Interview

The Bitcoin bull is raging and StarkWare aims to ensure blockchain follows suit

The Israeli startup has developed a cryptographic solution it believes can solve the problems of scalability and privacy hampering distributed ledger technology

Allon Sinai 08:4518.01.21

It may take another 10-20 years, but blockchain technology is going to revolutionize the world, much like the internet did, says Eli Ben-Sasson, the co-founder and president of Israeli startup StarkWare. He founded the company in 2017 with Uri Kolodny (CEO), Michael Riabzev (Chief Architect) and Alessandro Chiesa (Chief Scientist), aiming to use zero-knowledge proof to solve the inherent problems of blockchains.

"Our mission is to solve two burning problems of permissionless blockchains and these problems are scalability and privacy. Through our core technology which is called STARK, we have the ability to solve both of these problems. Both the scalability, which is very limited today, and privacy as these blockchains are very open and transparent," Ben-Sasson told CTech. "It took the internet 20-30 years to become essential and for businesses to move there. The Bitcoin whitepaper was published in 2008 so we still have 10-20 more years to go to be adopted."

Blockchain technology is the brainchild of the person or group known by the pseudonym, Satoshi Nakamoto, the inventor of Bitcoin. Blockchain plays a core part in securing Bitcoin and has since been expanded to numerous fields. Apart from Bitcoin, the most used and famous permissionless blockchain is called Ethereum, and that is where StarkWare is currently placing its focus.

StarkWare President and co-founder Eli Ben-Sasson. Photo: StarkWare

"The technology can easily be applied outside of the blockchain space, but our strategic decision was to first deploy it on the blockchain. What the technology delivers is a very high grade of computational integrity," explained Ben-Sasson. "Suppose I want you to run a computation and I want to know that you ran that computation with computational integrity, meaning doing the right thing in an expected manner. Operating with integrity is hard when you have incentives not to report the right answer, especially when it involves things that you do privately. So our technology uses cryptography to ensure that other parties are doing computations with computational integrity. Our technology allows them to generate a proof that basically asserts that the output of the computation is correct. Crucially, the proof is exponentially smaller than the computation. For instance, you could have a proof that the whole Bitcoin blockchain is correct, and that proof would take roughly 100KB, far less than the hundreds of gigabytes the Bitcoin’s blockchain needs. This technology can be deployed anywhere, for example, the traditional banking system or healthcare. However, we decided strategically that the very best place to put it to use is on permissionless blockchain even though it is more general than that."

Much like the price of Bitcoin, blockchain technology and its use has been on somewhat of a rollercoaster over recent years, and Ben-Sasson is hopeful that the recent bull run experienced by the leading cryptocurrency will have a positive effect on the entire blockchain industry. Bitcoin crossed $20,000 for the first time in mid-December and went on to double its all-time high by January 10th.

"I'm very optimistic about the future of blockchains. I think that in this current bull run we will see not just more money flow into it but also we will see more and more parts of the conventional technology moving over to it. It is a little bit like the world wide web and the internet and how it took some time and then now almost all businesses operate on the cloud. I think we will see a similar process here," said Ben-Sasson. "A lot of the technology that is currently done by conventional means like networks of trusted parties, for example, SWIFT payments, will slowly adopt blockchain and move over to use this better way for settlement and conducting financial transactions. I'm very bullish on blockchain, not just for financial speculation, but as a core technology for governments and for operating economic systems at a big scale."

Ben-Sasson noted that in permissionless blockchains the fundamental principle is 'verify don't trust' and that everyone is invited to check that the system is running correctly. "In that world, you need tools that will allow you to check very efficiently the computational integrity of a big system and that is exactly what our technology delivers. It allows you without any trust assumptions to check very efficiently that a very long computation, an exponentially long computation, was performed correctly, which is essential in the blockchain world. In the conventional world you can get computational integrity by simpler means like inspection,” said Ben-Sasson.

He explained that in most conventional systems, for example in the banking world, the institutions operate under the trust assumption. “We trust the bank to operate with computational integrity and also society delegates certain people to hold the banks accountable. So we have accountants and lawyers and regulators and auditors and all of them serve the same purpose. They operate on behalf of the public to come and inspect the computations of these financial institutions and we trust them to report to us if the financial system isn't working well. So the conventional world operates under the principles of trust and delegates accountability."

Ben-Sasson said that while he is confident that StarkWare's technology will one day be implemented in the traditional financial world, right now many people in that sector have a hard time grasping what it delivers. "In some institutions, our technology replaces people. Our technology can replace many functions provided by an accountant or an auditor, at least regarding computations. Just like blockchains challenge the conventional financial world, in a similar way, our technology challenges the conventional way for asserting and inspecting computational integrity."

StarkWare raised a $30 million round A in October of 2018, led by Paradigm, a fund set up by cryptocurrency investors Matt Huang, formerly a partner at Sequoia Capital, and Fred Ehrsam, co-founder of Coinbase. Coinbase, Sequoia Capital, and Intel Capital also participated in the round, which brought StarkWare’s capital funding to $36 million. Another notable investor in the company is Vitalik Buterin, one of the co-founders of Ethereum.

"Definitely names like Vitalik and Sequoia and Paradigm add to our brand name. We started off with a very good impression in the blockchain space and because we are consistently maintaining a good name in this space we attracted that class of investors and we are very happy to have them," said Ben-Sasson.

Ben-Sasson is not too concerned about the bad reputation the cryptocurrency and blockchain space often suffers from, saying it is only natural it has also attracted its fair share of bad actors.

"When in 1849 gold was discovered on the West Coast of the U.S. it led to a lot of development, a lot of funding coming in, and a lot of good things came out of it. But of course, there were also a lot of crooks and villains and a lot of bad actions. The internet bubble of 2001 was similar. It was really great in bringing funding and speculation into this amazing space that later led to the world we live in today, but it also had a lot of ridiculously overpriced companies and things that imploded and it went through several cycles. I think it is a similar phenomenon here. Generally, I'd say the speculation is really good, but people who are reading this and are thinking if they should invest should be really cautious because it is a very speculative volatile market," said Ben-Sasson.

StarkWare recently announced the launch of StarkEx 2.0, the first system in production to be programmed in Cairo, the company's new Turing-complete, programming language for generating STARK proofs

"When we set out we started developing this really advanced mathematical technology so the first versions of our system were built by hand by our expert developers and it involved a lot of care. We then internally started developing these tools that allow us to specify our systems in a way that is easier for programmers to deal with. We just announced that we are opening up the Cairo programming language and releasing a developer tool chain for all external parties so they can now write their own scalable STARK systems and reach the same scale that we reach with our systems," explained Ben-Sasson.

StarkWare, which is based out of Netanya and currently employs over 40 people, mostly engineers, is aiming to drastically expand the number of applications that use STARK technology in the coming year, as well as diversify them. Ben-Sasson noted that the best way for developers and entrepreneurs to interact with StarkWare is to learn about and start using Cairo.

"I hope that by the end of 2021 and mid-2022 we will see a lot of independent applications that our customers will be doing without our intermediation, but by using our technology," said Ben-Sasson.

StarkWare is just one of numerous Israeli companies operating in the blockchain space, with at least three Israeli blockchain startups recently announcing the completion of major funding rounds: Unbound Tech, Celsius, and FireBlocks. Blockchain payments infrastructure startup Simplex also recently launched its latest products.

"In Israel, we are definitely good in things that involve cutting edge security and cryptography," said Ben-Sasson. "The powerhouses of Unit 8200 and steller academic institutions that we have and the fact that you have all these amazing researchers in cryptography and theoretical computer science gives you a big head start. I would say this is another area of computer science and cryptography in which Israel is naturally a world leader."

Nevertheless, Ben-Sasson believes the space could advance far faster should it receive help from local regulators. "I think that one thing that could really help is if Israeli regulators help, or at the very least do not interfere. There are quite a lot of challenges for blockchain companies. For instance, it is very hard to find banking services. There is a lot of regulatory unclarity in the crypto space," said Ben-Sasson. "There are certain areas like banking and regulatory guidelines that we are falling behind. For StarkWare, it is much easier to open and operate bank accounts in the U.S. than it is in Israel and that is very sad and troubling and is something that is true for all the companies in the crypto space.

"My guess is that there is a lack of leadership from the Bank of Israel and regulatory bodies. There were also some anti-money laundering incidents in the past, that are unrelated to blockchain, in which Israeli banks had an unpleasant experience," added Ben-Sasson. "Because there were some issues that were related to AML, now the regulators and banks are taking a very conservative stance which is harming this particular industry and that is very unfortunate."