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 it’s 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 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.
Alchemy replaces the nodes that businesses use to read and write blockchains with a faster, more scalable decentralized architecture. It also offers 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 revealed to TechCrunch that it secretly 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
Yet despite its momentum, it’s immediately clear that Alchemy doesn’t want to become some overhyped blockchain promise that doesn’t deliver. “There are two vanity metrics in Silicon Valley” Viswanathan says. “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.”
Viswanathan and co-founder and CTO Joe Lau already had a shot at the startup big leagues. For a brief moment, their simple social app for finding out where friends were around to hangout, called Down To Lunch, topped the app rankings and had VCs knocking down their door with term sheets. But the pair of Stanford computer science grads got knocked off the charts by a viscious 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 Sergei. His takeaways was that “You can have massive impact on the world. If they can do it we can do it to.”
So when cryptocurrency hit the zeitgeist in 2017, they cast aside the 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 college kids’ social app. They saw the chance to seize bridge layer of the next computing platform — the blockchain.
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 building transactions into 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 says with a laugh.
Making the same true for blockchain Alchemy’s goal. Typically just to get started, businesses have to 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.
Alchemy uses a whole different decentralized architecture. This lets it separate different types of data into their 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 Enterprise Services, offering a range of tools for managing decentralized apps. Those 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 since blockchains standardize the database and how it’s access, Alchemy can do it all and is already building more tools.
“Since using Alchemy, our team has been able to refocus it’s 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.” The 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 it top competitor in infrastructure, Infura, most of the clients it listed on its site are now actually working with Alchemy.
“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.”
“This is what spins the inovation cycle”
One of the most heartening signs? 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.
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.
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 sales person last week. Luckily, since it powers everything from exchanges to games to banking 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 CEO says 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 every one on the planet’s life improved by it” Viswanathan concludes.
“These technology shifts happen even 20 to 30 years. If this is a massive technology shift, we have chance to build a really foundational company in the space. It’s not about the money. There are so many less stressful ways than startups to make money.”