The behind-the-scenes blockchain startup Alchemy, which powers 70 per cent of the applications on Ethereum, is stepping into the public eye as it opens its services to any company or developer looking for tools to build smart contract-based projects.
Founded in 2017 by Nikil Viswanathan and Joe Lau, Alchemy until now has operated in private mode where customers had to apply to use its software developer tools. Viswanathan, 32, and Lau, 31, met at Stanford University, where they both served as teaching assistants for a database class. They have since gone on to create a firm that counts as investors Duncan Niederauer, Charles Schwab, John Hennessy, Jay Z, Jerry Yang, Ruchi Sanghvi and Will Smith. The co-founders want to remove the complexity from building blockchain applications so the nascent industry can grow.
“We’re all here because we believe blockchain will be as powerful as the internet,” Viswanathan said in a telephone interview. The San Francisco-based firm counts 4 million users worldwide and says the applications that use its services see about $7.8 billion a year move through them. Still, it’s difficult to build applications from scratch, Lau said in an interview.
“Everyone wants to build skyscrapers in Ethereum, but we don’t have the tools right now,” he said. “We have picks and shovels.”
Alchemy is helping create a new type of business model known as decentralized finance, or defi, that doesn’t feature a centralized corporation that makes decisions and is in control of operations. Instead, these blockchain-based apps run according to their code that’s stored on thousands of computers across the world. Changes to that code typically have to be agreed upon and updated by the distributed users, unlike Amazon.com Inc. which can change its terms of service whenever it wants.
Ethereum makes this all possible because it allows for computer programs known as smart contracts to operate within that distributed network. Defi applications like the prediction market Augur, the non-fungible token platform OpenSea, the stablecoin and crypto loan service MakerDAO, and the digital-scarcity collectible service CryptoKitties all use Alchemy to run their operations. The company says its tools have been used to build a majority of the defi market.
“If we can make development easier then more apps will come online and crypto will grow,” Viswanathan said. The firm is considering going public in the future to help it grow, according to Viswanathan.
Another new feature of the blockchain world is that investors are afforded an opportunity to purchase stakes in companies that are laying the groundwork for the entire system. That would have been like being able to invest in the late 1970s in the TCP/IP protocol that makes the internet work.
“Blockchain technology is transformative, but complex to work with today,” Emilie Choi, chief operating officer of cryptocurrency exchange Coinbase Inc. and an Alchemy investor, said in an emailed statement. “Alchemy’s platform helps unlock the promise of blockchain by making blockchain development accessible for every developer.”
While Viswanathan and Lau have been big fans of Bitcoin since its creation in 2009, Ethereum and its programmable capabilities showed them a whole new set of possibilities. Not only does Ethereum allow for computer programs to live on a blockchain, its native cryptocurrency ether adds a digital money component to the equation that Bitcoin can’t match.
“The real moment for us was Ethereum,” Viswanathan said. “We saw that and said, ‘oh my god, that’s the future.’”