In this episode, we sit down with Preethi Kasireddy - self-taught engineer turned entrepreneur and founder of TruStory - and Muneeb Ali, CEO of Blockstack PBC.

The two discuss Preethi’s journey of bringing TruStory to life, the regulatory challenges for crypto companies, Blockstack’s path to the SEC’s approval of its Stacks Token, and more.

0:02:13 Preethi: "I started to realize that my real passion was engineering, not finance."

0:02:48 Preethi: "I graduated college in 2012 and went to A16Z at the end of 2013."

0:02:54 Muneeb: "So this is like the early days of crypto, A16Z hadn't made the Coinbase investment yet."

0:03:10 Preethi: "It was through that investment [in Coinbase] that got me a little bit curious [in crypto]."

0:03:28 Muneeb: "How did you decide to leave Coinbase and start your own company?"

0:04:08 Preethi: "Coinbase - in the end - is a centralized company... so I wasn't really getting the kind of experience I really wanted."

0:04:55 Preethi: "I think one of the things that's missing - still, even to this day - in this space is lack of documentation and blog posts. Especially two years ago."

0:05:43 Muneeb: "It seems like you went into a deep dive on crypto... and then you ended up almost building a community around crypto. What was the thought process around that?"

0:05:58 Preethi: "I was just super passionate about this space. I also innately enjoy educating."

0:06:42 Muneeb: "[On Twitter] it seemed like a lot of these crypto communities are a little bit like religion."

0:06:57 Muneeb: "I noticed the conversation on TruStory was a lot more civil."

0:07:41 Preethi: "It bothers me a lot that people have a negative idea of what it means to debate."

0:08:18 Preethi: "We're trying to teach people the fact that debate doesn't have to be defeating... you don't need anxiety or to get angry..."

0:08:36 Muneeb: "Debates on Twitter - it's probably the worst medium for it."

0:09:23 Preethi: "You hit on two things: (1) Twitter was built for broadcast, not conversation (2) more importantly: the intent. People don't come on Twitter with the intent to seek to learn the other side."

0:10:45 Muneeb: "The kind of financial incentives that are at play here in crypto are not found anywhere else."

0:11:02 Muneeb: “But still, part of me wishes that there were those more structured, peer-review type processes in place in crypto. TruStory seems like a crypto-native take on something like that."

0:11:21 Preethi: "We can't expect crypto to be like these other industries, purely because there's money tied into it."

0:11:57 Muneeb: "You got caught up in an ICO scandal? Is that real?!"

0:12:07 Preethi: "When I was exploring early in the crypto space - just like everyone else - I had rose-colored glasses and everything looked shiny."

0:12:18 Preethi: "I ended up jumping into a project... and two months later I had to leave because the project wasn't going to work out."

0:12:39 Preethi: "It was a huge shocker for me because it was the first time I took on a role and it was catastrophic."

0:12:59 Muneeb: "Did that somehow play a role in TruStory as well?"

0:13:07 Preethi: "The way I got information in crypto in the early days is I had to crowdsource it from my friends."

0:13:23 Preethi: "And I realized this was how most people were starting to get their information in crypto, too."

0:13:43 Preethi: "[Initially,] we were trying to do claim validation."

0:14:00 Preethi: "People were not just focusing on objective claims that had a right and a wrong answer, but were using it more as a tool to get to answers that are somewhat more subjective as well."

0:14:15 Preethi: "We pivoted over to debate from verifying 'objective claims'."

0:14:56 Preethi: "You are still learning truths, but it's not like there's one objective truth for every claim. It's more that you're coming in to understand and hear the different sides."

0:15:12 Muneeb: "I think it's very interesting that you noticed similar things in crypto - that it's like the Wild West and there's a lot of misinformation."

0:15:31 Muneeb: "Our response [at Blockstack] was more like "Why don't we work with regulators and try to have the traditional checks and balances in place that pretty much exist in public markets."

0:16:15 Muneeb: "I was very curious how the industry would perceive our approach, but I've been very pleased with the response."

0:16:53 Preethi: "Basically, what we're trying to do is take the Wild, Wild West and add a little bit of rationality and rules to it - but one could argue that's antithetical to decentralization."

0:17:26 Muneeb: "A lot of people thought the regulators are never going to approve anything."

0:18:05 Preethi: "Are you hoping to be the poster child for setting the right way to do these token sales?"

0:18:40 Muneeb: "No serious company is ever going to  keep an asset on their balance sheet that they think might be illegal."

0:18:49 Muneeb: "For us it was about opening up the network in a fully regulated manner to the US markets because the other option is just to block US nationals."

0:19:02 Muneeb: "Part of the intention is also that this can help other projects."

0:19:42 Muneeb: "We were doing the analysis for the first time with our securities lawyer. Other people don't have to do it again and again."

0:20:07 Muneeb: "If you're familiar with what the SEC did with Ethereum, they effectively did not comment on how Ethereum started or how it reached a stage where they think it's no longer a security."

0:21:06 Preethi: "Being a crypto entrepreneur in the US is hard. Regulations aren't friendly, nobody's set the right path for what the right way to do anything is."

0:21:33 Preethi: "One of the TruStory community members noticed that the Blockstack token almost had to reinvent accounting principles to account for what these token sales represent."

0:22:01 Muneeb: "Accounting is different for different purposes. Like for tax purposes, we could actually recognize it as one thing, for your financial statements the treatment might be different."

0:22:20 Muneeb: "We would always take the worst case scenario in every type of treatment. We're willing to pay the highest amount of taxes and we're willing to treat our crypto holdings as fully discounted."

0:23:45 Preethi: "When you were considering going the SEC route, did you consider any other routes?"

0:23:55 Muneeb: "The alternatives were: (1) ban US investors and developers and go abroad (2) do the offering and go to court with the SEC."

0:24:56 Muneeb: "The technology can adapt to regulations faster than regulations can adapt to technology."

0:25:18 Muneeb: "Another option was to just wait for a new law to be introduced."

0:25:38 Preethi: "What about all the crypto startups that may not have as much capital?"

0:26:04 Muneeb: "People should look at the framework we used for some company that is at least a Series B stage startup from a traditional VC perspective. It's not for doing your seed round."

0:26:27 Muneeb: "Imagine going back to the 80s or 90s, where people were coming up with the typical Series A and Series B round and - interestingly - some of the decisions we made back then, we still live with them. Like four year vesting."

0:27:10 Muneeb: "It's not just the legal framework. Think about employee retention. We had come up with frameworks around how to do token drafts."

0:28:04 Preethi: "Now that you've worked with the SEC, are you more optimistic about the regulatory scenario in the US?"

0:28:16 Muneeb: "I'm extremely optimistic. A big shout out to the staff at the SEC."

0:28:48 Muneeb: "I know that to the outside world, even 10 months might seem like a long time. But for the SEC, where the securities regulations have been around since 1933 and they're trying to get a new type of an asset out. Imagine how many different questions there are."

0:29:26 Preethi: "I mean, even ICOs spend a year marketing their projects!"

0:29:39 Preethi: "What I struggle with is how to get the SEC comfortable with the fact that, unlike public company stock where it's a lot more liquid... with crypto projects, the liquidity comes way later in the network's lifecycle."

0:30:18 Muneeb: "If you go and read our SEC offering circular, it's almost like a mini IPO filing. And the section that is most comprehensive is our risk factors."

0:30:46 Muneeb: "In terms of the liquidity... my opinion is that the next big step for the industry is going to be regulated securities exchanges that will come into play."

0:31:35 Muneeb: "I think it will reduce the noise in the space. ... Unsophisticated players or obvious scams just won't be able to get through the door."

0:31:54 Preethi: "So you mean a more regulated version of an IEO?"

0:32:26 Muneeb: "[We were told] given how compliant you guys are trying to be, you're not a good fit for an IEO."

0:33:18 Preethi: "If done right, these types of token offerings are opening up the door for retail investors who never had access to this type of investing."

0:33:44 Muneeb: "The first 100,000 users of Facebook just used a free product and told all their friends about it, but they never had any financial upside in the success of Facebook."

0:34:02 Muneeb: "With a decentralized system and a crypto asset like this, the early users can also have a potential financial upside."

0:34:35 Muneeb: "Speaking of Facebook, what do you think about the recent headlines about them potentially installing backdoors in Whatsapp?"
https://www.forbes.com/sites/kalevleetaru/2019/07/26/the-encryption-debate-is-over-dead-at-the-hands-of-facebook/#6644bdc55362

0:34:56 Preethi: "It's not new, right? [Facebook]'s been doing this for about a decade almost. But I think people started to get smarter only very recently."

0:35:19 Preethi: "I think it's going to take a long time before Facebook's culture internally changes to care about privacy because their whole business around user data. So to complete change that is not an overnight thing. It's a massive shift in how they do everything."

0:35:50 Muneeb: "I've been publicly supporting efforts like Facebook Libra."

0:36:40 Preethi: "I don't think culture can change overnight. Or even in one year. ... I struggle to understand how they'll meet the future, which I think is open and decentralized."

0:37:33 Muneeb: "I've been involved with some conversations with lawmakers where they want to have antitrust actions against Google and Facebook."

0:37:42 Muneeb: "I think Facebook has a worse image, generally, but internally in the US Government, I'm noticing more hostility towards Google than Facebook."

0:38:07 Muneeb: "When Facebook comes up and says 'We're completely going  bypass a lot of these regulations that may apply and start anew global reserve currency, I think a lot of people are going to freak out."

0:38:26 Muneeb: "I never thought I would say this, but Microsoft is better positioned to deal with a lot of these things than Facebook or Google."

0:39:11 Muneeb: "Google and Facebook are two companies that are basically the native cloud computing companies. And their business model is 'let's just get as much user data as possible."

0:39:31 Muneeb: "Microsoft is actually not sitting on a lot of user data. And now, when the world is about to move away from this business model and there's a lot of heat around these big tech companies, Microsoft can come across as 'look we care about user privacy'."
https://www.coindesk.com/microsoft-launches-decentralized-identity-tool-on-bitcoin-blockchain

0:40:43 Preethi: "They specifically said they didn't want [Facebook] to be a public utility, which is interesting because if that's not the case, you can't really claim it's going to be a global reserve currency."

0:41:22 Muneeb: "Speaking of decentralization, how decentralized is TruStory right now?"

0:41:35 Preethi: "We built the backend on Cosmos SDK - which gives you the tools to build decentralized applications."
https://cosmos.network/

0:41:54 Preethi: "Right now, we only have one node running, because everything is in beta."

0:42:26 Preethi: "The actual [TruStory] app has an in-app currency, and that same currency can be used for validating transactions on the backend."

0:42:41 Preethi: "It's a Tendermint blockchain and the consensus is the same thing as Tendermint."
https://tendermint.com/

0:42:48 Muneeb: "From what I can understand, they're helping people with the SDKs to start their own blockchains, and then they're working on interconnecting the different blockchains."

0:43:00 Muneeb: "Whereas, for [Blockstack] there's the stacks blockchain that gives developers the tools for basically building their apps apps on the stacks blockchain, for the most part."

0:43:10 Muneeb: "But if some app really needs the scalability of - let's say their transactions are becoming too much for the underlying main chain, then we have the concept of an app chain, where you're logically on top of the stacks blockchain."

0:43:33 Preethi: "They have many, many blockchains and then they connect these many blockchains using something called IBC, which is their interoperability protocol."

0:43:49 Muneeb: "I wanted to invite you live, so that you can't say no, to our conference in San Francisco."
https://summit.blockstack.org/

0:44:04 Muneeb: "Neil Stephenson is going to open up the conference with Naval Ravikant."

0:45:00 Muneeb: "My PHD thesis, Chapter 1, has a quote from Snowcrash."
https://www.amazon.com/Snow-Crash-Neal-Stephenson/dp/0553380958

0:45:18 Goodbyes.

0:45:26 Credits.
Preethi Kasireddy: twitter.com/iam_preethi
Muneeb Ali: twitter.com/muneeb
Zach Valenti: twitter.com/zachvalenti

In this episode, we sit down with Preethi Kasireddy - self-taught engineer turned entrepreneur and founder of <a href="TruStory.io">TruStory</a> - and Muneeb Ali, CEO of <a href="blockstack.org">Blockstack PBC</a>.
The two discuss Preethi&rsquo;s journey of bringing TruStory to life, the regulatory challenges for crypto companies, Blockstack&rsquo;s path to the SEC&rsquo;s approval of its Stacks Token, and more.
0:02:13 Preethi: "I started to realize that my real passion was engineering, not finance."
0:02:48 Preethi: "I graduated college in 2012 and went to A16Z at the end of 2013."
0:02:54 Muneeb: "So this is like the early days of crypto, A16Z hadn't made the Coinbase investment yet."
0:03:10 Preethi: "It was through that investment [in Coinbase] that got me a little bit curious [in crypto]."
0:03:28 Muneeb: "How did you decide to leave Coinbase and start your own company?"
0:04:08 Preethi: "Coinbase - in the end - is a centralized company... so I wasn't really getting the kind of experience I really wanted."
0:04:55 Preethi: "I think one of the things that's missing - still, even to this day - in this space is lack of documentation and blog posts. Especially two years ago."
0:05:43 Muneeb: "It seems like you went into a deep dive on crypto... and then you ended up almost building a community around crypto. What was the thought process around that?"
0:05:58 Preethi: "I was just super passionate about this space. I also innately enjoy educating."
0:06:42 Muneeb: "[On Twitter] it seemed like a lot of these crypto communities are a little bit like religion."
0:06:57 Muneeb: "I noticed the conversation on TruStory was a lot more civil."
0:07:41 Preethi: "It bothers me a lot that people have a negative idea of what it means to debate."
0:08:18 Preethi: "We're trying to teach people the fact that debate doesn't have to be defeating... you don't need anxiety or to get angry..."
0:08:36 Muneeb: "Debates on Twitter - it's probably the worst medium for it."
0:09:23 Preethi: "You hit on two things: (1) Twitter was built for broadcast, not conversation (2) more importantly: the intent. People don't come on Twitter with the intent to seek to learn the other side."
0:10:45 Muneeb: "The kind of financial incentives that are at play here in crypto are not found anywhere else."
0:11:02 Muneeb: &ldquo;But still, part of me wishes that there were those more structured, peer-review type processes in place in crypto. TruStory seems like a crypto-native take on something like that."
0:11:21 Preethi: "We can't expect crypto to be like these other industries, purely because there's money tied into it."
0:11:57 Muneeb: "You got caught up in an ICO scandal? Is that real?!"
0:12:07 Preethi: "When I was exploring early in the crypto space - just like everyone else - I had rose-colored glasses and everything looked shiny."
0:12:18 Preethi: "I ended up jumping into a project... and two months later I had to leave because the project wasn't going to work out."
0:12:39 Preethi: "It was a huge shocker for me because it was the first time I took on a role and it was catastrophic."
0:12:59 Muneeb: "Did that somehow play a role in TruStory as well?"
0:13:07 Preethi: "The way I got information in crypto in the early days is I had to crowdsource it from my friends."
0:13:23 Preethi: "And I realized this was how most people were starting to get their information in crypto, too."
0:13:43 Preethi: "[Initially,] we were trying to do claim validation."
0:14:00 Preethi: "People were not just focusing on objective claims that had a right and a wrong answer, but were using it more as a tool to get to answers that are somewhat more subjective as well."
0:14:15 Preethi: "We pivoted over to debate from verifying 'objective claims'."
0:14:56 Preethi: "You are still learning truths, but it's not like there's one objective truth for every claim. It's more that you're coming in to understand and hear the different sides."
0:15:12 Muneeb: "I think it's very interesting that you noticed similar things in crypto - that it's like the Wild West and there's a lot of misinformation."
0:15:31 Muneeb: "Our response [at Blockstack] was more like "Why don't we work with regulators and try to have the traditional checks and balances in place that pretty much exist in public markets."
0:16:15 Muneeb: "I was very curious how the industry would perceive our approach, but I've been very pleased with the response."
0:16:53 Preethi: "Basically, what we're trying to do is take the Wild, Wild West and add a little bit of rationality and rules to it - but one could argue that's antithetical to decentralization."
0:17:26 Muneeb: "A lot of people thought the regulators are never going to approve anything."
0:18:05 Preethi: "Are you hoping to be the poster child for setting the right way to do these token sales?"
0:18:40 Muneeb: "No serious company is ever going to&nbsp; keep an asset on their balance sheet that they think might be illegal."
0:18:49 Muneeb: "For us it was about opening up the network in a fully regulated manner to the US markets because the other option is just to block US nationals."
0:19:02 Muneeb: "Part of the intention is also that this can help other projects."
0:19:42 Muneeb: "We were doing the analysis for the first time with our securities lawyer. Other people don't have to do it again and again."
0:20:07 Muneeb: "If you're familiar with what the SEC did with Ethereum, they effectively did not comment on how Ethereum started or how it reached a stage where they think it's no longer a security."
0:21:06 Preethi: "Being a crypto entrepreneur in the US is hard. Regulations aren't friendly, nobody's set the right path for what the right way to do anything is."
0:21:33 Preethi: "One of the TruStory community members noticed that the Blockstack token almost had to reinvent accounting principles to account for what these token sales represent."
0:22:01 Muneeb: "Accounting is different for different purposes. Like for tax purposes, we could actually recognize it as one thing, for your financial statements the treatment might be different."
0:22:20 Muneeb: "We would always take the worst case scenario in every type of treatment. We're willing to pay the highest amount of taxes and we're willing to treat our crypto holdings as fully discounted."
0:23:45 Preethi: "When you were considering going the SEC route, did you consider any other routes?"
0:23:55 Muneeb: "The alternatives were: (1) ban US investors and developers and go abroad (2) do the offering and go to court with the SEC."
0:24:56 Muneeb: "The technology can adapt to regulations faster than regulations can adapt to technology."
0:25:18 Muneeb: "Another option was to just wait for a new law to be introduced."
0:25:38 Preethi: "What about all the crypto startups that may not have as much capital?"
0:26:04 Muneeb: "People should look at the framework we used for some company that is at least a Series B stage startup from a traditional VC perspective. It's not for doing your seed round."
0:26:27 Muneeb: "Imagine going back to the 80s or 90s, where people were coming up with the typical Series A and Series B round and - interestingly - some of the decisions we made back then, we still live with them. Like four year vesting."
0:27:10 Muneeb: "It's not just the legal framework. Think about employee retention. We had come up with frameworks around how to do token drafts."
0:28:04 Preethi: "Now that you've worked with the SEC, are you more optimistic about the regulatory scenario in the US?"
0:28:16 Muneeb: "I'm extremely optimistic. A big shout out to the staff at the SEC."
0:28:48 Muneeb: "I know that to the outside world, even 10 months might seem like a long time. But for the SEC, where the securities regulations have been around since 1933 and they're trying to get a new type of an asset out. Imagine how many different questions there are."
0:29:26 Preethi: "I mean, even ICOs spend a year marketing their projects!"
0:29:39 Preethi: "What I struggle with is how to get the SEC comfortable with the fact that, unlike public company stock where it's a lot more liquid... with crypto projects, the liquidity comes way later in the network's lifecycle."
0:30:18 Muneeb: "If you go and read our SEC offering circular, it's almost like a mini IPO filing. And the section that is most comprehensive is our risk factors."
0:30:46 Muneeb: "In terms of the liquidity... my opinion is that the next big step for the industry is going to be regulated securities exchanges that will come into play."
0:31:35 Muneeb: "I think it will reduce the noise in the space. ... Unsophisticated players or obvious scams just won't be able to get through the door."
0:31:54 Preethi: "So you mean a more regulated version of an IEO?"
0:32:26 Muneeb: "[We were told] given how compliant you guys are trying to be, you're not a good fit for an IEO."
0:33:18 Preethi: "If done right, these types of token offerings are opening up the door for retail investors who never had access to this type of investing."
0:33:44 Muneeb: "The first 100,000 users of Facebook just used a free product and told all their friends about it, but they never had any financial upside in the success of Facebook."
0:34:02 Muneeb: "With a decentralized system and a crypto asset like this, the early users can also have a potential financial upside."
0:34:35 Muneeb: "Speaking of Facebook, what do you think about the recent headlines about them potentially installing backdoors in Whatsapp?"
<ul>
<li><a href="https://www.forbes.com/sites/kalevleetaru/2019/07/26/the-encryption-debate-is-over-dead-at-the-hands-of-facebook/#6644bdc55362">https://www.forbes.com/sites/kalevleetaru/2019/07/26/the-encryption-debate-is-over-dead-at-the-hands-of-facebook/#6644bdc55362</a></li>
</ul>
0:34:56 Preethi: "It's not new, right? [Facebook]'s been doing this for about a decade almost. But I think people started to get smarter only very recently."
0:35:19 Preethi: "I think it's going to take a long time before Facebook's culture internally changes to care about privacy because their whole business around user data. So to complete change that is not an overnight thing. It's a massive shift in how they do everything."
0:35:50 Muneeb: "I've been publicly supporting efforts like Facebook Libra."
0:36:40 Preethi: "I don't think culture can change overnight. Or even in one year. ... I struggle to understand how they'll meet the future, which I think is open and decentralized."
0:37:33 Muneeb: "I've been involved with some conversations with lawmakers where they want to have antitrust actions against Google and Facebook."
0:37:42 Muneeb: "I think Facebook has a worse image, generally, but internally in the US Government, I'm noticing more hostility towards Google than Facebook."
0:38:07 Muneeb: "When Facebook comes up and says 'We're completely going&nbsp; bypass a lot of these regulations that may apply and start anew global reserve currency, I think a lot of people are going to freak out."
0:38:26 Muneeb: "I never thought I would say this, but Microsoft is better positioned to deal with a lot of these things than Facebook or Google."
0:39:11 Muneeb: "Google and Facebook are two companies that are basically the native cloud computing companies. And their business model is 'let's just get as much user data as possible."
0:39:31 Muneeb: "Microsoft is actually not sitting on a lot of user data. And now, when the world is about to move away from this business model and there's a lot of heat around these big tech companies, Microsoft can come across as 'look we care about user privacy'."
<ul>
<li><a href="https://www.coindesk.com/microsoft-launches-decentralized-identity-tool-on-bitcoin-blockchain">https://www.coindesk.com/microsoft-launches-decentralized-identity-tool-on-bitcoin-blockchain</a></li>
</ul>
0:40:43 Preethi: "They specifically said they didn't want [Facebook] to be a public utility, which is interesting because if that's not the case, you can't really claim it's going to be a global reserve currency."
0:41:22 Muneeb: "Speaking of decentralization, how decentralized is TruStory right now?"
0:41:35 Preethi: "We built the backend on Cosmos SDK - which gives you the tools to build decentralized applications."
<ul>
<li><a href="https://cosmos.network/">https://cosmos.network/</a></li>
</ul>
0:41:54 Preethi: "Right now, we only have one node running, because everything is in beta."
0:42:26 Preethi: "The actual [TruStory] app has an in-app currency, and that same currency can be used for validating transactions on the backend."
0:42:41 Preethi: "It's a Tendermint blockchain and the consensus is the same thing as Tendermint."
<ul>
<li><a href="https://tendermint.com/">https://tendermint.com/</a></li>
</ul>
0:42:48 Muneeb: "From what I can understand, they're helping people with the SDKs to start their own blockchains, and then they're working on interconnecting the different blockchains."
0:43:00 Muneeb: "Whereas, for [Blockstack] there's the stacks blockchain that gives developers the tools for basically building their apps apps on the stacks blockchain, for the most part."
0:43:10 Muneeb: "But if some app really needs the scalability of - let's say their transactions are becoming too much for the underlying main chain, then we have the concept of an app chain, where you're logically on top of the stacks blockchain."
0:43:33 Preethi: "They have many, many blockchains and then they connect these many blockchains using something called IBC, which is their interoperability protocol."
0:43:49 Muneeb: "I wanted to invite you live, so that you can't say no, to our conference in San Francisco."
<ul>
<li><a href="https://summit.blockstack.org/">https://summit.blockstack.org/</a></li>
</ul>
0:44:04 Muneeb: "Neil Stephenson is going to open up the conference with Naval Ravikant."
0:45:00 Muneeb: "My PHD thesis, Chapter 1, has a quote from Snowcrash."
<ul>
<li><a href="https://www.amazon.com/Snow-Crash-Neal-Stephenson/dp/0553380958">https://www.amazon.com/Snow-Crash-Neal-Stephenson/dp/0553380958</a></li>
</ul>
0:45:18 Goodbyes.
0:45:26 Credits.
<ul>
<li>Preethi Kasireddy: twitter.com/iam_preethi</li>
<li>Muneeb Ali: twitter.com/muneeb</li>
<li>Zach Valenti: twitter.com/zachvalenti</li>
</ul>

The Stacks Podcast is an on-going deep dive into the world of crypto networks with Blockstack PBC's CEO, Muneeb Ali, Head of Growth, Patrick Stanley, and Media Partner, Zach Valenti.

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