Last June, at a swanky, strobe-lit event in Washington, DC, Brendan Blumer, the 33-year-old CEO of a blockchain company called Block.one, unveiled a new product with Steve Jobs-like theatrics: a social network called Voice. A year earlier, Blumer’s company had raised $4 billion selling a crypto token called EOS. It was, by far, the largest-ever initial coin offering—more money than just about any US initial public offering that year. But unlike an IPO, it wasn’t clear what exactly participants had bought, apart from rights to a token that did not yet exist, based on a technology that didn’t exist either.
That was the story of most ICOs. But even in that high-flying, speculative world, Block.one’s approach was unique. Many groups doing ICOs funneled their funds into foundations in places like Switzerland, governed by bylaws that required the money be used to build relevant technology. But Block.one was a for-profit, Cayman Islands-based entity that, after it delivered the platform and tokens, could spend the money as it pleased. “That raised many questions in my mind,” says Jill Carlson, an investor and adviser to early ICOs. Plus, the money had been raised over the course of a year, longer than most ICOs, with no cap on how much Block.one could accumulate.
In that time, there had been plenty of globe-trotting hype by Block.one, based on promises of its software's world-changing potential. John Oliver roasted the company as emblematic of the irresponsible crypto frenzy. “You’re not investing, you’re gambling,” he said.
Shortly after the 2018 ICO, Block.one delivered what it had promised token buyers: an open-source technology platform that others could use to launch a network. EOS is now run in a “decentralized” fashion, with developer groups around the world voting on changes and keeping the network secure. EOS tokens collectively are now worth about $5 billion. But the network hasn’t spawned many interesting applications. Instead, it’s filled with spam, games, and gambling apps.
Voice was an attempt to quell the haters. The vision, Blumer tells me, is to use blockchain to tackle the well-trodden problems of social media, avoiding both the control of big tech companies and also the misinformation and trolling that a lack of control begets. It would also show how EOS could deliver on its promise to provide “the most powerful infrastructure for decentralized applications,” which rely on a network of computers owned by different people, rather than a single entity like Google. That, at least, was the pitch during the token sale: an upgrade from older blockchains like Ethereum, which are too slow for most use cases.
On both points, the jury is still out. As of Friday, Voice is in beta, and there’s a new company running it, spun out with $150 million from Block.one. It uses Block.one’s blockchain technology, but for a “private” blockchain that runs on Voice’s servers; its currency is a new “Voice” token. Blumer points out it’s only the beta, and that the company will consider decentralizing Voice in the future, perhaps making use of the EOS network. But doing so means wrangling a daunting set of technical and regulatory issues, and Blumer wouldn’t commit to specifics. “It’s going to come down to what regulators will tolerate,” he says.
“I look at something like Voice where there’s a lot of centralization, and my first question is: Can you do it without using a blockchain?” says Carlson, the investor and adviser.
Currently, Voice (the company) has one employee, Salah Zalatimo, who was previously chief digital officer at Forbes. This week, he was on the hunt for office space in Brooklyn, which he expects to fill with the types of people found at other social media companies, from engineers to content moderators. Some of those employees may come, initially, from Block.one. (Blumer says the company has already spent $150 million developing the site, including $30 million for the domain Voice.com.)
Zalatimo tells me to think of Voice like Medium, or maybe Twitter, but with a key difference: money. The goal is to use the tokens to incentivize good behavior—or as Blumer puts it, “tie economics to all of our behavior.” Users get paid in Voice tokens for watching or clicking on ads, and can use the tokens to do things like give more visibility to posts or comments. That, Zalatimo says, will help encourage people to post quality content. (The company can also intervene if necessary and take away tokens for things like violating rules and terms of service, which are still being hashed out but will emphasize “respect.”) Eventually, media companies might want to post their content on Voice and get tokens in exchange for clicks.
To use the Voice tokens, you’ll need to upload an ID to prove your identity. There are two reasons for that. One, Blumer says, is to avoid bots and misinformation by verifying everyone is a unique human. The other is regulatory. With digital money floating around the platform, Voice needs to follow know-your-customer laws. (For now, in the beta, the tokens have no value; Voice is still lobbying the Securities and Exchange Commission to give it the go ahead.) Block.one has ample experience navigating those rules. In September, the company agreed to a $24 million settlement with the SEC over its $4 billion unregistered ICO.
Blumer acknowledges that might rankle crypto diehards. Usually, the pitch behind blockchain-based social media is that it will decentralize power, giving control to users instead of a single company. But Blumer points out companies can be legally responsible for the content they host—for things like child pornography, say, but also any personal data under privacy laws like GDPR in Europe and the California Consumer Privacy Act. Under those rules, companies are required to delete personal information, which can be difficult on a decentralized blockchain network that no single entity controls.
There are challenges with building a big business on a decentralized network. “How can you go and build a regulated business when the chain can change tomorrow?” Blumer asks, pointing to changes on the Ethereum network that have angered some developers. It would be as if Facebook were being constantly broken by changes to the internet. Since launch, the public EOS network has been fraught with issues related to its decentralized governance.
For Voice, the big challenge will be attracting users, and getting its marketplace working. Despite a backlash against companies like Facebook, similar blockchain efforts have struggled. Those include Steemit, a social media site cofounded in 2016 by Dan Larimer, who is Block.one’s CTO, and Civil, which sought to fund news outlets through tokens. In 2018, Steemit laid off 70 percent of its staff; Civil shut down, but has attempted a reboot. Requirements like uploading your ID to join don’t help attract users, but Blumer thinks the promise of payment will.
The rationale for blockchain, according to Blumer, is transparency. Although Voice will control the network, he says anyone will be free to inspect the blockchain database and see whatever data they’d like: where ads were targeted, who purchased them, a record of every like and comment. Yes, Voice could change the rules or rewrite the data. But Blumer argues by keeping it open, the public will be able to hold it accountable.
It remains to be seen how that will work in practice. Eventually, Blumer notes, the company might rely on a decentralized, public chain in some fashion—perhaps to store some of the social network’s data, if not all of it. The company is also developing an identity system that would act as a bridge between the Voice blockchain and others. Blumer says Block.one will continue working on that effort after the Voice spin out.
Boram Kim, a software developer in Seoul who is part of a group that runs the EOS network, says he understands why Voice isn’t decentralizing yet—the EOS network is clogged, currently, with spam, and it’s good to test on a private network. But he hopes it migrates eventually. “We hope that this will be a killer [decentralized app] that everybody wants to use on the EOS mainnet,” he says.
Block.one has plenty of runway to keep at it. Of the $4 billion haul, the company has said it will delegate $1 billion to venture capital firms that plan to invest in products related to EOS. As for the rest? The company will continue improving the underlying protocol, Blumer says, and plans to expand its efforts in private blockchains for businesses, which have been dominated by Ethereum thus far.
In the end, the answer is really up to Block.one and its investors—the ones with actual equity, not just tokens, including Peter Thiel and Bitmain cofounder Jihan Wu. Blumer points out that Block.one had built its protocol before the token sale. The ICO “was our way of monetizing our product,” he says. Then, the company was free to use its billions to “build the business it wants to build.” With a blockchain-based social media venture, that’s what he’s doing.
Updated, 2-14-20, 1:55pm ET: An earlier version of this article quoted Brendan Blumer saying Block.one executives "haven't discussed" whether the $150 million investment in Voice.com would come from the $1 billion delegated to venture capital firms. After publication of this article, a Block.one spokesperson said the Voice investment would not come from the venture capital funds.