Interview with Bluzelle CEO Pavel Bains on the importance of decentralized databases and why crypto has a “gateway problem”

My background is in business strategy and finance. I started in media and entertainment, working with Disney, Microsoft, Warner Bros. About 5 years ago I moved into crypto after becoming enamored with Bitcoin and blockchain. It combined everything I was interested in: math, finance, political science, economics and technology.

We originally were doing work for banks and insurers leveraging smart contracts and blockchain. It was based on Ethereum but we still needed a database to store customer information. If we did it on Ethereum it would have been too expensive. Because Microsoft is a partner, we used Azure as the backend. The issue was that it required some serious configuration to connect Ethereum to Azure. From there we determined that Web 3 was going to be decentralized and needed a fully decentralized database. 

We have operations in Vancouver (Canada) and Singapore. We were born in Canada so it was natural to tap into the talent there. We also saw Singapore as the hub for fintech and decided to move here. 

There were several notable milestones for us. We’ve executed a blockchain project for the banking group HSBC, OCBC and MUFG and supported by the Singapore government. 

In addition, we’ve executed a smart insurance project with the insurance company MSIG and KPMG. We were named a technology pioneer by the World Economic Forum and, in April we’ve finally launched our incentivized testnet with staking, which has attracted a lot of attention.

Though Dapps is short for  “decentralized applications”, they aren’t really decentralized. A good part of their tech stack is centralized, such as file and data storage.  This opens them up to serious points of failure. And if part of the Dapp can be corrupted by an outsider, then what is it’s benefit over centralized apps?

A decentralized database offers greater security, is censorship-resistant, and scales faster. This is because of the decentralized nature by using validator nodes to store and verify all data inputs. There is no threat of the network going down or being manipulated. Those are major drawbacks of a traditional database. IPFS is file storage. It would be like Dropbox where we are MongoDB. Plus IPFS is maintained by volunteer nodes who have no economic incentive to maintain the truth. Lastly, IPFS can be reset at any time. Bluzelle has a financial incentive for our nodes to act right.

Currently, we are finishing off our incentivized testnet under the name Swarm of Duty. We will be launching staking rewards next with the ability to delegate. Then we will be launching the mainnet so production-ready Dapps can store their data. In addition, we are working on specific ways for Bluzelle to benefit DeFi.

Designing the core was difficult as you had to accept some tradeoffs. For example, you can’t be super-fast, secure, and scalable. By going decentralized we had to give up on some speed as we felt security (censor-proof) and scalability were more needed.

To be truly decentralized you needed a BFT system. Originally there was nothing that fit our needs and we started by building it ourselves. That was a serious challenge. Then Cosmos/Tendermint came through and we were able to save a big headache.

Given what happened after the financial market crashes when Covid-19 reached pandemic levels, I’m even more bullish on Bitcoin’s long term potential than ever before. Governments will continue to print money, currencies from emerging markets will continue to devalue if not get destroyed by the USD, high inflation will happen. This all benefits Bitcoin adoption. Which then brings more people to learn about all the other great crypto projects.

Cosmos is exciting as it allows for interoperability between chains better than others. That is why we adopted it for our backend. As more blockchains connect to Cosmos, then we’ll be easily available for projects across all chains.

After all these years of blockchain use cases, it seems like the first use is still the best use case – Finance. Given the global printing of money by governments, this is the one most needed and will continue to grow. High inflation is going to come, USD printing is going to devalue and outright destroy currencies from developing countries. People will turn to crypto and the benefits of DeFi, since they defy borders.

The current DeFi ecosystem is just setting the stage as it’s still being tested for security and usability. But it’s getting stronger and 3 years from now will be an excellent alternative financial system. By the time my kids enter university, they will find it easier to save money and earn interest by DeFi.

Anything that isn’t related to finance or privacy will slow down by a lot. Covid 19 is making everyone think about survivability. A logistics company is concerned about getting their supply chain going again and getting sales. They aren’t going to care about using blockchain to save some money or track goods better. This goes for all enterprise blockchain. We need to stick with our early adopters and push our communities and users and address the biggest pain. People are losing ways of making, saving and growing their money. People are also aware of the post-Covid 19 moves made by politicians to take away privacy. Solving those are the biggest areas for blockchain.

The second half of 2020 will have the biggest growth of new users into crypto since early 2017.

I call it the gateway problem. It’s still too hard for anyone to get through the gate. We have a big house, with great music and excellent food. But the party doesn’t have that many people because it’s too hard to get through the gate. Once we can on-board users in a way they are accustomed to, we’ll have serious lift off.

Outside of Bitcoin, every crypto project will have a tough time. Our industry is dictated by the acceptance of crypto. Increasing asset prices will attract more users which will require more applications. If application growth isn’t there, there will be a lot of problems for any blockchain company. The earliest adopters of blockchain technology are those familiar with crypto.

Blockchain games are the most over-hyped area of blockchain. I come from the video game space and keep in contact with some of the best game developers. None of them are interested in blockchain. The games industry isn’t broken as the industry is hitting record revenues every year. Covid-19 is making it even bigger. There is no need for companies like Electronic Arts to use blockchain and have an open garden. They prefer it closed. The only people who want blockchain games are those that played card games like Magic The Gathering and also own ETH. How many of those people do you know?