An approximate introduction to how zk-SNARKs are possible (part 2)
If tasked with the problem of coming up with a zk-SNARK protocol, many people would make their way to this point and then get stuck and give up. How can a verifier possibly check every single piece of the computation, without looking at each piece of the computation individually? But it turns out that there is a clever solution.
Polynomials
Polynomials are a special class of algebraic expressions of the form:
- x+5
- x^4
- x^3+3x^2+3x+1
- 628x^{271}+318x^{270}+530x^{269}+…+69x+381
i.e. they are a sum of any (finite!) number of terms of the form cx^k
There are many things that are fascinating about polynomials. But here we are going to zoom in on a particular one: polynomials are a single mathematical object that can contain an unbounded amount of information (think of them as a list of integers and this is obvious). The fourth example above contained 816 digits of tau, and one can easily imagine a polynomial that contains far more.
Furthermore, a single equation between polynomials can represent an unbounded number of equations between numbers. For example, consider the equation A(x)+ B(x) = C(x). If this equation is true, then it's also true that:
- A(0)+B(0)=C(0)
- A(1)+B(1)=C(1)
- A(2)+B(2)=C(2)
- A(3)+B(3)=C(3)
And so on for every possible coordinate. You can even construct polynomials to deliberately represent sets of numbers so you can check many equations all at once. For example, suppose that you wanted to check:
- 12+1=13
- 10+8=18
- 15+8=23
- 15+13=28
You can use a procedure called Lagrange interpolation to construct polynomials A(x) that give (12,10,15,15) as outputs at some specific set of coordinates (eg. (0,1,2,3)), B(x) the outputs (1,8,8,13) on thos same coordinates, and so forth. In fact, here are the polynomials:
- A(x)=-2x^3+\frac{19}{2}x^2-\frac{19}{2}x+12
- B(x)=2x^3-\frac{19}{2}x^2+\frac{29}{2}x+1
- C(x)=5x+13
Checking the equation A(x)+B(x)=C(x) with these polynomials checks all four above equations at the same time.
Comparing a polynomial to itself
You can even check relationships between a large number of adjacent evaluations of the same polynomial using a simple polynomial equation. This is slightly more advanced. Suppose that you want to check that, for a given polynomial F, F(x+2)=F(x)+F(x+1) with the integer range {0,1…89} (so if you also check F(0)=F(1)=1, then F(100) would be the 100th Fibonacci number)
As polynomials, F(x+2)-F(x+1)-F(x) would not be exactly zero, as it could give arbitrary answers outside the range x={0,1…98}. But we can do something clever. In general, there is a rule that if a polynomial P is zero across some set S=\{x_1,x_2…x_n\} then it can be expressed as P(x)=Z(x)*H(x), where Z(x)=(x-x_1)*(x-x_2)*…*(x-x_n) and H(x) is also a polynomial. In other words, any polynomial that equals zero across some set is a (polynomial) multiple of the simplest (lowest-degree) polynomial that equals zero across that same set.
Why is this the case? It is a nice corollary of polynomial long division: the factor theorem. We know that, when dividing P(x) by Z(x), we will get a quotient Q(x) and a remainder R(x) is strictly less than that of Z(x). Since we know that P is zero on all of S, it means that R has to be zero on all of S as well. So we can simply compute R(x) via polynomial interpolation, since it's a polynomial of degree at most n-1 and we know n values (the zeros at S). Interpolating a polynomial with all zeroes gives the zero polynomial, thus R(x)=0 and H(x)=Q(x).
Going back to our example, if we have a polynomial F that encodes Fibonacci numbers (so F(x+2)=F(x)+F(x+1) across x=\{0,1…98\}), then I can convince you that F actually satisfies this condition by proving that the polynomial P(x)=F(x+2)-F(x+1)-F(x) is zero over that range, by giving you the quotient:
H(x)=\frac{F(x+2)-F(x+1)-F(x)}{Z(x)}
Where Z(x) = (x-0)*(x-1)*…*(x-98).
You can calculate Z(x) yourself (ideally you would have it precomputed), check the equation, and if the check passes then F(x) satisfies the condition!
Now, step back and notice what we did here. We converted a 100-step-long computation into a single equation with polynomials. Of course, proving the N'th Fibonacci number is not an especially useful task, especially since Fibonacci numbers have a closed form. But you can use exactly the same basic technique, just with some extra polynomials and some more complicated equations, to encode arbitrary computations with an arbitrarily large number of steps.
see part 3
(Edited)
Hackernoon
4 years ago
👏 Awesome post! When is part 3 coming?
Trent Lapinski
4 years ago
Very complex topic, great explanation
More on Web3 & Crypto
Jayden Levitt
3 years ago
The country of El Salvador's Bitcoin-obsessed president lost $61.6 million.
It’s only a loss if you sell, right?
Nayib Bukele proclaimed himself “the world’s coolest dictator”.
His jokes aren't clear.
El Salvador's 43rd president self-proclaimed “CEO of El Salvador” couldn't be less presidential.
His thin jeans, aviator sunglasses, and baseball caps like a cartel lord.
He's popular, though.
Bukele won 53% of the vote by fighting violent crime and opposition party corruption.
El Salvador's 6.4 million inhabitants are riding the cryptocurrency volatility wave.
They were powerless.
Their autocratic leader, a former Yamaha Motors salesperson and Bitcoin believer, wants to help 70% unbanked locals.
He intended to give the citizens a way to save money and cut the country's $200 million remittance cost.
Transfer and deposit costs.
This makes logical sense when the president’s theatrics don’t blind you.
El Salvador's Bukele revealed plans to make bitcoin legal tender.
Remittances total $5.9 billion (23%) of the country's expenses.
Anything that reduces costs could boost the economy.
The country’s unbanked population is staggering. Here’s the data by % of people who either have a bank account (Blue) or a mobile money account (Black).
According to Bukele, 46% of the population has downloaded the Chivo Bitcoin Wallet.
In 2021, 36% of El Salvadorans had bank accounts.
Large rural countries like Kenya seem to have resolved their unbanked dilemma.
An economy surfaced where village locals would sell, trade and store network minutes and data as a store of value.
Kenyan phone networks realized unbanked people needed a safe way to accumulate wealth and have an emergency fund.
96% of Kenyans utilize M-PESA, which doesn't require a bank account.
The software involves human agents who hang out with cash and a phone.
These people are like ATMs.
You offer them cash to deposit money in your mobile money account or withdraw cash.
In a country with a faulty banking system, cash availability and a safe place to deposit it are important.
William Jack and Tavneet Suri found that M-PESA brought 194,000 Kenyan households out of poverty by making transactions cheaper and creating a safe store of value.
Mobile money, a service that allows monetary value to be stored on a mobile phone and sent to other users via text messages, has been adopted by most Kenyan households. We estimate that access to the Kenyan mobile money system M-PESA increased per capita consumption levels and lifted 194,000 households, or 2% of Kenyan households, out of poverty.
The impacts, which are more pronounced for female-headed households, appear to be driven by changes in financial behaviour — in particular, increased financial resilience and saving. Mobile money has therefore increased the efficiency of the allocation of consumption over time while allowing a more efficient allocation of labour, resulting in a meaningful reduction of poverty in Kenya.
Currently, El Salvador has 2,301 Bitcoin.
At publication, it's worth $44 million. That remains 41% of Bukele's original $105.6 million.
Unknown if the country has sold Bitcoin, but Bukeles keeps purchasing the dip.
It's still falling.
This might be a fantastic move for the impoverished country over the next five years, if they can live economically till Bitcoin's price recovers.
The evidence demonstrates that a store of value pulls individuals out of poverty, but others say Bitcoin is premature.
You may regard it as an aggressive endeavor to front run the next wave of adoption, offering El Salvador a financial upside.
William Brucee
3 years ago
This person is probably Satoshi Nakamoto.
Who founded bitcoin is the biggest mystery in technology today, not how it works.
On October 31, 2008, Satoshi Nakamoto posted a whitepaper to a cryptography email list. Still confused by the mastermind who changed monetary history.
Journalists and bloggers have tried in vain to uncover bitcoin's creator. Some candidates self-nominated. We're still looking for the mystery's perpetrator because none of them have provided proof.
One person. I'm confident he invented bitcoin. Let's assess Satoshi Nakamoto before I reveal my pick. Or what he wants us to know.
Satoshi's P2P Foundation biography says he was born in 1975. He doesn't sound or look Japanese. First, he wrote the whitepaper and subsequent articles in flawless English. His sleeping habits are unusual for a Japanese person.
Stefan Thomas, a Bitcoin Forum member, displayed Satoshi's posting timestamps. Satoshi Nakamoto didn't publish between 2 and 8 p.m., Japanese time. Satoshi's identity may not be real.
Why would he disguise himself?
There is a legitimate explanation for this
Phil Zimmermann created PGP to give dissidents an open channel of communication, like Pretty Good Privacy. US government seized this technology after realizing its potential. Police investigate PGP and Zimmermann.
This technology let only two people speak privately. Bitcoin technology makes it possible to send money for free without a bank or other intermediary, removing it from government control.
How much do we know about the person who invented bitcoin?
Here's what we know about Satoshi Nakamoto now that I've covered my doubts about his personality.
Satoshi Nakamoto first appeared with a whitepaper on metzdowd.com. On Halloween 2008, he presented a nine-page paper on a new peer-to-peer electronic monetary system.
Using the nickname satoshi, he created the bitcointalk forum. He kept developing bitcoin and created bitcoin.org. Satoshi mined the genesis block on January 3, 2009.
Satoshi Nakamoto worked with programmers in 2010 to change bitcoin's protocol. He engaged with the bitcoin community. Then he gave Gavin Andresen the keys and codes and transferred community domains. By 2010, he'd abandoned the project.
The bitcoin creator posted his goodbye on April 23, 2011. Mike Hearn asked Satoshi if he planned to rejoin the group.
“I’ve moved on to other things. It’s in good hands with Gavin and everyone.”
Nakamoto Satoshi
The man who broke the banking system vanished. Why?
Satoshi's wallets held 1,000,000 BTC. In December 2017, when the price peaked, he had over US$19 billion. Nakamoto had the 44th-highest net worth then. He's never cashed a bitcoin.
This data suggests something happened to bitcoin's creator. I think Hal Finney is Satoshi Nakamoto .
Hal Finney had ALS and died in 2014. I suppose he created the future of money, then he died, leaving us with only rumors about his identity.
Hal Finney, who was he?
Hal Finney graduated from Caltech in 1979. Student peers voted him the smartest. He took a doctoral-level gravitational field theory course as a freshman. Finney's intelligence meets the first requirement for becoming Satoshi Nakamoto.
Students remember Finney holding an Ayn Rand book. If he'd read this, he may have developed libertarian views.
His beliefs led him to a small group of freethinking programmers. In the 1990s, he joined Cypherpunks. This action promoted the use of strong cryptography and privacy-enhancing technologies for social and political change. Finney helped them achieve a crypto-anarchist perspective as self-proclaimed privacy defenders.
Zimmermann knew Finney well.
Hal replied to a Cypherpunk message about Phil Zimmermann and PGP. He contacted Phil and became PGP Corporation's first member, retiring in 2011. Satoshi Nakamoto quit bitcoin in 2011.
Finney improved the new PGP protocol, but he had to do so secretly. He knew about Phil's PGP issues. I understand why he wanted to hide his identity while creating bitcoin.
Why did he pretend to be from Japan?
His envisioned persona was spot-on. He resided near scientist Dorian Prentice Satoshi Nakamoto. Finney could've assumed Nakamoto's identity to hide his. Temple City has 36,000 people, so what are the chances they both lived there? A cryptographic genius with the same name as Bitcoin's creator: coincidence?
Things went differently, I think.
I think Hal Finney sent himself Satoshis messages. I know it's odd. If you want to conceal your involvement, do as follows. He faked messages and transferred the first bitcoins to himself to test the transaction mechanism, so he never returned their money.
Hal Finney created the first reusable proof-of-work system. The bitcoin protocol. In the 1990s, Finney was intrigued by digital money. He invented CRypto cASH in 1993.
Legacy
Hal Finney's contributions should not be forgotten. Even if I'm wrong and he's not Satoshi Nakamoto, we shouldn't forget his bitcoin contribution. He helped us achieve a better future.
Sam Hickmann
3 years ago
Token taxonomy: Utility vs Security vs NFT
Let's examine the differences between the three main token types and their functions.
As Ethereum grew, the term "token" became a catch-all term for all assets built on the Ethereum blockchain. However, different tokens were grouped based on their applications and features, causing some confusion. Let's examine the modification of three main token types: security, utility, and non-fungible.
Utility tokens
They provide a specific utility benefit (or a number of such). A utility token is similar to a casino chip, a table game ticket, or a voucher. Depending on the terms of issuing, they can be earned and used in various ways. A utility token is a type of token that represents a tool or mechanism required to use the application in question. Like a service, a utility token's price is determined by supply and demand. Tokens can also be used as a bonus or reward mechanism in decentralized systems: for example, if you like someone's work, give them an upvote and they get a certain number of tokens. This is a way for authors or creators to earn money indirectly.
The most common way to use a utility token is to pay with them instead of cash for discounted goods or services.
Utility tokens are the most widely used by blockchain companies. Most cryptocurrency exchanges accept fees in native utility tokens.
Utility tokens can also be used as a reward. Companies tokenize their loyalty programs so that points can be bought and sold on blockchain exchanges. These tokens are widely used in decentralized companies as a bonus system. You can use utility tokens to reward creators for their contributions to a platform, for example. It also allows members to exchange tokens for specific bonuses and rewards on your site.
Unlike security tokens, which are subject to legal restrictions, utility tokens can be freely traded.
Security tokens
Security tokens are essentially traditional securities like shares, bonds, and investment fund units in a crypto token form.
The key distinction is that security tokens are typically issued by private firms (rather than public companies) that are not listed on stock exchanges and in which you can not invest right now. Banks and large venture funds used to be the only sources of funding. A person could only invest in private firms if they had millions of dollars in their bank account. Privately issued security tokens outperform traditional public stocks in terms of yield. Private markets grew 50% faster than public markets over the last decade, according to McKinsey Private Equity Research.
A security token is a crypto token whose value is derived from an external asset or company. So it is governed as security (read about the Howey test further in this article). That is, an ownership token derives its value from the company's valuation, assets on the balance sheet, or dividends paid to token holders.
Why are Security Tokens Important?
Cryptocurrency is a lucrative investment. Choosing from thousands of crypto assets can mean the difference between millionaire and bankrupt. Without security tokens, crypto investing becomes riskier and generating long-term profits becomes difficult. These tokens have lower risk than other cryptocurrencies because they are backed by real assets or business cash flows. So having them helps to diversify a portfolio and preserve the return on investment in riskier assets.
Security tokens open up new funding avenues for businesses. As a result, investors can invest in high-profit businesses that are not listed on the stock exchange.
The distinction between utility and security tokens isn't as clear as it seems. However, this increases the risk for token issuers, especially in the USA. The Howey test is the main pillar regulating judicial precedent in this area.
What is a Howey Test?
An "investment contract" is determined by the Howey Test, a lawsuit settled by the US Supreme Court. If it does, it's a security and must be disclosed and registered under the Securities Act of 1933 and the Securities Exchange Act of 1934.
If the SEC decides that a cryptocurrency token is a security, a slew of issues arise. In practice, this ensures that the SEC will decide when a token can be offered to US investors and if the project is required to file a registration statement with the SEC.
Due to the Howey test's extensive wording, most utility tokens will be classified as securities, even if not intended to be. Because of these restrictions, most ICOs are not available to US investors. When asked about ICOs in 2018, then-SEC Chairman Jay Clayton said they were securities. The given statement adds to the risk. If a company issues utility tokens without registering them as securities, the regulator may impose huge fines or even criminal charges.
What other documents regulate tokens?
Securities Act (1993) or Securities Exchange Act (1934) in the USA; MiFID directive and Prospectus Regulation in the EU. These laws require registering the placement of security tokens, limiting their transfer, but protecting investors.
Utility tokens have much less regulation. The Howey test determines whether a given utility token is a security. Tokens recognized as securities are now regulated as such. Having a legal opinion that your token isn't makes the implementation process much easier. Most countries don't have strict regulations regarding utility tokens except KYC (Know Your Client) and AML (Anti Money-Laundering).
As cryptocurrency and blockchain technologies evolve, more countries create UT regulations. If your company is based in the US, be aware of the Howey test and the Bank Secrecy Act. It classifies UTs and their issuance as money transmission services in most states, necessitating a license and strict regulations. Due to high regulatory demands, UT issuers try to avoid the United States as a whole. A new law separating utility tokens from bank secrecy act will be introduced in the near future, giving hope to American issuers.
The rest of the world has much simpler rules requiring issuers to create basic investor disclosures. For example, the latest European legislation (MiCA) allows businesses to issue utility tokens without regulator approval. They must also prepare a paper with all the necessary information for the investors.
A payment token is a utility token that is used to make a payment. They may be subject to electronic money laws.
Because non-fungible tokens are a new instrument, there is no regulating paper yet. However, if the NFT is fractionalized, the smaller tokens acquired may be seen as securities.
NFT Tokens
Collectible tokens are also known as non-fungible tokens. Their distinctive feature is that they denote unique items such as artwork, merch, or ranks. Unlike utility tokens, which are fungible, meaning that two of the same tokens are identical, NFTs represent a unit of possession that is strictly one of a kind. In a way, NFTs are like baseball cards, each one unique and valuable.
As for today, the most recognizable NFT function is to preserve the fact of possession. Owning an NFT with a particular gif, meme, or sketch does not transfer the intellectual right to the possessor, but is analogous to owning an original painting signed by the author.
Collectible tokens can also be used as digital souvenirs, so to say. Businesses can improve their brand image by issuing their own branded NFTs, which represent ranks or achievements within the corporate ecosystem. Gamifying business ecosystems would allow people to connect with a brand and feel part of a community.
Which type of tokens is right for you as a business to raise capital?
For most businesses, it's best to raise capital with security tokens by selling existing shares to global investors. Utility tokens aren't meant to increase in value over time, so leave them for gamification and community engagement. In a blockchain-based business, however, a utility token is often the lifeblood of the operation, and its appreciation potential is directly linked to the company's growth. You can issue multiple tokens at once, rather than just one type. It exposes you to various investors and maximizes the use of digital assets.
Which tokens should I buy?
There are no universally best tokens. Their volatility, industry, and risk-reward profile vary. This means evaluating tokens in relation to your overall portfolio and personal preferences: what industries do you understand best, what excites you, how do you approach taxes, and what is your planning horizon? To build a balanced portfolio, you need to know these factors.
Conclusion
The three most common types of tokens today are security, utility, and NFT. Security tokens represent stocks, mutual funds, and bonds. Utility tokens can be perceived as an inside-product "currency" or "ignition key" that grants you access to goods and services or empowers with other perks. NFTs are unique collectible units that identify you as the owner of something.
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The Velocipede
2 years ago
Stolen wallet
How a misplaced item may change your outlook
Losing your wallet means life stops. Money vanishes. No credit. Your identity is unverifiable. As you check your pockets for the missing object, you can't drive. You can't borrow a library book.
Last seen? intuitively. Every kid asks this, including yours. However, you know where you lost it: On the Providence River cycling trail. While pedaling vigorously, the wallet dropped out of your back pocket and onto the pavement.
A woman you know—your son's art teacher—says it will be returned. Faith.
You want that faith. Losing a wallet is all-consuming. You must presume it has been stolen and is being used to buy every diamond and non-fungible token on the market. Your identity may have been used to open bank accounts and fake passports. Because he used your license address, a ski mask-wearing man may be driving slowly past your house.
As you delete yourself by canceling cards, these images run through your head. You wait in limbo for replacements. Digital text on the DMV website promises your new license will come within 60 days and be approved by local and state law enforcement. In the following two months, your only defense is a screenshot.
Your wallet was ordinary. A worn, overstuffed leather rectangle. You understand how tenuous your existence has always been since you've never lost a wallet. You barely breathe without your documents.
Ironically, you wore a wallet-belt chain. You adored being a 1993 slacker for 15 years. Your wife just convinced you last year that your office job wasn't professional. You nodded and hid the chain.
Never lost your wallet. Until now.
Angry. Feeling stupid. How could you drop something vital? Why? Is the world cruel? No more dumb luck. You're always one pedal-stroke from death.
Then you get a call: We have your wallet.
Local post office, not cops.
The clerk said someone returned it. Due to trying to identify you, it's a chaos. It has your cards but no cash.
Your automobile screeches down the highway. You yell at the windshield, amazed. Submitted. Art teacher was right. Have some trust.
You thank the postmaster. You ramble through the story. The clerk doesn't know the customer, simply a neighborhood Good Samaritan. You wish you could thank that person for lifting your spirits.
You get home, beaming with gratitude. You thumb through your wallet, amazed that it’s all intact. Then you dig out your chain and reattach it.
Because even faith could use a little help.
Sanjay Priyadarshi
2 years ago
Using Ruby code, a programmer created a $48,000,000,000 product that Elon Musk admired.
Unexpected Success
Shopify CEO and co-founder Tobias Lutke. Shopify is worth $48 billion.
World-renowned entrepreneur Tobi
Tobi never expected his first online snowboard business to become a multimillion-dollar software corporation.
Tobi founded Shopify to establish a 20-person company.
The publicly traded corporation employs over 10,000 people.
Here's Tobi Lutke's incredible story.
Elon Musk tweeted his admiration for the Shopify creator.
30-October-2019.
Musk praised Shopify founder Tobi Lutke on Twitter.
Happened:
Explore this programmer's journey.
What difficulties did Tobi experience as a young child?
Germany raised Tobi.
Tobi's parents realized he was smart but had trouble learning as a toddler.
Tobi was learning disabled.
Tobi struggled with school tests.
Tobi's learning impairments were undiagnosed.
Tobi struggled to read as a dyslexic.
Tobi also found school boring.
Germany's curriculum didn't inspire Tobi's curiosity.
“The curriculum in Germany was taught like here are all the solutions you might find useful later in life, spending very little time talking about the problem…If I don’t understand the problem I’m trying to solve, it’s very hard for me to learn about a solution to a problem.”
Studying computer programming
After tenth grade, Tobi decided school wasn't for him and joined a German apprenticeship program.
This curriculum taught Tobi software engineering.
He was an apprentice in a small Siemens subsidiary team.
Tobi worked with rebellious Siemens employees.
Team members impressed Tobi.
Tobi joined the team for this reason.
Tobi was pleased to get paid to write programming all day.
His life could not have been better.
Devoted to snowboarding
Tobi loved snowboarding.
He drove 5 hours to ski at his folks' house.
His friends traveled to the US to snowboard when he was older.
However, the cheap dollar conversion rate led them to Canada.
2000.
Tobi originally decided to snowboard instead than ski.
Snowboarding captivated him in Canada.
On the trip to Canada, Tobi encounters his wife.
Tobi meets his wife Fiona McKean on his first Canadian ski trip.
They maintained in touch after the trip.
Fiona moved to Germany after graduating.
Tobi was a startup coder.
Fiona found work in Germany.
Her work included editing, writing, and academics.
“We lived together for 10 months and then she told me that she need to go back for the master's program.”
With Fiona, Tobi immigrated to Canada.
Fiona invites Tobi.
Tobi agreed to move to Canada.
Programming helped Tobi move in with his girlfriend.
Tobi was an excellent programmer, therefore what he did in Germany could be done anywhere.
He worked remotely for his German employer in Canada.
Tobi struggled with remote work.
Due to poor communication.
No slack, so he used email.
Programmers had trouble emailing.
Tobi's startup was developing a browser.
After the dot-com crash, individuals left that startup.
It ended.
Tobi didn't intend to work for any major corporations.
Tobi left his startup.
He believed he had important skills for any huge corporation.
He refused to join a huge corporation.
Because of Siemens.
Tobi learned to write professional code and about himself while working at Siemens in Germany.
Siemens culture was odd.
Employees were distrustful.
Siemens' rigorous dress code implies that the corporation doesn't trust employees' attire.
It wasn't Tobi's place.
“There was so much bad with it that it just felt wrong…20-year-old Tobi would not have a career there.”
Focused only on snowboarding
Tobi lived in Ottawa with his girlfriend.
Canada is frigid in winter.
Ottawa's winters last.
Almost half a year.
Tobi wanted to do something worthwhile now.
So he snowboarded.
Tobi began snowboarding seriously.
He sought every snowboarding knowledge.
He researched the greatest snowboarding gear first.
He created big spreadsheets for snowboard-making technologies.
Tobi grew interested in selling snowboards while researching.
He intended to sell snowboards online.
He had no choice but to start his own company.
A small local company offered Tobi a job.
Interested.
He must sign papers to join the local company.
He needed a work permit when he signed the documents.
Tobi had no work permit.
He was allowed to stay in Canada while applying for permanent residency.
“I wasn’t illegal in the country, but my state didn’t give me a work permit. I talked to a lawyer and he told me it’s going to take a while until I get a permanent residency.”
Tobi's lawyer told him he cannot get a work visa without permanent residence.
His lawyer said something else intriguing.
Tobis lawyer advised him to start a business.
Tobi declined this local company's job offer because of this.
Tobi considered opening an internet store with his technical skills.
He sold snowboards online.
“I was thinking of setting up an online store software because I figured that would exist and use it as a way to sell snowboards…make money while snowboarding and hopefully have a good life.”
What brought Tobi and his co-founder together, and how did he support Tobi?
Tobi lived with his girlfriend's parents.
In Ottawa, Tobi encounters Scott Lake.
Scott was Tobis girlfriend's family friend and worked for Tobi's future employer.
Scott and Tobi snowboarded.
Tobi pitched Scott his snowboard sales software idea.
Scott liked the idea.
They planned a business together.
“I was looking after the technology and Scott was dealing with the business side…It was Scott who ended up developing relationships with vendors and doing all the business set-up.”
Issues they ran into when attempting to launch their business online
Neither could afford a long-term lease.
That prompted their online business idea.
They would open a store.
Tobi anticipated opening an internet store in a week.
Tobi seeks open-source software.
Most existing software was pricey.
Tobi and Scott couldn't afford pricey software.
“In 2004, I was sitting in front of my computer absolutely stunned realising that we hadn’t figured out how to create software for online stores.”
They required software to:
to upload snowboard images to the website.
people to look up the types of snowboards that were offered on the website. There must be a search feature in the software.
Online users transmit payments, and the merchant must receive them.
notifying vendors of the recently received order.
No online selling software existed at the time.
Online credit card payments were difficult.
How did they advance the software while keeping expenses down?
Tobi and Scott needed money to start selling snowboards.
Tobi and Scott funded their firm with savings.
“We both put money into the company…I think the capital we had was around CAD 20,000(Canadian Dollars).”
Despite investing their savings.
They minimized costs.
They tried to conserve.
No office rental.
They worked in several coffee shops.
Tobi lived rent-free at his girlfriend's parents.
He installed software in coffee cafes.
How were the software issues handled?
Tobi found no online snowboard sales software.
Two choices remained:
Change your mind and try something else.
Use his programming expertise to produce something that will aid in the expansion of this company.
Tobi knew he was the sole programmer working on such a project from the start.
“I had this realisation that I’m going to be the only programmer who has ever worked on this, so I don’t have to choose something that lots of people know. I can choose just the best tool for the job…There is been this programming language called Ruby which I just absolutely loved ”
Ruby was open-source and only had Japanese documentation.
Latin is the source code.
Tobi used Ruby twice.
He assumed he could pick the tool this time.
Why not build with Ruby?
How did they find their first time operating a business?
Tobi writes applications in Ruby.
He wrote the initial software version in 2.5 months.
Tobi and Scott founded Snowdevil to sell snowboards.
Tobi coded for 16 hours a day.
His lifestyle was unhealthy.
He enjoyed pizza and coke.
“I would never recommend this to anyone, but at the time there was nothing more interesting to me in the world.”
Their initial purchase and encounter with it
Tobi worked in cafes then.
“I was working in a coffee shop at this time and I remember everything about that day…At some time, while I was writing the software, I had to type the email that the software would send to tell me about the order.”
Tobi recalls everything.
He checked the order on his laptop at the coffee shop.
Pennsylvanian ordered snowboard.
Tobi walked home and called Scott. Tobi told Scott their first order.
They loved the order.
How were people made aware about Snowdevil?
2004 was very different.
Tobi and Scott attempted simple website advertising.
Google AdWords was new.
Ad clicks cost 20 cents.
Online snowboard stores were scarce at the time.
Google ads propelled the snowdevil brand.
Snowdevil prospered.
They swiftly recouped their original investment in the snowboard business because to its high profit margin.
Tobi and Scott struggled with inventories.
“Snowboards had really good profit margins…Our biggest problem was keeping inventory and getting it back…We were out of stock all the time.”
Selling snowboards returned their investment and saved them money.
They did not appoint a business manager.
They accomplished everything alone.
Sales dipped in the spring, but something magical happened.
Spring sales plummeted.
They considered stocking different boards.
They naturally wanted to add boards and grow the business.
However, magic occurred.
Tobi coded and improved software while running Snowdevil.
He modified software constantly. He wanted speedier software.
He experimented to make the software more resilient.
Tobi received emails requesting the Snowdevil license.
They intended to create something similar.
“I didn’t stop programming, I was just like Ok now let me try things, let me make it faster and try different approaches…Increasingly I got people sending me emails and asking me If I would like to licence snowdevil to them. People wanted to start something similar.”
Software or skateboards, your choice
Scott and Tobi had to choose a hobby in 2005.
They might sell alternative boards or use software.
The software was a no-brainer from demand.
Daniel Weinand is invited to join Tobi's business.
Tobis German best friend is Daniel.
Tobi and Scott chose to use the software.
Tobi and Scott kept the software service.
Tobi called Daniel to invite him to Canada to collaborate.
Scott and Tobi had quit snowboarding until then.
How was Shopify launched, and whence did the name come from?
The three chose Shopify.
Named from two words.
First:
Shop
Final part:
Simplify
Shopify
Shopify's crew has always had one goal:
creating software that would make it simple and easy for people to launch online storefronts.
Launched Shopify after raising money for the first time.
Shopify began fundraising in 2005.
First, they borrowed from family and friends.
They needed roughly $200k to run the company efficiently.
$200k was a lot then.
When questioned why they require so much money. Tobi told them to trust him with their goals. The team raised seed money from family and friends.
Shopify.com has a landing page. A demo of their goal was on the landing page.
In 2006, Shopify had about 4,000 emails.
Shopify rented an Ottawa office.
“We sent a blast of emails…Some people signed up just to try it out, which was exciting.”
How things developed after Scott left the company
Shopify co-founder Scott Lake left in 2008.
Scott was CEO.
“He(Scott) realized at some point that where the software industry was going, most of the people who were the CEOs were actually the highly technical person on the founding team.”
Scott leaving the company worried Tobi.
Tobis worried about finding a new CEO.
To Tobi:
A great VC will have the network to identify the perfect CEO for your firm.
Tobi started visiting Silicon Valley to meet with venture capitalists to recruit a CEO.
Initially visiting Silicon Valley
Tobi came to Silicon Valley to start a 20-person company.
This company creates eCommerce store software.
Tobi never wanted a big corporation. He desired a fulfilling existence.
“I stayed in a hostel in the Bay Area. I had one roommate who was also a computer programmer. I bought a bicycle on Craiglist. I was there for a week, but ended up staying two and a half weeks.”
Tobi arrived unprepared.
When venture capitalists asked him business questions.
He answered few queries.
Tobi didn't comprehend VC meetings' terminology.
He wrote the terms down and looked them up.
Some were fascinated after he couldn't answer all these queries.
“I ended up getting the kind of term sheets people dream about…All the offers were conditional on moving our company to Silicon Valley.”
Canada received Tobi.
He wanted to consult his team before deciding. Shopify had five employees at the time.
2008.
A global recession greeted Tobi in Canada. The recession hurt the market.
His term sheets were useless.
The economic downturn in the world provided Shopify with a fantastic opportunity.
The global recession caused significant job losses.
Fired employees had several ideas.
They wanted online stores.
Entrepreneurship was desired. They wanted to quit work.
People took risks and tried new things during the global slump.
Shopify subscribers skyrocketed during the recession.
“In 2009, the company reached neutral cash flow for the first time…We were in a position to think about long-term investments, such as infrastructure projects.”
Then, Tobi Lutke became CEO.
How did Tobi perform as the company's CEO?
“I wasn’t good. My team was very patient with me, but I had a lot to learn…It’s a very subtle job.”
2009–2010.
Tobi limited the company's potential.
He deliberately restrained company growth.
Tobi had one costly problem:
Whether Shopify is a venture or a lifestyle business.
The company's annual revenue approached $1 million.
Tobi battled with the firm and himself despite good revenue.
His wife was supportive, but the responsibility was crushing him.
“It’s a crushing responsibility…People had families and kids…I just couldn’t believe what was going on…My father-in-law gave me money to cover the payroll and it was his life-saving.”
Throughout this trip, everyone supported Tobi.
They believed it.
$7 million in donations received
Tobi couldn't decide if this was a lifestyle or a business.
Shopify struggled with marketing then.
Later, Tobi tried 5 marketing methods.
He told himself that if any marketing method greatly increased their growth, he would call it a venture, otherwise a lifestyle.
The Shopify crew brainstormed and voted on marketing concepts.
Tested.
“Every single idea worked…We did Adwords, published a book on the concept, sponsored a podcast and all the ones we tracked worked.”
To Silicon Valley once more
Shopify marketing concepts worked once.
Tobi returned to Silicon Valley to pitch investors.
He raised $7 million, valuing Shopify at $25 million.
All investors had board seats.
“I find it very helpful…I always had a fantastic relationship with everyone who’s invested in my company…I told them straight that I am not going to pretend I know things, I want you to help me.”
Tobi developed skills via running Shopify.
Shopify had 20 employees.
Leaving his wife's parents' home
Tobi left his wife's parents in 2014.
Tobi had a child.
Shopify has 80,000 customers and 300 staff in 2013.
Public offering in 2015
Shopify investors went public in 2015.
Shopify powers 4.1 million e-Commerce sites.
Shopify stores are 65% US-based.
It is currently valued at $48 billion.
Tim Denning
3 years ago
In this recession, according to Mark Cuban, you need to outwork everyone
Here’s why that’s baloney
Mark Cuban popularized entrepreneurship.
Shark Tank (which made Mark famous) made starting a business glamorous to attract more entrepreneurs. First off
This isn't an anti-billionaire rant.
Mark Cuban has done excellent. He's a smart, principled businessman. I enjoy his Web3 work. But Mark's work and productivity theories are absurd.
You don't need to outwork everyone in this recession to live well.
You won't be able to outwork me.
Yuck! Mark's words made me gag.
Why do boys think working is a football game where the winner wins a Super Bowl trophy? To outwork you.
Hard work doesn't equal intelligence.
Highly clever professionals spend 4 hours a day in a flow state, then go home to relax with family.
If you don't put forth the effort, someone else will.
- Mark.
He'll burn out. He's delusional and doesn't understand productivity. Boredom or disconnection spark our best thoughts.
TikTok outlaws boredom.
In a spare minute, we check our phones because we can't stand stillness.
All this work p*rn makes things worse. When is it okay to feel again? Because I can’t feel anything when I’m drowning in work and haven’t had a holiday in 2 years.
Your rivals are actively attempting to undermine you.
Ohhh please Mark…seriously.
This isn't a Tom Hanks war film. Relax. Not everyone is a rival. Only yourself is your competitor. To survive the recession, be better than a year ago.
If you get rich, great. If not, there's more to life than Lambos and angel investments.
Some want to relax and enjoy life. No competition. We witness people with lives trying to endure the recession and record-high prices.
This fictitious rival worsens life and work.
If you are truly talented, you will motivate others to work more diligently and effectively.
No Mark. Soz.
If you're a good leader, you won't brag about working hard and treating others like cogs. Treat them like humans. You'll have EQ.
Silly statements like this are caused by an out-of-control ego. No longer watch Shark Tank.
Ego over humanity.
Good leaders will urge people to keep together during the recession. Good leaders support those who are laid off and need a reference.
Not harder, quicker, better. That created my mental health problems 10 years ago.
Truth: we want to work less.
The promotion of entrepreneurship is ludicrous.
Marvel superheroes. Seriously, relax Max.
I used to write about entrepreneurship, then I quit. Many WeWork Adam Neumanns. Carelessness.
I now utilize the side hustle title when writing about online company or entrepreneurship. Humanizes.
Stop glorifying. Thinking we'll all be Elon Musks who send rockets to Mars is delusional. Most of us won't create companies employing hundreds.
OK.
The true epidemic is glorification. fewer selfies Little birdy needs less bank account screenshots. Less Uber talk.
We're exhausted.
Fun, ego-free business can transform the world. Take a relax pill.
Work as if someone were attempting to take everything from you.
I've seen people lose everything.
Myself included. My 20s startup failed. I was almost bankrupt. I thought I'd never recover. Nope.
Best thing ever.
Losing everything reveals your true self. Unintelligent entrepreneur egos perish instantly. Regaining humility revitalizes relationships.
Money's significance shifts. Stop chasing it like a puppy with a bone.
Fearing loss is unfounded.
Here is a more effective approach than outworking nobody.
(You'll thrive in the recession and become wealthy.)
Smarter work
Overworking is donkey work.
You don't want to be a career-long overworker. Instead than wasting time, write down what you do. List tasks and processes.
Keep doing/outsource the list. Step-by-step each task. Continuously systematize.
Then recruit a digital employee like Zapier or a virtual assistant in the same country.
Intelligent, not difficult.
If your big break could burn in hell, diversify like it will.
People err by focusing on one chance.
Chances can vanish. All-in risky. Instead of working like a Mark Cuban groupie, diversify your income.
If you're employed, your customer is your employer.
Sell the same abilities twice and add 2-3 contract clients. Reduce your hours at your main job and take on more clients.
Leave brand loyalty behind
Mark desires his employees' worship.
That's stupid. When times are bad, layoffs multiply. The problem is the false belief that companies care. No. A business maximizes profit and pays you the least.
To care or overpay is anti-capitalist (that run the world). Be honest.
I was a banker. Then the bat virus hit and jobs disappeared faster than I urinate after a night of drinking.
Start being disloyal now since your company will cheerfully replace you with a better applicant. Meet recruiters and hiring managers on LinkedIn. Whenever something goes wrong at work, act.
Loyalty to self and family. Nobody.
Outwork this instead
Mark doesn't suggest outworking inflation instead of people.
Inflation erodes your time on earth. If you ignore inflation, you'll work harder for less pay every minute.
Financial literacy beats inflation.
Get a side job and earn money online
So you can stop outworking everyone.
Internet leverages time. Same effort today yields exponential results later. There are still whole places not online.
Instead of working forever, generate money online.
Final Words
Overworking is stupid. Don't listen to wealthy football jocks.
Work isn't everything. Prioritize diversification, internet income streams, boredom, and financial knowledge throughout the recession.
That’s how to get wealthy rather than burnout-rich.