// Nebulas COO Wang Guan (center) at the startup’s community meetup / Image credit: Nebulas
With a bachelor’s degree from one of China’s most prestigious architecture schools, Wang Guan’s career was on a roll. After stints at a few prominent Chinese property firms, he landed contracts to build properties in the Middle East.
Then the 2009 financial crisis hit. The economic shock torpedoed those projects and left his customers cash-strapped.
He was exhausted, but it wasn’t just about the economic meltdown. He was frustrated by the foot-dragging of the international payment system that delayed remittances.
“It would take two weeks for my customers to transfer the money, and sometimes it had to be transferred via Hong Kong, instead of going directly to the mainland,” Wang says. “There were a lot of frictions in between.
”
As the property boom turned to bust, Wang pondered: Is there a way for businesses to reach a mass market without the unnecessary friction? Blockchain became the answer.
Nebulas , a startup he co-founded in 2017, is doubling down on the technology.
If successful, it could upend business models and redefine how the Internet works. The company has raised over US$60 million worth of ethereum since its establishment.
The team is comprised of software engineers with deep experience in the field. Co-founders Hitters Xu and Robin Zhong worked on a blockchain platform for Ant Financial, Alibaba’s payments affiliate. Also, Xu and Wang collaborated on Antshares, which they claim is China’s first open-source blockchain.
CTO Robin Zhong (left) CEO Hitters Xu / Image credit: Nebulas
Wang saw the potential of blockchain when he first bought bitcoin in 2011. At the time, the digital cash challenged the conventional wisdom about the monetary system. The public became aware of the first generation of the underlying technology behind the cryptocurrency.
Dubbed blockchain 1.0, it allows investors to trade virtual cash on a peer-to-peer network without a central authority.
But that is all it does.
Ethereum, an open-source public platform, ushered in the second generation of blockchain technology, which allows entities to build decentralized applications (dapps) on top of its infrastructure. With smart contracts – computer protocols which automatically execute terms between a buyer and seller – blockchain 2.0’s value extends far beyond just exchanging digital currency.
Now, Wang and his team are stepping up their game by building what they call “blockchain 3.
0,” which promises to tackle the constraints faced by the current technology. The first problem is scalability – Ethereum can only handle around 15 transactions a second , compared to Visa’s 45,000.
The second issue is a system rupture known as a “hard folk,” in which an update to the core code – often to fix a problem – splits the network into two. Image credit: Master The Crypto
On one side are users who are sticking to the old version of the blockchain network, on the other are those who’ve implemented the upgrade. This creates problems like driving up transaction costs.
Nebulas, which is headquartered in the US but has a presence in Beijing, is one of many companies working on a next-generation blockchain. There’s EOS, NEM, IOTA, Zilliqa, and others.
But Nebulas’ take on it is certainly unique. Google for blockchain
Nebulas’ first solution is called Nebulas Force (NF), which allows for unprecedented forkless development and smart contract upgrading in its blockchain.
“NF provides the Nebulas blockchain, and its distributed applications built on top of it, the capability to self-evolve,” said the company’s white paper . “With NF, developers are able to make changes, incorporate new technologies, and fix bugs without needing to hard fork.
”
In essence, programmers can tweak the blockchain’s core protocols without affecting the entire network. Bug fixes, new features, and scalability solutions can be tested without causing disruptions. Proposed changes to the entire network can also be voted upon by the most influential users, giving them a say in the future of the blockchain.
There are two implications of Nebulas Force. First, in order for NF to work, it needs a method of deciding who are the most influential users in the blockchain network. Second, if NF succeeds, it could help create an explosion of dapps, which means users might have difficulties finding useful and relevant ones.
Nebulas is building Nebulas Rank (NR) to fill those gaps. It’s an open-source algorithm that acts like a PageRank (an algorithm used by Google to rank webpages) for blockchains. NR ranks users and dapps based on how active they are on a network. It can compare things within a blockchain and even across blockchains.
NR is a key component of the third technology Nebulas is building. Previous blockchains verify transactions through two common means.
The main method – used by Bitcoin and Ethereum – is Proof of Work (PoW), in which miners compete to solve mathematical equations and earn tokens. This solution is unsustainable because of the need to obtain greater computing power, which consumes ever greater amounts of electricity.
An alternative that’s now coming into use is Proof of Stake (PoS). Instead of using computing power to fight for mining rights, PoS says that whoever owns the most assets in a blockchain can verify transactions.
However, the risk is that a blockchain could become controlled by a wealthy entity who may act against the interests of the group.
“Under PoW, those who make the biggest profit get to dictate rules. Under PoS, it is those who boast the biggest fortune. We believe these two ways are problematic,” Wang says.
Nebulas is ditching these old consensus algorithms in favor of Proof of Devotion (PoD), which gives developers on a blockchain with high NR scores the right to verify transactions and earn rewards.
Combined, these technologies – Nebulas Force, Nebulas Rank, and Proof of Devotion – incentivize developers to create useful dapps that gain traction and make the entire blockchain ecosystem more useful. As significant as electricity
Indeed, the business world is taking notice of blockchain. In April, diamond companies including Berkshire Hathaway’s Helzberg Diamonds and Richline Group said they were working with IBM to use the technology to verify how jewelry are sourced. Facebook, still reeling from the data breach scandal, announced that it would establish a division to study blockchain to address privacy concerns.
By one estimation , global spending on blockchain solutions is expected to reach US$9.7 billion in 2021, up nearly 10 times from the US$945 million in 2017.
In China, blockchain technology has also garnered attention from the government and corporations.
In April, the municipal government in Hangzhou, in eastern China, set up a blockchain industrial park and allocated US$479 million in government fund to nurture startups. In a sign that the government is getting behind the technology, a senior Chinese official said in May that China had begun making national blockchain standards , which would be completed by 2019.
The arrival of blockchain technology will be like the invention of electricity.
Despite the enthusiasm, it will take some time for the technology to be widely adopted. A recent poll by internet research company Gartner found that 77 percent of the surveyed chief information officers at various corporations had no interest or did not plan to adopt blockchain technology.
“Blockchain technology requires an understanding of, at a fundamental level, aspects of security, law, value exchange, decentralized governance, process, and commercial architectures,” Gartner vice president David Furlonger was quoted as saying. “It, therefore, implies that traditional lines of business and organization silos can no longer operate under their historical structures.”
Wang is no stranger to having his work dismissed by people due to its novelty.
Before founding Nebulas, he faced resistance from his family and never managed to get his parents to fully understand the potential of the technology. His parents – now both retired from university jobs – see cryptocurrencies as nothing more than a series of numbers.
But Wang is as undeterred as he is optimistic.
The arrival of “blockchain technology will be like the invention of electricity,” he says. “We both know that it’s two worlds apart before and after electricity was invented.”
Note: Nebulas raised ETH 8,000 on June 28, 2017 (about US$2.
29 million at that date). It raised over US$60 million worth of Ethereum on December 17, 2017.
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