The top cryptocurrency companies have quietly begun to outsource their infrastructure problems to a tiny stealth startup. It's called Alchemy. Today it's making the big public reveal of its technology that could help developers finally build the killer use case atop Bitcoin or Ethereum.
If the operating system connected computers and software, and if browsers connected HTTP to web apps, Alchemy wants to be the bridge enabling the blockchain ecosystem. It's this middle layer that's produced Microsoft, Apple and Google -- some of the most valuable companies in the world.
How does Alchemy work? It replaces the nodes that businesses use to read and write blockchains with a faster, more scalable decentralized architecture. It also provides tools for analytics, monitoring, alerting, logging and debugging for cryptocurrency-connected software. The two-year-old startup already powers infrastructure for hundreds of businesses serving over one million customers in 200 countries per week, including big names like Augur, 0x, Cryptokitties, Kyber and the Opera browser.
"Right now people are trying to build skyscrapers with picks and shovels. We need to give them construction equipment," Alchemy co-founder and CEO Nikil Viswanathan tells me. "None of this exists for blockchain."
Investors are lining up to see that it will. Alchemy is now announcing that it has raised $15 million through a seed round and now a Series A led by Pantera Capital, and joined by Stanford University, Coinbase, Samsung, SignalFire, plus angels like Charles Schwab, Yahoo founder Jerry Yang, LinkedIn founder Reid Hoffman, Google chairman John Hennessy and more.
"For any new technology, developer infrastructure and tools are required to enable broader application development and adoption. We’ve seen this happen in previous tech waves like PC and the web," says Yang, who rarely does interviews. "Alchemy is trying to do the same thing for the blockchain space . . . they have the opportunity to meaningfully accelerate the entire blockchain industry."
From Down to Lunch to decentralized apps
Despite its momentum, it's immediately clear that Alchemy doesn't want to become another overhyped blockchain promise that doesn't deliver. "There are two vanity metrics in Silicon Valley," Viswanathan declares. "How much money you've raised and how many people you have on your team. In reality, you want to keep both of these as low as possible while being a big success."
Alchemy co-founders (from left): Nikil Viswanathan and Joe Lau
Viswanathan and co-founder and CTO Joe Lau already had a shot at the startup A-league. For a brief moment, their simple social app for finding out if friends could hang out via emojis, called Down to Lunch, topped the app rankings and had VCs beating down their door with term sheets. But the pair of Stanford computer science grads got knocked off the charts by a vicious rumor that their app helped kidnappers, which they call a purposeful smear campaign.
The two were resilient, though, drawing on Viswanathan's time in product management mentored by executives at Google, Microsoft and Facebook. He sat next to Mark Zuckerberg, brought Steve Ballmer to campus and had meetings with Larry and Sergey. His takeaway was that "You can have massive impact on the world. If they can do it, we can do it too."
So when cryptocurrency hit the zeitgeist in 2017, they cast aside the budding successors to Down to Lunch they'd built, and dove in head first. Through the frustration of spinning up nodes to build anything decentralized, they spotted the opportunity to start something with more potential than a college kids' social app. They saw the chance to seize the bridge layer of the next computing platform -- the blockchain.
One strategy the duo is carrying over from Down to Lunch is allowing any Alchemy customer to contact them directly. They actually put their phone numbers inside DTL to keep their ears open for problems, but soon were receiving about 10,000 text messages per day from the app's millions of users, rendering Viswanathan's iMessage inoperable. He shows me the "You're our only hope" email he Hail Mary'd to Tim Cook begging for a fix that was eventually granted.
Now, most of Alchemy's lean team -- founders included -- are openly available to customers via Telegram for instant assistance. Viswanathan justifies a CEO fielding complaints, saying "It's not just good customer support. It gives us really great user feedback." He doesn't want that to change, even with the new cash from investors, including Stanford's StartX, Mayfield, Kenetic, Dreamers and former Thompson Reuters CEO Tom Glocer.
Viswanathan and Lau are known in entrepreneur circles for embracing the thrifty ramen-fueled startup life, with Lau having once spent six straight days in the office to keep things afloat while Down to Lunch was blowing up. They still run a scrappy ship, with staffers sitting on cardboard boxes until chairs arrive for their new but still snug office.
It's not magic, it's Alchemy
"It's 1972. Who used computers? Only computer companies. By 2019, the entire world. In 1992, who used the web? Only internet companies. By 2019, the entire world. In 2019, who uses blockchain?..." Viswanathan explains.
The implication is that ubiquitous adoption is coming to transactions entwined with code, and blockchain will become so common we don't even talk about it the same way. "No one says 'I'm using an internet application,' " Viswanathan laughs.
Making the same true for blockchain is Alchemy's goal. Typically just to get started, businesses must spend tens of thousands of dollars to set up and operate nodes that can interpret and write to blockchains. It's not only slow and costly, but it sucks up a ton of engineering resources. And worse yet, node architecture may not gracefully support massive scale. Load balancing across servers, as is traditional with web applications, breaks down when nodes mistakenly return block numbers out of sync. Blockchain apps run slow and buggy, or crash completely. Programmers spend nights awake fighting fires.
Alchemy uses a whole different decentralized architecture, says Lau. This lets it separate different types of data into special data stores for much faster and more reliable access. The result is that it's easier to build apps on Bitcoin, Ethereum and other coins with fewer engineering resources. In that sense, it's not unlike an Amazon AWS for blockchain.
But Alchemy also takes inspiration from Microsoft, offering a range of tools for managing decentralized apps. These include analytics for tracking usage, monitoring of performance and availability, alerting to inform teams when things break, logging for tracing back errors and debugging for getting apps running right again. On the traditional web, this would be the work of multiple startups, but because blockchains standardize the database and how it's accessed, Alchemy can do it all and is already building more tools.
"Since using Alchemy, our team has been able to refocus its time on building new product features for Augur that we wouldn't have been able to otherwise," Augur's director of operations Tom Kysar tells me. "We used to spend a notable amount of time dealing with infrastructure issues, and now we don't worry at all." His prediction market startup writes that Alchemy resolved 98% of reliability issues and made its users' applications load 3X faster.
Crypto exchange AirSwap ditched the node system it had built and open-sourced to use Alchemy instead. Another client said it got 25% of its engineering staff back. When I looked at its top competitor in infrastructure, the Ethereum founder-backed Infura, most of the clients it lists on its site are now actually working with Alchemy. "Alchemy has grown quietly and quickly to become a leading infrastructure provider. We’re excited to see how Alchemy will push forward the crypto ecosystem," says Coinbase COO Emilie Choi.
Another heartening sign? Alchemy has already turned away acquisition interest. "For us, selling for $100 million or $1 billion isn't a success," Viswanathan says. They want to empower a generation of developers.
“I’ve been closely involved in companies that shaped the earlier internet like Google,” says Hennessy, the former president of Stanford. “What Alchemy is doing in blockchain has the potential to be similarly transformational, and Nikil and Joe have the deep technical background and proven entrepreneurial track record to make it happen.” The 30-year-old Lau tells me the advice of older tech luminaries is invaluable. "Hennessy saw the rise of computers. It's good to have people who saw things we didn't see."
"This is what spins the inovation cycle"
At my dining room table in San Francisco's Mission District, Viswanathan giddily scribbles out a grid to chart the history of developer platforms.
In the first age, IBM underestimated the market of personal computers, allowing Microsoft to swoop in with Windows that opened PCs to third-party software devs. In the second age, it was the browser and then the mobile OS that let Apple and Google conquer the middle ground between HTTP and our favorite apps. Alchemy assumes that lucrative spot in Viswanathan's vision of the blockchain-equipped third age. "This is what spins the innovation cycles and increases speed of development," he says of this infrastructure layer.
The real question, though, is one of timing. "The biggest threat is how quickly will crypto become a massive market," Viswanathan admits. He says Alchemy is already making a fair amount of money selling tools and service packages that start in the tens of thousands of dollars. But it may need its technology to jumpstart the blockchain developer flywheel by powering a breakout success serving mainstream consumers that could in turn attract more creators to the industry.
Convincing developers, especially incumbent corporations, to outsource a key part of their infrastructure to Alchemy could be tough for the engineering-focused startup. It only hired its first salesperson last week to help pitch big banks and commerce giants intrigued by blockchain's efficiencies. Crypto zealots might also balk at running their decentralized apps through a...central platform. Luckily, because Alchemy powers everything from exchanges to games to finance to integrating distributed ledgers into traditional businesses, it just needs something to win on the blockchain.
Many startups have died waiting. Why will Alchemy persevere? The founders say it's a sense of duty to pay it forward. "I just feel so lucky to live in 2019 and have technology and computers and internet. Never before in human history before the last 20 years could you build something and potentially have everyone on the planet's life improved by it," Viswanathan tells me.
"These technology shifts happen every 20 to 30 years. If this is a massive technology shift, we have a chance to build a really foundational company in the space. It's not about the money," he concludes with a bright-eyed smile. "There are so many less stressful ways than startups to make money."