problems. So there’s literally almost nothing I like doing is talking about this. So everyone you’re talking about the scalability problem, like everybody in this space, “Oh, Bitcoin is doing three transactions per second while credit card companies combined, they’re doing something like 5000 transactions per second.
And if you want to do all the really cool stuff on Blockchain, if you want to do micro transactions, that’s 50,000 to 70,000 transactions per second. If you want to do RoboChain, right, autonomous swarm robots like IoT devices communicating trustlessly, that’s the number of 50,000, 70,000 transactions per second. And the heaviest lifting is like Twitter on the Blockchain, Facebook on the Blockchain, these kind of stuff. If each active Facebook user would do just four likes per day, that’s 200,000 transaction per second, okay. So the volumes are . . . everybody knows that three transactions per second are nowhere close to what we need. But the question why thank we just increased it as we’d like isn’t getting enough attention. So let’s talk about it for a second. If you want to do more transactions per second, well, let’s do the math for a second.
The reason you’re doing three transactions per second in Bitcoin is because the average transaction size is 540 bytes and if you think about each one megabyte block has room for something like 1900 transactions, so 1900 transactions every 10 minutes, that’s something like 3.3 transactions per second. You want more transactions per second, that’s easy. Increase the block size by a factor of 10. From one megabyte to 10 megabytes and immediately you move from three to 30 transaction per second. Or the other thing you could do is rather than having a block every 10 minutes, you can have it every one minute, right. You’ll get the same 10 X improvement, right. The result is going to be the same, I’ll explain in a bit why is that. So let’s talk about block size just because it’s easier to imagine.
So if you increase the block size by a factor of 10, the good news are that you’ve got . . . you just increased the throughput of transaction per second by 10, right, from three to 30. But now every time a node receive a block or let’s say you’re a miner, you mind a new block and you have to send it to one of your peers, now you have to send 10 megabytes rather than one megabyte. That’s going to take you in the best case scenario, 10 times longer, right. I ignore congestion. I ignore topology. But you’re going to send 10 megabytes rather than one megabyte, it’s going to take you 10 times long. And the total time it takes for a block to reach the entire network and for the entire network to synch about a new block being mined, increases by the same factor, a factor of 10. Now, why is that crucial?
Why is that so important? Because that block propagation time, the time it takes for the entire system to synch about the new block, that is the only time in which forks happen naturally, right. A fork can only happen if I mine a new block despite the new block already mined, right. Another one was mined, but I didn’t hear about it in time. It’s still being propagated. So I mined a block next to it and I have a fork. If I’ve heard about that other block, I would’ve mined on top of it. So this block propagation time is really the window of opportunity for forks to happen. That’s the time that it can happen. And if you increase that by a factor of 10, you’re going to see roughly 10 times more forks. So that’s annoying, okay, that’s, like, you’ll have to wait 10 confirmations to get the same certainty of safe confirmation that you get today, but the system still works.
However, if you try to increase it by another order of magnitude, this is the important part. If you try to increase it by another order of magnitude from 10 megabytes to a 100 megabytes, at that point, the block propagation time, the time it takes for the entire system to synch, this window of opportunity becomes so long it exceeds the 10 minutes interval between blocks, okay. That means you’re going to see a fork pretty much every time a new block is mined. And what happened to the Blockchain then is rather than having a fork and convert it back to a single Blockchain every so often, you’ll have a fork and then fork of forks, and forks of forks of forks and the Blockchain kind of, like, unravels like a real . . . into more and more forks and nobody knows what is the true fork anymore. Nobody knows which fork to follow and the consensus rate, the Blockchain rates. This is the scalability problem.
This is the reason why you can’t do arbitrary large blocks because you can do a bit larger, but very fast, okay. A 100 X is nowhere close to the capacity that we need, right. Three hundred transactions per second is nothing. Very fast, you’re going to reach that point where the Blockchain can handle all of that. And that is kind of weird because it’s a networking problem. This is sending data between different nodes. And in reality, that none . . . like out there, the non-crypto space. In reality, we already know how we can send a lot of data, right. YouTube sends terabytes of data from hundreds of millions of people all around the world and nobody blinks an eye, right. We know how to do that. Akamai sold it in ’96. And what we want to do is bring these networking techniques into the world, into the crypto space, into the Blockchain space. Did that make sense for you guys?
Meher Roy: Of course, like, when you look back at this particular issue, this issue has appeared in a lot of academic papers in the past, right? So I think it appeared in a paper from ETH Zurich for the first time which is when it defined a network propagation time, which is – if I’m the miner and I generate a block and I propagated for the first time, right now I start the timer, how much time does it take for 80% of the network to have the block in full. And they measured this sort of network propagation time for different networks and sort of this network propagation time is ultimately what constraints how big a block can get. Because as blocks get bigger, it takes more and more time for it to propagate across the network.
Uri Klarman: But to the funny thing is – first of all, the funny thing is that nobody understands why long propagation time causes forks and how does that related to scalability, that’s a fairly simple explanation, right. You don’t need to be technical to understand it. nd it always bothers me or surprises me that not enough people are talking about it because everybody in this space, I understand, where is the bottleneck, right? The networking glare is the bottleneck. And if you understand the bottleneck, then you can try to solve it. If you’re just going to say “Oh, there is a problem,” but you don’t identify exactly what needs to be solved is going to be very hard to solve. So that’s number one. Number two, I was talking about Bitcoin, okay.
But this is true for all Blockchains, okay. I’m talking about Bitcoin being kind of the golden standard. We all know how Bitcoin works. Harmony is doing a different thing. Hashgraph is doing a third thing, okay. It’s going to be harder to explain for each one of them about that. But it’s the easiest example, but it’s true for every Blockchain out there. So that’s the second thing. I had a third thing, “Oh, I promise to say why it doesn’t matter if you increase the block size or reduce the time between blocks. And the reason it doesn’t matter which parameter you play with is that the probability for a fork to happen is something like one minus E to the power of blah, blah, blah. But it really depends on the ratio between the block propagation time, that window of opportunity and the time between blocks, the 10 minutes interval.
So it doesn’t matter if you increase the one by a factor of 10 or reduce the other by a factor of 10. The result is the same. If you increase throughput buy 10x, you’re going to see 10x more force. So that was about that.
Meher Roy: If you look back across the history of Bitcoin, people have been aware of this issue. And I remember that in 2013 or ’14, Matt Corallo and his associates created what is called the Bitcoin Relay Network like a fast relay network, which is a network that connects all of the miners and the wants to get blocks from one miner quickly propagated to the other blocks, reduce the propagation time, and therefore improve it.
Uri Klarman: So I would argue there. Okay, so Matt Corallo did build the first relay network then Falcon was built, and then the first relay network was replaced, I think, current fourth generation is FIBRE or something. But the very goal was not scalability surprisingly enough because it really helps with that. Which you say, “Oh, large mining operations have the ability to invest in infrastructure and networking infrastructure. So they send blocks faster and receive block faster and are therefore more profitable. And they wanted to put slow miners on par with the larger operations. So this is why they built their relay networks, okay. And their relay networks, a, really helped with that, they level the ground, but they also really reduce the block propagation time which is really the bottleneck. So they’re doing an excellent job about it.
This is the reason the existence of FIBRE and Falcon. So every block out there, both in Bitcoin and Bitcoin Cash currently being sent from both of them. They are the reason why today, if you go to the statistics about blockchain and about Bitcoin, you’ll see the average time it takes for a block to reach everyone is something like 10 seconds. Now this is surprising because in 2014 or so, it was 30 to 50 seconds and that was for half size of blocks, right. So you would expect today for a block to propagate for each to take a minute or so. But the reason is that that it doesn’t happen is because these really networks really help with that. But it’s kind of funny because nobody talk what is the bottleneck of that scalability problem. Nobody even considered them as a scalability solution. That wasn’t their goal when they were built.
Sebastien Couture: You mentioned that existing projects don’t address scalability as a networking problem. Do you really think that’s accurate given that, for example, something like lightning network aims to increase transaction throughput by creating essentially like a network that allows you to send transactions at a faster throughput. Do you think that perhaps they’re not addressing the networking problem directly but because it’s assumed that it’s a networking problem? Everybody is sort of aware that, of course, if you increase the block size, well, you’re going to run into networking constraints.
Uri Klarman: So I will say the following, some of the technical people understand that it’s a networking problem, but a surprisingly small number of them. Okay, I speak with very, very professional people who I’d like, who I think highly off, who are at some things are way better than I am. And then when I talk with them about this topic, they’re like “Oh, I didn’t consider it that way because nobody was actually trying to find what is the bottleneck and how we can kind of like resolve it and expand it,” so that’s on that. In the context of lightning, then if you want more transactions per second, you can do one of three things. You can try to build on top of the Blockchain, okay, which could be like the secondary solution. You could build lightning on top off Bitcoin or you can try to. And say for every one on chain transaction, I’m going to do X off change transaction, which is great.
Okay, it’s it’s a complicated problem which is the reason it takes so long for people to work on that. It’s not something that can be easily done. A second thing that they can try to do is to work on the first layer, okay. Trying to change what the Blockchain is doing. If you see . . . I don’t know, just take litecoin for example . . . right, let’s do faster block or larger blocks or change something in that, but the networking there is actually underneath the Blockchain, okay. It’s the AT&T and the Comcast, the internet service providers, it’s the BGP protocol that everybody kind of, like, assume it’s a black box that you can’t do anything about it. Not a lot of people. Lightning network isn’t trying to solve a networking problem. It tries to do something else, which is hard, it might be worth doing, but it’s not that. Nobody is . . . the networking that are good, they always called it like the forgotten layer.
Nobody touches it. and I think the reason for that is because the crypto space is filled with crypto experts and system designers, etcetera, but very, very few networking people reach these space.
Sebastien Couture: But in your view, have other attempts to scale Blockchain address the problems of networking or is bloXroute the very first project to addressing this?
Uri Klarman: We are the very first project who tried to address that. And our idea unlike many of the other projects – we’re not a project, we’re a company. What we do, we’re not trying to do our own blockchain. We’re not here to compete with anyone. We’re not trying to become the world cash advent. We are enablers. Our job is to come to cryptocurrencies and say, “O guys, you know what, we got this. We solve the networking problem. You do your own thing. You focus on what you do. I’m just going to remove that bottleneck. So your crypto or your blockchain, if you want to do a 100 times larger blocks, you can. You want to have them coming at 10 times faster intervals, now you can, okay. I’m solving that for you. I’m solving that for everyone and you guys cannot compete. And you guys try to focus on what you do rather than trying to solve the entire stack by yourself.
Sebastien Couture: Okay, so let’s bring it back then to bloXroute. Can you expand on what is bloXroute and what’s the vision here? What is the thing to do.
Uri Klarman: So bloXroute is the blockchain distribution network, okay. Its goal is to enable other blockchains and other cryptocurrencies to scale. That’s what we do. We bring the networking technology to financial information and blockchains so others can focus on what they do best, okay, consensus, great cool stuff using blockchains. And we saw the bottleneck for them. We remove the scalability bottleneck so they can actually do all the things they dream of doing. Now the way blocks sort of works is the following. Let’s assume that you guys are running a node. Then I come to you and I say “Don’t change anything in what you do. Don’t change your protocol, don’t change your implementation, don’t do anything in you. But I’m going to give you a small piece of open source code. That’s your magic gateway.
Take this code and if you’re a node or you are a miner, run this code on the same machine, but you run your node. And if you’re node is connected to this peer and this peer and this peer, connect with that magic gateway. Connect it just like any other peer. It’s a friendly neighbor peer. It’s a peer that seats on the same machine as your node. And every time you mine a new block, you send it to all your peers including the magic gateway who send it to everybody else and that magic gateway, like any other peer, will tell you about the blocks from the outside the only difference is that that magic gateway is going to do a thousand times faster work in spending blocks to the rest of the network and receiving blocks from up. So you don’t need a consensus to start using bloXroutes. No, you don’t need everybody to agree on that. I’m actually going to go to miners and ask them, “Oh, do you want to use that?
It’s for free, it’s open source, you don’t have to ever, ever, ever pay for that.” And that is going to broadcast blocks for you faster and tell you about blocks faster. Now, miners want to hear about blocks faster. Okay. They want their blocks to be sent to everybody else faster because that reduces their chance to prevent for their block to turn into an uncle block in a higher chance of being the real block. So for them, it’s a no brainer. It’s money in the pocket. I’m giving them up something completely for free and offering “If you use this, I’m just improving your network rather than use AT&T or Comcast or whatever it is ISP, I’m offering you this thing, which does a 1000 times faster job and is also provably neutral.”
Okay, we are neutral, which Comcast and AT&T and the rest of them are not and not only are not, they’re literally filtering and giving different priorities to different packets depending on their own policies for them to make money.
Sebastien Couture: Okay, so let’s maybe recap that once again. So as a node or a miner or any type of node on the network but specifically miners I guess would have more of an incentive to use this. I connect to a series of peers on the network. So I have a discovery service and I discover all the peers that are close to me that I can connect to into which I send blocks and from which I receive blocks. I install the software on my system. I point my node to the system as though it was just another Ethereum node on the network. And this node will transmit data to the network – how it does that in a more efficient and faster way in a few minutes. And I receive information from those nodes. So I receive blocks as well from this network, from this magic node. And the assumption is that there are other magic nodes on this network to which other Ethereum miners are connecting to.
And they’re sending information to each other at a very high throughput. So it’s sort of like a virtual private network of Ethereum nodes that are doing some kind of optimization, sending blocks to one another very fast and then the nodes themselves are receiving that data with the same speed benefit.
Uri Klarman: Right. So the idea is that we provide this for everyone and the more nodes that use that, the more valuable it is because of there is a strong network effect. But even for the first, like, because we bootstrap it connected using just regular nodes to make sure that everything propagates fast and it tells about . . . and it hears fast about blocks, then if you’re even the first miner to join in, you’re like “Oh, do I want to use this?” So what’s the cost? This cost you nothing, right. But if I use this and I send blocks to that, it is being sent from that magic gateway through the bloXroute BDN, the Blockchain Distribution Network, which broadcasts these data to everybody else to all the other magic gateways in the world. So it’s always a choice for you, do you want to reduce your block propagation time. Do you want to hear about blocks faster?
If so, you can use this. Now unlike VPNs out there, we have no control. We’ll talk about the neutrality in a second. We don’t have control, “Oh, this guy gets it fast, this guy get it slow. This guy is allowed to connect, that guy is not allowed to connect, etcetera.
Meher Roy: I personally run a validator for the Cosmos network. And I can actually understand the product and feel the user need for it. So for some context, like, we have been trying out different data centers to see there to locate our server. And it wasn’t Cosmos is, the validator needs to sign on every block. So in Bitcoin, you mine the block you win, right, and that’s, like, once every, let’s say a thousand blocks. But Cosmos is different. You as a validator have to sign on each block and if you miss blocks and you don’t sign on them, then you’re going to lose out on transaction fee revenue.
Uri Klarman: Right.
Meher Roy: Right. So for example, we have done some experiments in at least three data centers and one of the data centers, we lose 1% of the blocks. Like we’re trailing the network in some way and you’re not able to sign them. And in different data center, we lose only 0.2%. There’s a high incentive to switch to that data center where we’re only losing 0.2%. And the difference is that this data center with the least loss rate, it’s in England. So there’s probably like some geographical reason why that particular data center, when we run the evaluator there, we lose the least amount of blocks. So the way I think of it is, like, bloXroute is a software that if I install on the servers, it will reduce the number of blocks I lose from 1% down to, let’s say, 0.1% because it is able to transmit the data much quicker.
Uri Klarman: I’ll add to that and it’s maybe worth, like, talking about, okay, how blocks work. But it’s not about that. So, a, it’s going to reduce that percentile. But I’ll say something further than that. If Cosmos start to scale by a factor of 10 or a 100 or a 1000, that percent is going to go up by a lot. Okay, that’s not going to be 1%. I don’t want to throw a number that I can’t stand behind it. But it’s going to grow by a lot because as it turns into high volumes of traffic that has to be sent around the globe, you have a lot of ugly stuff pouring in, congestion, topology, messengers overhead, a bunch of stuff. The idea is for blocker to help you exactly with that. So I don’t care on which data center you’re sitting on, I’m going to make sure that the data is sent to you all the way through the machine that you’re running on direct, exactly where you sit instead of getting lost somewhere along the way because, well, network is complicated or real world is dirt.
Meher Roy: So that’s fair. So until now, we have, like, sort of, described bloXroute as this black box system, right. As a validator, I just download this open source software and run it in parallel to the mining or validation process and then this black box is going to propagate my information and give me information faster that I would through other means. Let us peer into this black box. How does it exactly work?
Uri Klarman: Perfect. So how does it work? It’s actually not simple to understand. So that it is the following. Again, you have a Cosmos validator. And so I give you that small piece of open source code, the magic gateway. Let’s say you signed the transaction or signed the block, you gave it to the magic gateway. What happens then? Well, the magic gateway, he receives the block and then he sends it to two bloXroutes, a network, the BDN. A network of very well connected servers all around the world to broadcast each to everybody else. But how does it get an improvement of a 1000 x from that? So first of all, when your magic gateway receives a block, then rather than send the entire block internally to everybody else, then internally, we represent each transaction in the block with a short I. D. So rather than have 500 bytes to represent a transaction, we represent that with three bytes I.D.
So we can take your block and we shrink it. So rather than say “this transaction, that transaction,” etcetera, we say “transaction five, transaction 17, transaction three.” So your magic gateway looks at the block, map each transaction to I.D. and shrinks it by a factor of a 100. Internally, only internally, we propagate that, which we can do more than a 100 times faster because it’s a 100 times smaller piece of information. And when it reaches the other magic gateways out there in the world, each one of them map each I.D. back to their original transaction, so they get their original block and give it to the node on the machine that they see that. And so the ideas that we reduce the amount of data that we need to propagate internally and we can do that internally because we are a single entity, okay.
If that was done in a distributed way, than just agreeing about how to map transactions to I.D.s and how to prevent collision of transaction and I.D.s, that’s a very hard problem. That’s almost the reason that you have Bitcoin. Okay, Bitcoin is used in order to create a consensus about a ledger of transaction. So this is slightly different but to have a consensus and mapping of transaction, which always updates, that’s something very, very hard to do in a decentralized way. But in a centralized way by a single entity, it’s very easy to do. So we got more than a 100 X improvement just by doing that. Second thing that we do is rather than when your magic gateway shrinks the block and send it to bloXroute, bloXroute doesn’t receive the entire block and only then sends it in a store and forward model. Rather it streams it. So as it receives the block from your magic gateway, it broadcasts all that data to everybody else.
So by the time your last packet arrives, everything was already broadcasted and only that last packet has to be sent. That adds additional somewhere between one and two orders of magnitude, so between these two things, we get more than three orders magnitude. We can actually do much better than that, okay. We can actually take the I.D.s and oh, what if we do bloom filters of these I.D.s? What if we use IBLTs we can get one or two order magnitude beyond that, but honestly, nobody needs it today. So we are not doing it right now, it’s not in our first version of that because it’s a complicated thing which nobody needs today, we prefer to have something working and scaling Blockchains by a factor of a 1000 and show that it works. So in terms of performance, this is how we reach that 1000 X. We propagate smaller pieces of information and we screen them faster.
Meher Roy: You mentioned these two things. One is the streaming, right, which totally makes sense to me. But the other thing is like the mapping of transactions to I.D.s. And there, I’m a little less clear. Is it the case that this 100 X efficiency arrives because of the use of some kind of compression algorithm?
Uri Klarman: It’s not really compression. When you think about compression, when you think about zip and trying, like, oh, let’s take this data and finally sequence this which I can shrink and represent something else. I want you to think about the simplest thing that you can do, okay. The idea is that transactions propagate anyway. So the core value off bloXroute is to propagate blocks fast but beyond that, well, we also propagate transactions. Why? Because we don’t care about it. Whenever we send a transaction through the magic gateway, we also say, oh, that thing that we have just gave you, that’s transaction number five or that’s transaction number three. And so all of the magic gateway have a consistent mapping just a hash table. Now I’m saying, this transaction is one, this transaction is two, this transaction is three, etc.
We use just three bytes for that. It says small address base that we continue to reuse. And when node gives the magic gateway the block, it maps the transaction the simplest, really the simplest thing that you could say just like instead of putting the transaction, say, this is five, that answer kind of like clarifies that.
Sebastien Couture: What I’m just trying to understand here is, okay, so I mine a block for instance and I want to propagate that block as quickly as possible to the entire network so that other miners can stop mining and start mining a new block on top of this one. So I use bloXroute to send transaction I.D.s but let’s take for example a Blockchain where, you know, we’ve increased the block size by 10 times because we want to have, you know, more scalability and we’re leveraging bloXroute to increase the propagation time of this block. I still, as a miner, at some point, need to receive other blocks so that I can also verify the constants of those transaction and that the Blockchain is in fact there’s integrity in the block. This is where it’s unclear to me, so we send these transaction I.D.s, but at some point, we still need to synch up the network that everybody needs to have.
Sebastien Couture: We need the entirety of the contents of the blockchain.
Uri Klarman: So the idea is the following. Let’s say you’re a miner and Meher is the different miner on the other side of the world. You mine the new block, okay, which has a bunch of transaction which you have received throughout the time. You take that block and you give it to your magic gateway. Your magic gateway takes that block and replace each transaction with a short I.D. Okay, three bytes. So it treats it considerably and send it to bloXroute. bloXroute streams that to everybody else, so Meher on the other side of the world, his magic gateway now receive that tiny block that shrunk block which has I.D.s in it. He receive that and he map each I.D. back to the original transaction because everybody has a consistent mapping. Which I.D. transaction, like, between transaction and I.D.s. So he maps Meher’s magic gateway maps the I.D.s back to the original transaction.
So he now holds the original block and then he gives it to the node or the miner that sits on the same machine.
Sebastien Couture: So that’s where I’m missing a part of it. The original’s transaction sits with me as the miner who mind it. How did that original transaction get to Meher or the other miners and how are those, you know, thousands of original transactions presuming that were trying to expand network throughput, making it also to the other miners in sort of a fast way?
Uri Klarman: Because more than 99.99% of the transactions were already received by everyone. How did you, as a miner, generally speaking, how did you receive these transactions? Somebody made the transaction. He send it to some Bitcoin node. It propagated through the system and everybody in the system have heard about this transaction. Yes, you might have your own transactions in it which nobody had seen before, that is in my small minority of these transactions. 99.99% of them were already seen by everybody else. So everything that was seen by everybody else that’s very simple to have that transaction. So if let’s say you transact some transaction X in your block, well, that transaction, some node saw that, gave it to his peers including the magic gateway, right. So at some point it reaches our system.
Our system receives that, maps that transaction X to I.D. five, and broadcast it to all the magic gateways who now have that in their mapping.
Sebastien Couture: Okay. So bloXroute is only transmitting the I.D.s from mine blocks and once you receive it, once you receive this as another miner, so for example, I transmit a block that I’ve mined, I’ve transmitted it to this node, the I.D.s get sent to the network, Meher receives it, and then he matches those I.D.s to transactions that he’s received from his main pool or his transaction pool . . .
Uri Klarman: There are two components. Your node doesn’t know any of it. Your node mines a block, give it to the magic gateway, right. Magic gateway . . . all magic gateways have seen almost all transactions up to this point and they map each transaction they have seen to a short I.D., okay. So your magic gateway takes the block and say, oh, I’ll replace this transaction with transaction 70 and this transaction with transaction . . . with the number 5. So they map each and . . . they replace each transaction with that I.D. It goes through bloXroute and all the way to Meher’s magic gateway. Okay, not his node, his magic gateway. Meher’s magic gateway have the same mapping as your magic gateway. So he takes each of these I.D.s and map them to the original transaction, okay.
So after this process, at Meher’s magic gateway, he has now the original block, right, because all the transaction were matched to I.D.s to be propagated and mapped back on the other side. And so Meher’s magic gateway take that full block and give it to Meher’s node or miner. So the miner, his node, he doesn’t know that somewhere in the middle it was propagated as transaction I.D.s or whatnot. He sees just a regular block from his perspective. Only internally inside the bloXroute system we propagate these shorter I.D.s.
Meher Roy: Essentially, if you think of it, like, assume right now is time zero and block 500 was created and propagated. Have you got to wonder about like what happens at block 501 and this is Bitcoin? So users are sending, streaming transactions. They want to be included in block 501, so these user transactions come to me. I am one of the bitcoin miners and these user transactions also come to you, Sebastien, and you are one of the other bitcoin miners. So I have transactions and you have transactions. And for the moment, let’s start with assuming that set of unconfirmed user transactions is the same as your set of unconfirmed user transactions. So if you have the transactions already. Now let’s say, Sebastien, you’ve been and you created block 501 and block 501 contains a subset of the transactions that the users sent to you.
Then what you will do as a miner is you will send to your bloXroute gateway a normal block, bloXroute gateway will take the transactions, convert them into a set of I.D.s, which is a much smaller dataset and then that set of I.D.s will be then transmitted to Meher’s magic gateway. And then Meher’s magic gateway will take that set of I.D.s and convert them back into user transactions that it has already heard and then it will create the original block and then send it to Meher’s Bitcoin miner.
Sebastien Couture: Okay, now this is, like, what I assumed to be true. So you match those transaction I.D.s to unconfirmed transactions that you’ve already heard of and these transactions are being streamed in the network or being propagated in the network much faster than entire blocks when they’re being mined. So we’re solving the problem that big blocks take long to propagate while transactions themselves propagate at a much faster rate.
Uri Klarman: Right. And it’s worth noting that if you have a 60 megabit per second link of bandwidth, that’s enough for somewhere between 15,000 and 30,000 transactions per second, okay. So it’s not a bandwidth limitation. You have little problem of receiving these transactions at high volumes, that’s . . . you’re good on that, okay. The only thing is about when somebody mines the block, that block has to be sent to everybody else as fast as possible because during that time, is when forks happen, so I guess to minimize that time of blocks being propagated.
Meher Roy: So my question is like there are some blockchains – so in Bitcoin, if you’d take a block, as a miner, all I need to know about is what transactions were part of that block. But in something like Ethereum, I need to know what transactions were part of that block, but I also need to know an order of transactions.
Uri Klarman: We preserve that, right. Then you receive a block and we should probably go over and finish the description of bloXroute because you guys got an unfair advantage over the listeners. You’ve got an early explanations, but to your point on Ethereum, then there is an order of transaction. We maintain that, okay. We take the transactions and we just replace them as smaller representations, so we don’t need as many bytes to represent the transaction. So we keep the order, we didn’t change that. We just replaced the entire transaction with saying five or 47.
Meher Roy: Okay. Cool. So that makes sense. So essentially, in some ways, is it correct to say that you’re building the Akamai off Blockchains because when I have a different kind of problem, which is, let’s say, the YouTube problem, I have a bunch of data and I need to stream it to my users and they are spread around the world, I might end up using something like Akamai in order to reduce my bandwidth costs. Out here, you’re building the Akamai of Blockchains, but the difference is that you’re building the system in a way that if I’m a miner, I do not need to place trust in bloXroute as the Akamai of Blockchains.
Uri Klarman: Right, until now, we talk just about the performance which is half the story, okay. We send it super-fast, but if your protocol, let’s say that you have Bitcoin and you decided to increase the block size by factor of a 1000, well, if your protocol depend on bloXroute to succeed, then what happens if I start to abuse that power, okay. What happened if I say “Oh, you want your block sent, please pay me a $1000. Or that guy, I really like him so I’ll send your blocks faster to him and that guy, I don’t really like, so he will get that only later. The worst case scenario, like the worst of it all is what happened – even if I’m a nice person, what happened if law enforcement comes and tell me, “Oh, these wallets and addresses are suspected of terrorism acts. You’re not allowed to relay any transaction blocks.”
We couldn’t take transaction to or from them. If I’m in charge of making sure that blocks go everywhere, I can actually reject some blocks. I can do all sorts of evil stuff. So performance is not enough. We have to maintain neutrality. And bloXroute is provably neutral. Now how do you achieve that, okay? And that is as important. If we’re not neutral, you shouldn’t be using us, okay. Then because it breaks the entire system. Well, we achieve neutrality by preventing ourselves, bloXroute from knowing the content of the block, where is it coming from, and where is it going to. And the way we achieve that is fairly simple. So we spoke earlier. Let’s say that you are a miner, you mine the new block and you gave that block to your magic gateway. Well, in order to prevent ourselves from knowing the contents of the block, then your magic gateway shrinks the block and then it encrypts it.
So rather than sending it directly to bloXroute, it encrypts the block and send the encrypted block to everyone. And only when your magic gateway hear from his peers, the other magic gateways that he’s connected to, that they have received the encrypted block because magic gateway tell each other, “Oh, I receive this encrypted block. Oh, I receive that encrypted block.” Only when your magic gateway would hear from his peers that they have received the encrypted block, only then do you reveal the encryption key. At that point, it’s already too late to do anything about it because it was already propagated. So you take the encrypted key, you send it through bloXroute and through the peer to peer to propagate as fast as possible to everyone. So the content of the block is revealed when it’s too late, we already sent it to everyone.
We can’t pull it back. So this is how we prevent ourselves from discriminating based on the content of the block, of what’s in it. We just don’t know. We blindly serve everyone. To prevent ourselves from discriminating based on where the block is coming from, then rather than your magic gateway sending the encrypted block directly to bloXroute, you can relay it through a peer, kind of like or, right. If you’re in North Korea and we’re legally not allowed to send the data or receive data throughout North Korea, you can send that data through your European node peer or your Australian peer or your American peer and that peer is going to relay the small encrypted block to us. So we don’t know where is it coming from. We don’t know what it contains and the same when they’re receiving it. Rather than receive it directly from us, you can ask your magic gateway peer to relay it to you.
So we can’t prevent those from sending to you because you’re going to get it from someone which we don’t control. So we intentionally hide from ourselves. Where is it coming from, where is it going to, and what it contains. So we can’t discriminate based on.
Meher Roy: So you’ve based this Blockchain Distribution Network and taken all of these measures to remove trust out of the Blockchain Distribution Network. Does there remain some element of trust that you are unable to remove?
Uri Klarman: So that’s a great question. Okay. It is really it. So without any of these tricks that we do, that everybody have to place their trust in us by identity – if everybody has to place their trust in a centralized system in the middle a Blockchain, what’s the point of the Blockchain, right? We can just keep the bank in the middle, everybody trusts the bank to move money. We do these techniques to prevent ourselves from being discriminating and censoring based on source destination and content. But there remains one problem that is solved the indifferent. What happened . . . how do you prevent bloXroute from turning into a single point of failure, right? What happens if a meteorite comes and hits all bloXroute servers and everything goes down? We can’t have all blocks and have to move from thousands of transactions per second to three transaction per second, right.
That’s just unacceptable. So in order to prevent that or a different thing, we’re being completely shut down by the government or something like that. You can’t have that affecting the Blockchains, which are using bloXroute. So this is the reason, in order to solve that, we actually open source everything that we do. Not only the magic gateways, our servers, our script to deploy our servers, etcetera, and we allow to deploy something called backup networks, okay. So let’s say that you are a medium size miner. Okay, you’re someone who has some stake in the system and you don’t want to go back to three transaction per second. You can take that code and you can deploy a backup network. Now a backup network is exactly like bloXroute but it’s idle. It doesn’t send anything at any given time, like, it just sits there, prevent doomsday scenario.
So it doesn’t cost you anything, okay. It costs you like half a dollar per month and we’ll actually pay you for that. We’ll pay you even that amount if you run our backup network. That’s our intention. So those who have any state . . . I mean, you could be just a medium size store, that’s enough if you have $5 a year interest in bloXroute, that’s enough for you to deploy such a thing. So these backup networks are not controlled by us. We don’t have any say in what’s happening and they’re sitting there idle in case something bad happened, that’s doomsday scenario. If that doomsday scenario ever happened and it should never happen, but if it does, then your magic gateway, well, he knows about your backup networks and he actually tells which backup network they’re going to hop to. So with network goes down, everybody can do a hot-swap and move to a backup network.
That backup network provide you exactly the same service as bloXroute. It’s not as a cost-effective, but you can use that. You can use that for a short period of time if this was just a temporary failure and we came back online or you can use it for a year or two years if we were shut down and you want to replace bloXroute with something else, you have a solution. It’s good enough to keep you running for the medium turn until you decide what do you want to replace bloXroute with. But we’ll never leave you high and dry, right. We’ll never go away and leave you stuck without anything.
Sebastien Couture: This is interesting because I mean, we haven’t really talked about your business model yet, but I presume there is a business model and there’s a way for bloXroute, the company, to make money from the service and maybe this is a good time to get into that. But by offering this service as open source and allowing people to do backup networks, it opens up bloXroute to competition in competing networks could perhaps priced lower or offer the service with better performance. So could you address those two? So what is your business model and how would you address this problem?
Uri Klarman: Sure. So it’s a good point to make and to explain why it’s not the case. Let’s talk about bloXroute business, okay. So bloXroute is provably neutral, okay. We enable scalability for everyone. But we can’t charge anyone directly who use bloXroute. I can’t charge you guys the $5 per month subscription to use bloXroute because I can’t prevent you from using bloXroute if you don’t pay me, right. I’m provably neutral. I can’t stop anyone from using bloXroute. And I could, then you shouldn’t use be at all because I’m not provably neutral. So in order to allow . . . so bloXroute creates this common good, okay. It gives a 1000 times scalability for everyone, but we can’t charge anyone directly. So the business model we built around that is a bit similar to Bitcoin. It’s about aligning the incentives, okay. We make bloXroute convert to this win, win, win scenario where everyone are super happy about bloXroute.
And it goes like this. bloXroute increases the transaction per second by more than a factor of a 1000. So users, those making the transactions can pay a 100 times smaller fees. So users are happy, that’s the first win. They get some cents transactions fees. They pay a 100 times smaller amounts. Miners on their end, each transaction is a 100 times smaller, there are more than a 1000 times more transactions per second, so they make in total more than 10 times the amount of the fees that they were making without bloXroute. So that’s kind of like the second win, right. So users are happy, they pay lower fees. Miners are happy because they get a total of more fees. And for bloXroute, the third win, we allow users when they make a transaction, they can pay a fraction of that small . . . a 100 times smaller mining fee, they can pay it to bloXroute if they want to. Now, why would they want to? This is not a donation base level.
They can choose to pay bloXroute a fraction of their mining fee because bloXroute created this fee reduction service. If you pay a smaller . . . this fraction of the mining fee to bloXroute, miners would require a smaller fee from you in total, okay. So rather than pay half a cent, you can pay a quarter of a cent or rather than pay a cent, you’ll pay half a cent. Now, why would miners require a smaller fee from you? Why do they require less incentive for? Because miners know that we add all this capacity for free, but we also add additional capacity to transactions that do pay bloXroute. And the more transaction that’s paid to bloXroute in miner included, the more addition . . . so not only does that not come and complete with regular non-paying tobacco transactions, but also we increase the amount of throughput . . . the amount of bandwidth that they can use for transactions that don’t pay to bloXroute.
So to recap, miners, they do the regular thing that they can choose. But if you paid bloXroute, they can see your transactions and say, “Oh, that doesn’t compete with the other transactions. I have almost infinite capacity for these kind of transactions. And furthermore, the more of these transactions that they put in the block, the more bandwidth and more scalability I get for transactions that don’t pay bloXroute. So the miner is going to require a smaller incentive to include these kind of transactions. So he’s going to require a smaller fees. We don’t enforce any of it. We can’t force none of it, but because miners know we enable further capacity for them, then we reach this win, win, wins scenario. You never have to pay bloXroute. But if you will pay bloXroute, then miners would require a smaller fee from you. So it’s an option if you want to reduce your fees.
Meher Roy: So in this bloXroute future, I assume I’m the miner, right. And I have a mempool. I have 1000 transactions that do not pay anything to bloXroute. I receive 1000 transactions that pay something to bloXroute but on an average have a lower miner fee for myself. Let’s say the 1000 transactions that did not pay bloXroute have average fee of 20 cents, the transactions that are paying bloXroute have an average fee of 10 cents and there’s thousands of this type and thousand of this type, right. So now I have like three choices, three main choices. Choice one might be okay, I created a block with these 1000 transactions that did not play bloXroute anything. Choice two is I create a block with these 1000 transactions, all of them playing to bloXroute.
And choice three is I create an average, like . . . so 500 non-bloXroute paying transactions and 500 bloXroute paying transactions.
Uri Klarman: So I disagree on that. That’s not your three options. I think you have this mempool and you’re a miner. So you always pick the transaction that pay the highest fee per byte, right. Then you sort them, that’s what you do today, right? And this is how you choose them. If you have infinite capacity, we’ll just put all of them, right. You don’t have to pick and choose. As long as it’s paid the most minute amount that it’s worth it for you to include in the block, you will include that, the single satoshi, okay. So that’s what you do, you always try to maximize how much money you’re making. So all of the regular transactions that pay to bloXroute then you know that, like, oh, I’m going to leave those transaction according to their order not but about these transactions. And you have some limitations.
When you see these kind of transactions, you could like, oh, do I want to pays less fee, why would I include it there, right? Why would I include it when I can put a transaction that pays more money? Well, you can include that transaction because it will allow you to include rather than 1000 transactions of not paying to bloXroute. Now you include a 1001, okay or a thousand and 10. So the more transactions that you include the to-do pay bloXroute, the more bandwidth, the larger the blocks that you can sent through bloXroute and now comes the question, oh, but what’s the limiting factor? Like, at what point do I start to have to include transactions that pay to bloXroute in order to increase that capacity even further?
Meher Roy: Let’s say in case one, I created a block and all transactions play to bloXroute. A propagation time for that block is going to be, let’s say, X. X might be, I don’t know, five seconds, it’s very quick. But if I . . .
Uri Klarman: Five second is not quick.
Meher Roy: Okay, quicker, like, a second, like, what I mean is, like, my block propagating 80% of the network. So let’s say it’s two seconds. Now, had I created a block in which none of the transactions were to pay to bloXroute then the propagation time would have been five seconds instead of two seconds. Is it like that?
Uri Klarman: It doesn’t work like that. It is the following. Let’s say you just create a giant block which doesn’t include transaction that pay to bloXroute, okay. Then you created a really giant, beyond bloXroute. bloXroute tells you, “I can give you a 100 transactions two per second, okay. I give you that, that’s for free, you don’t need to pay bloXroute any transaction fees, nothing like that. We can give you that for free, just enjoy that. Like, what happens? So you create a block which matches 100 transaction per second. You send it to bloXroute. It reaches everybody else. Now what happens if you try to create a larger block, beyond what we tell you that we can provide you with without paying bloXroute? Well, if you do these kind of transaction, you make a giant block, you shrink it, you encrypt it, you send it to bloXroute.
It’s being sent to everybody else. We can’t do anything about it, right. We don’t know what you’re sending. But the other magic gateways, the other . . . your magic gateway peers, when they receive that block, they see, oh, that doesn’t follow the rules. It’s too big for us to support it without starting to pay bloXroute. So they will reject such a block. Now that’s . . . we can do anything. But the magic gateway is controlled by the miners and nodes. They will reject such a block. Now if you follow the rules and say, oh, this is the amount of transaction I can do without paying bloXroute. And if you want to do more, you can. Include transactions that pay to bloXroute. And so you have an incentive to include them and you can have more . . . even further capacity, transactions that don’t pay to bloXroute. So you as a miner, you’re, like, oh, if I could only include more transactions that pay to bloXroute,
I could do even larger blocks. So you include these kind of transactions. You create a block, you encrypt it, you shrink it, you send it through bloXroute, other magic receive it and they look, “Oh, is it following the rules, right? Is it more larger than the hundred transaction per second? Yes. But is it following the rules that we increase the capacity based on the number of transaction that pay to bloXroute? Then it’s fine and so they will give that block instead of dropping it. They will give it to the node that did next to it.
Sebastien Couture: So I presume that there is an assumption where in order for miners to be happy with smaller transaction fees but more transaction, there needs to be a higher throughput of the network and more usage of the network, so there seems to be sort of a chicken and egg problem here where for miners to have . . . for miners to be happier with lower transaction fees but higher transactions means have more users using it to make payments for example. How do you address this? Like, where do you think transaction demand will come from?
Uri Klarman: So the idea . . . we have already seen what to demand. Demand increases, increases, and increases until it reaches the capacity. You could see that with Bitcoin, right, original Bitcoin, it increases. And then it stops because of capacity reasons so fees go up. Our job is not to try to get traction. That’s the job of the different cryptos and the different Blockchains. We remove the scalability problem. And we say, oh, we allow you, you can do that if you want to. Go ahead, compete. There are something like 2000 cryptos out there, go ahead and try to compete in getting traction.
Sebastien Couture: If miraculously, I mean, we just increased transaction throughput on Bitcoin by a factor of a 1000 more, you wouldn’t have a thousand times more people are using Bitcoin to pay for coffee.
Uri Klarman: The idea about the win, win, win scenario is what is the end game. How everybody are happy about bloXroute going forward and we reach these capacities, etcetera. In the beginning, it’s an even easier choice. We provide bloXroute for free for everyone. So if you want to go a 100 transactions per second, I allow you to do that today. And it costs you nothing. I charge you nothing. So in going back to your question about reaching that, oh, will users get smaller fees? Will they get higher fees? That’s the job of the different cryptocurrency. They should go out there and try to get real value for real people even the real world and get traction. We’re not trying to solve all the problem off crypto coming oh, yeah, we’re doing our own Blockchain and we create our own cryptocurrency and we do all that. We remove the scalability problem, right. I allow your crypto scale, it’s your job to scale it if you want.
Meher Roy: So essentially, like, bloXroute is like in the business of capacity, right, like transactions that pay to bloXroute will be offered higher capacity when the miners broadcast each other. And presumably, what will end up happening is bloXroute, the organization will get a small slice of transaction fees in different tokens happening on different networks. So Bitcoin users pay bloXroute inm Bitcoin, Bitcoin Cash, and Bitcoin Cash, Cosmos in atoms, and, like, your company in subcollecting, like, these tokens. What’s the plan from there? What are you going to use these tokens for and is there some plan to get a community around bloXroute on boarded with this plan?
Uri Klarman: First of all, it’s important to say we don’t have the utility token. The scalability as I explained you don’t need a token to use bloXroute, you don’t need none of that. But if bloXroute is going to provide these fee reduction service and it’s going to be paid be everyone or who want to . . . or not by paid by everyone, if bloXroute is going to be paid by those who wish to use the fee reduction service, then it kind of like has a problem that we want everybody to be happy about bloXroute. We don’t want to be considered the leechers, the rent seekers, right. So I don’t feel bad because we increase the capacity, we increase scalability by a factor of 1000. And we give 99.99% of the value that we create to users and miners by reducing their fees and increasing their total fee that are collected.
But if we’re collecting, even a fraction of the mining fee through this service that we allow, and if we make a lot of money out of that, then people would resent people us. People would think we’re rent seekers and leechers. And that is a problem for us because as we said at the beginning, it’s all about incentives. It should be a win, win, win scenario where everybody are very happy about bloXroute existence. So in order to overcome this problem, we understood that if we have money coming from the crypto ecosystem through bloXroute, it has to pull back to the crypto ecosystem. So these tiny, tiny payments that we’re getting and we’re thinking, like, 5% of a cent per transaction, tiny payments in this fee reduction service, what we’re going to do is to say, “These payments, only half of that 50% go to bloXroute for the operation, for the development, for the company like going forward, etcetera. And 50% go to the reserve.
The reserve is just a giant pile of crypto of these payments going in that payments go in and never out. And we’re going to issue a security token they called BLXR for bloXroute. So we issue a let’s say a 100 BLXRs. And if one of these BLXRs is yours, then 1% of the reserve is yours. You can always take . . . give your BLXR to the reserve and get 1% of the Monero, 1% of the Ethereum, 1% of the Bitcoin, whichever in their 1% of that is yours. The remaining 99% will belong to the other 99 tokens. Yours will burn and go out of circulation, so they’re unaffected if somebody’s cashing up. So the idea is, we want people who are . . . we allow for those who want to invest in bloXroute and get a portion of these future payments going in the future. If we allow people from the ecosystem to invest in that and be a part of that, so more people out there in the eco space are happy about bloXroute.
The idea is to make sure that it’s not money just pouring to us, it’s money that circulates throughout the crypto ecosystem. So we want to keep everyone happy. We don’t want to be people what people call the leechers and the rent seekers. So we move from that business. Now an interesting thing about the BLXRs is that the more payments go in there, the more each BLXR is worth. And actually act as a crypto index, okay. It has all sorts of crypto which are scaling using bloXroute and it automatically adjust toward the crypto which used the nodes, right. So if Ethereum becomes the most dominant crypto, then the most payments, small payments of Ethereum will go through the reserve. And the index will tell it to work that. If Monero becomes or Zcash becomes the next dominant thing, then the index will tilt towards that.
And even if a new crypto that doesn’t exist today, it comes tomorrow. Nobody can buy it today. But that becomes the most dominant crypto. Then small payments of this new crypto will start growing into the reserve and it will tilt towards that crypto index . . . into . . . the index will tilt toward that crypto. Did that make sense for you guys?
Meher Roy: For sure. This is a very interesting model, right. So I think it’s the first time . . . I mean, like, people have been talking about, like, having crypto indexes for a long time. But I think like the way of designing the token is very unique because first of all, it’s a security token. Like, you are accepting upfront that it’s a security token which means the eventual value of this token is going to rely on your and your co-founder and your teams managerial efforts, right. It’s not meant to be a currency, it’s not meant to be a utility token, right. So it’s probably one of the first security tokens itself from, like, purely crypto Blockchain project. And then secondly, there’s a . . . it’s a very unique model of bootstrapping value into this security token. I’m actually curious what kind of legal implications this tokens structure ends up having.
Uri Klarman: So here’s what we’re doing, right. Rather than do this thing where we tried to play this game by creating something and try to persuade the SEC that eats a utility token and not the security, so we’re coming upfront and say, like, we’re following the rules. We’re playing it as straight as possible. This is an investment in bloXroute. If you part of these future payments off that and it’s worth mentioning, the reason that we’re afraid of people calling us leechers and rents seekers is because if you do the math, we expect to get very, very small payments per transaction, 5% of a cent. But if you think that we . . . when we help one medium size crypto, let’s say . . . not the end game, not the hundreds of thousands, but 30,000 transactions per second, if you do the math off 5% of a cent times 30,000 transactions per second times 31 million seconds per year, that end up being $460 million per year in revenues with very low cost.
If we’re talking about our end game, 200,000 300,000 transactions per second. We’re talking about billions of dollars per year in revenue. So it’s a real thing at these . . . at these, like, volumes and size of money, people would resent us. We have to make sure that doesn’t happen because we’re not the bad guy here, right. We create all these value. We capture a highly fraction of it. But we make sure that optics are okay. We don’t want people to resent us about what we do. So this is how we built it and so this is an investment in bloXroute. If you believe in bloXroute, it’s as . . . it’s just a security. So we’re already in touch with the SEC. We follow all the regulation. We have top lawyers, so . . . Patrick Murck and the Cooley team, they are the experts about crypto. We follow the law to the letter. We’re really, really playing it as safe as possible. Rather than try to avoid the regulation.
Sebastien Couture: So can you talk about how this token will be distributed?
Uri Klarman: So our idea is to sell . . . we want to sell enough. We want to sell enough in the first round. Currently that’s not our focus. Currently what we’re doing is we’re building the technology and we’re trying to get to show how bloXroute works and to get traction with cryptos, but somewhere towards the end of the year or so, we’re going to do a token sale which we plan to sell a significant portion of these . . . of these tokens.
Sebastien Couture: Okay. And so what is the current state of development, are you rebuilding the technology of the moment? What parts of the BDN have you . . . you have so far and when will that be released?
Uri Klarman: So we actually already have the Blockchain distribution working. What we’re doing right now, we deal with the Bitcoin Unlimited code base, okay. We do them because their code base is more efficient than others and but we want to show how we take crypto network and we deploy it, a large one. And we see how many transactions you can do without bloXroute and show how much you can do with bloXroute. So our idea is to show that in the coming few weeks, Version 1 of bloXroute should probably go out either in Q4 this year or Q1 of 2019. And just another word about Bitcoin Unlimited, so the Bitcoin Unlimited, guys, we don’t have any special integration with them. So in other word regarding Bitcoin Unlimited, we don’t have any special integration with them. But Bitcoin Unlimited went ahead and said they have their Gigablock Test Initiative.
They try to see how many transactions per second they can execute and they found that the Bitcoin code base actually have the bottleneck of taking transactions and putting them in the mempool. It’s down in a single thread. So that max out at a hundred transactions per second. So Andrew Stone from Bitcoin Unlimited took that and allowed to do that in parallel. So put transactions into the mempool on numerous threads which allow to scale by a lot.
Sebastien Couture: Okay, great. Well, thanks so much for coming on, Uri. It was really interesting to learn about bloXroute and it is a bit of a complex architecture to sort of wrap your head around, but I think that we’re able to unwrap it . . . unravel it in a way that . . . well, our listeners to understand how this works and how it’s beneficial to the ecosystem as a whole. So we look forward to seeing how this plays up in the coming months as you start releasing parts of this new architecture.
Uri Klarman: Thank you for having me. It was a real pleasure.