Halsey Minor, Founder of CNET and Salesforce, Targets Video Streaming With Blockchainbr>
Halsey Minor has a track record of delivering platforms. He’s responsible for the creation of CNET, Salesforce.com, and Uphold, among others.
He’s also no stranger to controversy. He recently railed against regulations at CoinAgenda, where he argued that SEC regulations are driving blockchain innovation out of the USA, and has been a vocal supporter of the idea of setting up an Atlas Shrugged-style solution for the cryptocurrency industry in Puerto Rico.
Minor is now turning his pursuits toward disrupting the online video ecosystem dominated by Amazon Web Services (AWS) and Google. His VideoCoin Network proposes to tap into unused or under-utilized computers in data centers to dramatically reduce the cost of encoding, storing, and streaming video, which he claims currently wastes $30 billion worth of computing resources.
If he’s successful, the next YouTube, Netflix, or video apps may emerge, and the costs for streaming video will drop dramatically for all of the companies currently involved in content. The innovation may also have a drastic effect on Amazon’s business.
The project has already raised close to $50 million in its pre-initial coin offering (ICO) sale, and will likely launch a public ICO in March.
Minor talked with Block Tribune about regulators, damned regulators, the crypto industry and his plans for video.
BLOCK TRIBUNE: So I read your Atlas Shrugged article in the New York Times. You’re de-camping to Puerto Rico?
HALSEY MINOR: Well, I’m not. I was part of a larger article about a whole group of people that are moving there, and they’re trying to, you know, sort of transform the island into – my description – sort of Silicon Valley for crypto. I spent some time with the reporter and I’m looking at doing things there, but I’m personally not looking (to move there). I have seven kids, and I’m not moving anywhere. It’s really more of participating in what they’re building. This one particular thing, which interests me, is the idea of creating a bank that’s a public/private partnership. When I created Uphold, it took two-and-a-half years for us to be able to get access to the US and European banking system. We had to buy part of a bank to make that happen. Uphold and Coinbase are the only two wallets that really allow you to connect your bank account directly to the service.
The first problem that I solved in crypto, which is the same one that Coinbase solved, is how do you allow people to buy it? It was a very frustrating experience. I had the change the name from Bitreserve to Uphold because nobody would bank us with the Bit in our name.
There are a lot of hard problems in crypto. The first hard problem I solved is, how do you let people buy it in the first place? The idea of a public/private partnership around the bank is obviously would be a great thing for the industry.
I’m supporting them. I’m looking at putting an initiative there, but in terms of me … I hope they’re all successful in what they want to do. But I’m not part of the gang living there.
BLOCK TRIBUNE: But you will locate the company’s headquarters there, correct? Or is that inaccurate?
HALSEY MINOR: No, I think what I told her is that I’m looking at it like everybody else. They need to make sure that they have all the correct rules and that the laws are in place. I think that it’s a goal for everybody, because it would be great if we could have at least a US territory as part of what we do. I told her that people are basically refugees from the United States because of the lack of clarity in the laws, and it would be great if we could start bringing some of this stuff at least to an American territory.
There’s really nothing definitive for anybody. There are people that are definitely moving there. But there are a lot of issues, there’s a lot of discussions with the government on how to make sure that it is crypto-friendly.
BLOCK TRIBUNE: I saw your speech online that you just a made at CoinAgenda regarding the US government regulations. Anything specific? Or is it just that they don’t just understand it, so they’re imposing regulations that are hindering the business?
HALSEY MINOR: That’s part of it. I think lack of clarity. So, for instance, if we do our crowdsale, we will not be able to accept people from the United States. And the reason is that everybody’s afraid that the SEC or any other government body just like says a word, it will freeze you and you can’t get any more money. So everybody is just incredibly cautious, and we are absolutely, positively a utility coin. We meet every definition, including the fact that the coin will start trading and can be used on our cloud, the first app on the VideoCoin Network within a month. There’s not a single box that we don’t check, and yet we’re afraid. That’s the first thing.
The second thing is that every bank is terrified they’re going to lose their banking license by working with crypto. It doesn’t matter how sophisticated your AML (anti-money laundering) and KYC (know your customer) is. You could do it far better than every other bank. But they’re terrified the government’s going to say (something). I mean, look, the rules in the United States are what they enforce. It’s not what’s on the books. If the regulators want to find a way to shut something down because they don’t like it, they will. I mean, they just will. It’s unfortunate. It has really driven almost all of the innovation off-shore. And even those people who are here, physically here, are looking to leave and leave all the taxes that they would generate.
The third thing, which is absolute insanity, is if you want to move money around Europe. You’d do one filing, and you can now move money to every EU country. It’s called a money transmitter license. In the United States if you want do that, it’s 48 separate municipalities. All with different rules. All with different fees, all with different requirements, and it literally takes $7 million dollars and two to three years to get all these licenses. It is the most archaic system in finance on planet earth. The fact that we are a developed country, and that we do not have a single idea on how money moves from state to state, is absolutely mind-bending.
Ultimately, the only way Uphold could get it, the only way anybody could get it, is to get a bank to be behind you, because banks don’t have to get a money transfer license. But the problem is, banks don’t want to back anybody. So it’s a really, really, really difficult problem. If you go to Bittrex, or GDAX or any sort of US exchanges, you can’t move dollars in and out. You go to Coinbase first, or Uphold. You have to buy bitcoin. Then you take it to an exchange and change it around. Then you got to go back to bitcoin. And the reason that Tether was so successful…at Uphold, after I left, I was begging them to do a Tether because it created a perfectly … if you do Uphold transparently, I built a totally transparent reserve for that purpose.
The reason Tether’s been successful is because people can’t get the money to the banking system very easily, or convert into dollars. If you want to convert your money on Bittrex to dollars you use Tether. It’s a surrogate and hopefully I’m praying Bittrex has reserved every single dollar for that’s been issued.
My first two-and-a-half years of my life were really focused around this industry. We’re focusing on how do we take this new form of money and how do we give people access to it? The challenges there are almost entirely regulatory.
Uphold kind of hopped over that. People have some pathways in, now. It’s not easy, but people can do it. That sort of transitions into me sort of looking more deeply at the technology of the blockchain and trying to figure out whether I thought there were any other legitimate uses for it.
BLOCK TRIBUNE: And that’s how you came up with what you’re working on now, the VideCoin Network.
HALSEY MINOR: That‘s right. I have to say for a year … more than a year, maybe even the first three years that I was involved, it didn’t strike me. I felt honestly that the blockchain was a technology looking for an application. It didn’t strike me. I saw some very simple applications. I own a company called Voxelus and they launched an in-game currency that can be used out of the game. That’s a use-case that’s been around forever. In-game currencies have always existed.
But in terms of heavy duty use of the blockchain… When we started, I have a history of starting things and building platforms, whether it’s a Salesforce or it’s CNET. My software was spun out, became an 11 billion dollar company called Vignette. It was the leading web-publishing company in the 90’s. CNET made a billion and a half dollars on it. We spun out, I kept 35% of it.
What happens was we started building this VR cloud, which takes video in and then streams it to all the major VR platforms, as well as Facebook and YouTube and Periscope. It requires a huge amount of processing and a huge amount of data. The company’s called Live Planet, because the idea is I want these cameras all over the world streaming live, you know, museums, zoos, you watch plays, you go to horse races. You drop in really anywhere around the world. It’s all sort of lit up and the world becomes accessible from your house. The cost of running one of our cameras 24 hours a day, 7 days a week, is about $25,000 dollars in Google cloud costs.
BLOCK TRIBUNE: Right.
HALSEY MINOR: This is a lot of money, and you have not just an issue that we face. It’s an issue that everyone in the entertainment industry faces, because video is now 80% of the Internet. Growing at a 25% compound annual rate. We got 2.1 million people who look at video. I mean, video is the Internet now, and it will only become more so. And we have 4k coming out, and then 8k, and then VR, and that’s where video is not even video anymore. It’s your reality. Reality is kind of at this inflection point itself. The big problem that we solved sort of immediately is all these companies – like, our advisor Hanno Basse, the CTO of 20th Century Fox, sees – these guys are seeing massively escalating costs in streaming as people move from watching broadcast-based services to delivering one-on-one streaming against the server.
Every single person who’s connecting to the DirecTV app is costing money that they do not cost if they actually watch it on the television set. And none of them have figured out how to monetize this, really. I now watch about half of DirecTV on my app on my computer. That means that they’ve gone from having no extra cost for me, to having additional cost, as I switch mediums. That’s happening ubiquitously and it’s accelerating. That’s creating a huge problem, where they are seeing accelerating costs, and they have no real ability to offset those. It’s no different than the publishers in the 90’s who had to build websites. Extra cost, extra people. But they couldn’t monetize them. They just had a hard time monetizing them.
So we’re seeing this same thing happening with video. Another problem that’s overlooked, which is, in Amazon’s case, 100% of their profit is from Amazon Web Services. All of these media companies are using AWS and Google. For instance, Netflix is using AWS to do all of their decoding storage and streaming. Which means everybody is basically giving money to Amazon to compete against them.
This isn’t sort of a philosophical issue, this is a real issue. And, you know, anybody who’s watching what Amazon’s strategy is, it’s to use AWS to basically drive people out of other businesses. They’re running everything else at a zero margin. They’re using AWS as the engine to do that. It is a real problem. It’s a legitimate real problem that these companies are talking about.
So the epiphany for me was working with my head engineer who built Intel’s video streaming cloud, which was sold to Facebook, so that epiphany to me was, one thing that’s proven about bitcoin and the other cryptocurrencies, that if you give people the opportunity to connect the server to the Internet, to have it run software that does something useful, to pay in some form of digital value, as much demand as appears on the network will be met with the needed supply. In other words, it just scales. More people who come on that who want to buy bitcoin, the more the infrastructure scales. And not only with bitcoin. It’s been proven to happen over and over again with all these other coins. Somebody creates a coin, somebody creates a software that does something with a computer, and it gets paid and is exchanged. This is something that’s totally new in all of history, that you can just put a computer on the Internet and run software, and you’ll get paid. This could never exist before because without digital crypto currency, everybody would have to have a Bank of America account and everybody would either get sent a check or they would have to have a large transfer done. That’s huge friction, huge friction, to have to use the existing monetary system.
So the idea that I can just run software, get a crypto currency with it anywhere in the world. So if I ran VideoCoin and I had to people pay in China, I need to convert renminbi to dollars, I need to go through the government. So the idea of this ubiquitous global currency that can be created and that can be tied to software that validates whether something has been done or not, is part theory, part the aha! moment. Not necessarily because the theory by itself solves really sophisticated problems. But it kind of points to an idea of being able to create what I call smart money. I have this thing, when I get on stage, I show a street that’s on the border of Canada and the United States. One side they use the Canadian dollar, other side the American dollar, and it sort of points out what I say, is that it’s a world of dumb money served by geographic and arbitrary borders. In fact, that currency is kind of used to enforce borders. But we all know borders move all the time. So how we use money today is almost sort of capricious, just based on where the borders are today.
So the idea is that we go from dumb money serving geography, to smart money serving industries. Money that serves the purpose, and right now the purpose it serves is to find the geography, but the Internet blew that idea up. That’s why bitcoin’s so successful, because it’s not anybody’s currency. It’s everybody’s currency. The ICOs that are successful, and they deliver something of value, it’s because they will have taken resources of some kind, pulled them, and created a very efficient system for using them. We’re in a very fortunate position, because if you want to mine a coin, you have to go buy special cards to do that. Every chip, whether it’s GPU or CPU, has a video encoder on it. That means that every computer sitting in every data center everywhere can immediately, without any additional hardware, be used to encode, store, and stream video.
You have you type in zombie server, you’ll see that there’s $10 billion to $20 billion dollars, that 20% of all data center capacity is a zombie. That means it’s not designed for over-fail, it’s just simple overbuilding. So bitcoin started with people who found computers and they got a CPU card and they had miners. In our case, the capacity is already sitting there latent. They’re buying cards, no nothing, literally just running the software.
So this is a massive ability to de-risk cost, right from the very beginning. Right from the very, very beginning. Over time, to me, what’s happening in the world of cloud computing, is again very similar to bitcoin. If you want to be a successful bitcoin miner, you need the lowest cost to power. And if you think about that, it means that the system’s so efficient that the only thing that matters is whether you’re next to a hydroelectric dam. Is that is the future of computing? Then what we’re talking about is something that is so extraordinarily efficient and cost-effective that it makes things like Amazon with all their margin look like the software applications of the late 90’s.
I’m kind of all about computing architecture. It’s why I got involved with the Internet in ’93. We went from people doing hand computation, and we called those people actual computers. They were all fired when the mainframe came along. People felt the mainframe took too long to do things, so they started buying servers, and made it a client server, and everything distributed again. Then people like me, in the late ’90s, early 2000s, like – hold on a second, that’s too complicated. Let’s centralize everything around one app, one database in the cloud. It was much more cost-effective by a factor of 10, and more innovative. Then the blockchain comes along. It is the leader, the fulcrum that is going to create this entirely new way of doing things. It distributes computers again, an entirely new and more efficient way of doing computation.
It was ultimately that the Internet became fast enough and the browsers became sophisticated enough to allow software that ran in the enterprise to be replaced by cloud services. It required that, and it required trust, because I put $19.5 million dollars in Salesforce in 1999, Larry Ellison put some in, but we were probably the ones who were 90% of the backing of a company. There were no VCs who would invest in the company, because none believed that companies would put their crucial sales data in the cloud.
So with Salesforce, there was a technical issue and there was also a social issue. I think maybe, in some ways, crypto’s kind of the same way. There’s kind of the social acceptance of crypto, which kind of has to happen. But I think it’s now happening fairly rapidly for blockchain. Then you have to build these technologies and make them work.
Building any of these things and making them work well is not an easy job. For people who think they’re going to go build something big and transformative, they’re going to use an off-the-shelf or ERC-20 token, that is not going to happen. These are serious computer science kind of things where you have to have people steeped in computer science to figure out how to make these work. And you also have to deep knowledge of the market you’re serving.
For us, we are our own customer, because it usually dramatically brings our cost down. So we have deep, deep insight into the problem we’re solving. We’re not doing this theoretically. This isn’t just some idea that we’re going to go and do this. We know exactly what we’re going to build for us and for every other media company, because we’re building it for ourself. In fact, if we fail, then we actually fail to reduce our own cost. So it’s a very important part. It’s like Vignette became a $10.8 billion-dollar company. That was software I built internally and people who bought my software, they also built my workflow. The idea that you could take a story and put it up 5 o clock, and take it down at 9 o clock. People didn’t even know that they needed that kind of stuff back in the mid 90s.
So we have a very enlightened point of view on what needs to be built and of course we have guys like Hanno Basse, who’s the CTO at 20th Century Fox, and guys like that who represent the potential customer base when we’re running. So it’s not like we don’t also have feedback from customers. We’ll have, in addition to our advisors, we’ll have custom councils, we’ll do a bunch of things to make sure that we are fully aligned with the needs of the industries.
BLOCK TRIBUNE: What are the technological hurdles you have to overcome to get this thing working, What sort of timeline do you foresee?
HALSEY MINOR: We built all the encoding stuff, storing, streaming, all of the stuff related to video, we built. The best analogy is Salesforce came out with the CRM app, and then they spent another year and a half turning themselves into a platform. There was a general platform for building apps. So we’ve built a VR video app that it takes in VR and it sends it out to all these platforms, is what every company does today. The video gets turned into 4k HD, 720, then it’s optimized for every device. The number of video streams that have to be created to reach all these different platforms is astounding. I would bet that Netflix for any show probably has 10,000 different versions, depending upon the device and that sort of thing. All totally offline.
So the hard part really is building the coin itself. I mean, for us, we think that people should not underestimate how difficult these are to build. We’re building a real-time marketplace that picks the least expensive resources and is able to make sure that those resources are both able and have done what they are suppose to have done. I would add one additional thing to it, which is the ability to run in real time. That requires a proof of stake model that really nobody has today delivered. But at the critical part, because you can’t click on a video and have it take 20 minutes at the speed of the blockchain to start streaming. This is a ubiquitous thing across the entire industry, ethereum’s trying to address it. My belief is that all these proof of stake models cannot be solved by sort of a generalized tool. They’re going to have to be built with very specific markets in mind. It’s sort of like having you have a sort of generalized tool. At CNET, we had to build our own software. At Amazon, he built his own operating system. Usually you have to do hardcore building. I think getting this ability to move instantaneously, despite the scale of the blockchain, is a pretty significant hurdle.
Because we built a lot of the video stuff, that we can get probably get out by the end of the year. I think it probably would take another six months after that for operational. Like I said, a lot of that is really building out all of the token characteristics that serve this really sophisticated marketplace that we’re creating.
BLOCK TRIBUNE: This will be transparent to the consumer at large I presume. This will all be run through the individual companies.
HALSEY MINOR: That’s right, that’s right.
BLOCK TRIBUNE: Your ICO – when is it kicking off?
HALSEY MINOR: So we’re in process now, if we do a crowd sale, it would be late March. We’re well over halfway to 50 million, so it’s gone very well and it’s gone, so far, faster than we’ve anticipated. If we decide to go with the public ICO, we will have wrapped up the private part pretty quickly.