Reflecting on Time Well-Spent at LedgerX

I will soon be leaving LedgerX. I wanted to take a moment and reflect on my experiences and lessons learned from working at LedgerX, the first CFTC-regulated digital currency clearinghouse and options exchange.

I joined LedgerX four years ago in 2014 to help build out the technology stack and its interaction with the Bitcoin system. Since that time, Bitcoin has grown in leaps and bounds from a fledgling cryptocurrency into a global, somewhat regulated asset class of its own kind. Although I had expertise in Bitcoin back then, the landscape was very different and my previous work was focused on backend application development, mobile apps, reverse engineering, typical full stack development. Everything has changed.

What’s next for the Bitcoin ecosystem, and what’s next for myself? Well, to find the answer for the industry, it may be helpful to reflect on the broader technological trends in society today. In particular, I want to highlight something that has been gnawing at the back of my head for quite a while now. It’s the contrast of a highly regulated venture like LedgerX operating in the world of Bitcoin, a world which is widely seen as outside the reach of regulation. LedgerX at its core has a contrarian thesis that stands in contrast to the various startups that pray at the altar of the likes of Uber or Airbnb: a thesis that up-front regulation can coexist with innovation.

Before I go into my interpretation of the core thesis, though, I want to point out that technology and its development fundamentally cannot be regulated, in the same way that the laws of physics cannot be (aren’t) regulated. Hobbyists, enthusiasts, hackers, garage biohackers, cypherpunks– call these individuals whatever you want; they are technology tool users, and individuals are the ultimate form of decentralization. Many of the tools of technology development have become so cheap, and the communications cost so low, that even cryptography once restricted by export control laws was trivially disseminated by a few lines of source code printed on t-shirts. For fun. Often this story is told starting with the original hackers of the personal computing revolution, followed by the Internet and its decentralization, and later an emphasis on file sharing protocols, and the now-famous observation that software is eating the world, which by now has long been updated to the observation that Bitcoin is eating the world as well. A good perspective on this was provided by Balaji Srinivasan in his 2013 talk, “Voice and Exit” where (and this summary won’t do his argument any justice) he painted a picture of East and West Coast philosophies at war with each other.

In the talk (which I recommend watching), one of the ideas he proposes is that maybe regulators are really no longer capable of enforcing regulations, particularly against certain venture-backed technology companies that can simply treat penalties as a cost of doing business if they grow fast enough. By invoking the narrative of software eating the world, have startups found an invisibility cloak giving them stealth from the eyes of regulation or even lawfulness? Maybe, or maybe these startups are taking advantage of the natural shape and structure of the underlying technological landscape. Maybe there’s truly meaningful signal to be found in Bitcoin’s meteoric 60 million percent market price climb, or in Bitcoin’s equally outstanding hashrate growth and difficulty target growth, or in the many efficiencies and cryptography innovations that the Bitcoin software system has been accumulating.

In the long-term, I wonder how society will deal with these kinds of regulatory problems. I think that the regulatory sandbox concept is fascinating. It’s the idea of letting people opt-in to an experimental sandbox where they can access products and services that are, basically, unregulated and unapproved. How society will resolve these different pressures and forces at play, I really don’t know yet. Obviously, the resolution to this issue chosen by LedgerX was engaging with regulators to the maximal extent possible.

So that’s the theme of our times that has been bouncing around in my head for a while now. LedgerX has made it clear that there is room for working closely with regulators to operate a U.S. clearinghouse, in an industry that doesn’t always embrace regulation with open arms. Boiling down four years of effort (and even more years for a few of my colleagues here) into a short sound bite: we launched and have found traction, which is cool. But upfront regulation also took us three years to get licensed, which was uncool. Everyone knew from the beginning that things would take a while, of course.

However, instead of seeing the regulatory environment as inherently hostile, I saw it as encouragement to maintain a high quality of work and a certain level of discipline. Sometimes the regulatory requirements are basic, everyday sane things that have made me wonder: what exactly is it about those less regulated companies that they can’t meet these standards?

Beyond regulation, LedgerX has also shown it’s possible to use modern software development practices and tech to build a U.S. clearinghouse. All of this software can run on a single laptop during development. An entire test clearinghouse can be spun up or down, and migrated from one cloud computing platform to another. In the world of clearinghouses, this is a marvel.

I wish I had time to do a deep dive into technical details here. I’ll share some very quick highlights, and then wrap this up. In a previous blog post, I described some of the aspects of the LedgerX signing ritual and security around bitcoin custody. Separately, one odd problem I ran into was that docker’s build cache doesn’t actually do graph search over the set of available layers (reported here). I’d also like to point out that bitcoind RPC for the Bitcoin Core wallet acts basically like a database but the wallet RPC layer doesn’t have any transactional or atomicity guarantees. The takeaway is that one might find it more productive to build applications against the p2p layer instead of the RPC layer.

I think all of the efforts from the LedgerX team over the years- across finance, technology, and regulation- are starting to pay off. I am proud of the work I have done here, and I am happy to have been part of the team. I wish nothing but the best for the team going forward, and I expect to see great products from them in the future based on the solid foundation we have built.

Moving forward, I am in the midst of entertaining a bunch of very exciting opportunities and I hope to announce soon where I will land. Follow me on to keep in touch.


Bryan Bishop

July 2018