Samuel Kim, Founding Partner of Umbrella Network – Interview Series
Samuel Kim is a founding partner of the Umbrella Network, Oracle’s second tier that extends the capabilities of next-generation DeFi applications. Previously, he was founder and CEO of Lucidity, a blockchain-based transparency solution for digital advertising, and co-founder of Gimbal, a mobile advertising platform. He graduated from Columbia University and earned an MBA from Chicago Business School, where he focused on analytical finance.
How did you find out about blockchain and crypto-currencies?
In 2013, I worked as COO on a mobile advertising technology project I co-founded called Gimbal. We had a very smart employee who was also probably the least productive member of the Gimbal team. Whatever we’re discussing, he’ll have a conversation with Bitcoin. Finally, mostly to appease him, we attended the Bitcoin Meetup in Santa Monica. The room was warm, noisy and filled with a diverse crowd, and the passion and interest really caught my attention. After that meeting, I started studying technology and was very interested in the idea of decentralization and bitcoin. At the time, I didn’t see myself starting my career with bitcoin or blockchain. The application of this technology seemed to be primarily aimed at creating financial products. I had just escaped from Wall Street and I didn’t want to go back to finance.
Four years later, in 2017, my colleague at Gimbal, Miguel, introduced me to Ethereum and smart contracts. We both thought it was a good idea to use smart contracts to solve some of the most pressing problems in digital advertising. From there, Lucidity was born, a digital advertising protocol that uses blockchain for faster billing, fraud prevention and transparency.
Can you tell us how Umbrella came to be?
My first introduction to oracles and the problems they solve was in 2017 or 2018, when I went to a meeting sponsored by Augur. Augur is a robust, decentralized prediction marketplace platform and one of the first applications built on Ethereum. Joey Krug, co-founder and developer of the project, explained the unique problem Augur solves with its oracle. The open-source smart contracts that make Ethereum so powerful require data from off-chain sources. The integrity of these smart contracts depends on the absence of falsification of this off-chain data.
The challenge of ensuring data quality for decentralized smart contract applications intrigued me, but at the time I was too busy managing Lucidity to do anything meaningful. That changed in the fall of 2020. It was at this point that Lucidity entered a new phase of focusing on revenue generation. As I was less concerned with product innovation and the co-founders of Lucidity were involved in the day-to-day operations of the company, I began working on Oracle to solve the problem of deploying blockchain for frequently updated data points, as many ofFi’s applications require a scalable and cost-effective way.
What is the overall vision of the umbrella network?
The main task of the Umbrella Network is to transmit all data securely and cost-effectively through the chain. Only with reliable and thoroughly validated data can blockchain application developers apply unique blockchain features to deliver value to their users. Our goal at Umbrella is to reduce the cost of this data to zero as much as possible.
The Umbrella Network is a decentralized oracle service, can you explain to our readers what an oracle is?
When traditional centralized applications need data, they typically get it via an API from an external data source. Suppose a centralized lending platform needs a bitcoin/USD spot rate to calculate a borrower’s collateral requirements. To find out this price, their application accesses Coinbase’s digital API or another source and gets this data to use in their application.
However, unlike centralized applications, blockchain applications and smart contracts do not have access to data located outside the chain. Therefore, they cannot access the bitcoin exchange rate through the APIs used by traditional applications.
Instead, blockchains rely on third-party oracles, the layer that validates, queries and authenticates data sources outside the network, and then makes that data available to the blockchain. Because blockchain applications are open source and completely transparent, it is essential that data is transferred securely across the chain without being tampered with. This is the functionality that the oracles provide.
Why are decentralized oracles the best way to access off-chain data?
First, it is important to clarify what true decentralization means in the context of oracles. For example, the Chainlink system is technically decentralized. It has about 21 nodes in its network. However, the Oracle Chainlink solution requires the trust of the participants. In this system, Chainlink is the central authority, approving the oracles it wishes to include in its network and rejecting the others. Chainlink users must first have confidence that Chainlink has selected the right data providers, and second, because it is a proof-of-authority system, users must trust the providers that Chainlink has given authority to.
True decentralization must be accompanied by appropriate economic incentives and disincentives to ensure that it is truly transparent and that participants maintain the integrity of the system without resorting to Siberian attacks. At Umbrella, the community chooses our validators, and we encourage good behavior through the proof-of-stake economy that powers our decentralized network.
An umbrella network uses Merkle trees to bring together multiple transactions in a single node. Can you briefly explain what Merkle axes are and how this solution can effectively reduce costs?
At this point, most people see the benefits of decentralization. The question is how to make decentralization scalable. This is where Merkle trees make a big difference. Umbrella uses the Merkle tree system to solve the scalability problem. For example, each leaf of the umbrella tree contains one or two keys, such as the key : ETHUSD; value: 2000, represented by hash. With Merkle trees, Umbrella takes all the leaves and associated hashes and merges them into a single hash (the root hash) that is a unique representation of all the data in that tree. This underlying technology, which is used by some of the most popular blockchains such as Bitcoin and Ethereum, allows Umbrella to store thousands of chunks of data in a single transaction, enabling high-volume scalability and a wider variety of data that eludes other Oracle solutions.
Where do you personally see DeFi in the next 5 years ?
Blockchain is a generational technology that is already beginning to fundamentally change the way we communicate and interact. I think we will be using more and more of these technologies in the next five years. More and more people will benefit from decentralized solutions that give them more control over their money and data, and I expect Umbrella to be an important part of that ecosystem.
Is there anything else you’d like to share about the Umbrella Network?
We are very pleased with the development of the Umbrella Network to date and are proud to work with the community of developers, validators and our strategic partners. We look forward to launching our core network and continuing to develop our Oracle community solution.
Thanks for the great interview, readers who want to know more should visit the umbrella network.