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Samuel Kim, Founding Partner of Umbrella Network – Interview Series

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Samuel Kim is a founding partner of Umbrella Network, a layer-two oracle empowering the next generation of DeFi applications. Previously, he was the founder and CEO of Lucidity, a blockchain-based transparency solution for digital advertising and a co-founder of Gimbal, a mobile advertising platform. He is a graduate of Columbia University and received his MBA from Chicago Booth School of Business, where he concentrated in analytic finance.

How did you initially discover blockchain and cryptocurrency?

In 2013, I was working as COO on a mobile ad tech project that I had co-founded, called Gimbal. We had a really brilliant employee there who was also possibly the least productive member on the Gimbal team. No matter what we were discussing, he would steer the conversation to Bitcoin. Eventually, mainly to appease him, a couple of us attended a Bitcoin Meetup in Santa Monica. The room was hot, loud and packed shoulder to shoulder with a diverse audience and the passion and interest there really got my attention. After the Meetup, I began to explore the technology and I became very interested in the idea of decentralization and Bitcoin. At the time, I didn’t see myself embarking on a career in Bitcoin or blockchain, though. The applications of the technology seemed mostly aimed at building financial products. I had just escaped Wall Street and wasn’t looking to get back into finance.

Four years later, in 2017, my colleague at Gimbal, Miguel introduced me to Ethereum and smart contracts. We both loved the idea of using smart contracts to solve some of the most critical issues plaguing digital advertising. That was the impetus for Lucidity, a digital advertising protocol utilizing the blockchain for faster billing, fraud prevention and transparency.

Could you share the genesis story behind Umbrella Network?

My first introduction to oracles and the problems they solved happened in 2017 or 2018 when I went to a Meetup sponsored by Augur. Augur is a trustless, decentralized prediction market platform and one of the first Ethereum applications to build an oracle. Joey Krug, co-founder and developer on the project was explaining the unique problem Augur solved with their 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 that off-chain data being free of manipulation.

The problem of ensuring the quality of the data inputs for decentralized smart-contract applications intrigued me, but at the time, I was too busy running Lucidity to engage in any meaningful way. That changed in the Fall of 2020. At that point, Lucidity entered a new phase where it was focused on generating revenue. With less focus on product innovation, and my Lucidity co-founders managing the company’s day to day operations, I started working to build an oracle to solve the problem of providing blockchains the frequently updated data points, many DeFi apps require in a scalable and cost-effective way.

What is the overall vision of the Umbrella Network?

Umbrella Network’s overarching mission is to bring all of the world’s data on chain securely and cost effectively. Only with robust, comprehensive validated data can blockchain application developers apply the unique properties of blockchain to deliver value to their users. Our goal at Umbrella is to drive the cost of that data to as close to zero as possible.

The Umbrella Network is a decentralized oracle service, could you explain to our readers what an oracle is?

When traditional, centralized applications need data, they usually pull the data from an outside data source via an API. For example, let’s say a centralized lending platform needs the spot price of Bitcoin/USD to calculate collateral requirements for a borrower. To find out that price, their application would reach out to the Coinbase Digital API or some other source and retrieve that piece of data to use within their application.

However, unlike centralized applications, blockchain applications and smart contracts are unable to access data that is off-chain. As a result, they cannot access the price of Bitcoin via the APIs used by traditional applications.

Instead, blockchains rely on third party oracles to be the layer that verifies, queries, and authenticates data sources external to the network and then makes that data available on the blockchain. Given that blockchain applications are open sourced and fully transparent, it is imperative that the data is brought on chain securely and free of manipulation. That is the functionality that oracles provide.

Why are decentralized oracles the best way to access off-chain data?

First of all, it is important to clarify what true decentralization means in the context of oracles. For example, technically, Chainlink’s system is decentralized. It has 21 or so nodes on its network. However, Chainlink’s oracle solution requires participants to trust. In that system, Chainlink is a central authority, sanctioning the oracles they choose to be included in their network and rejecting others. Chainlink users must trust, first, that Chainlink has picked the right data providers and second, since it is a Proof of Authority system, users must trust those providers that Chainlink has granted authority to.

True decentralization must be paired with appropriate economic incentives and disincentives for it to truly be trustless, with participants supporting the integrity of the system and not launching Sybil attacks. At Umbrella, the community chooses our validators, and we incentivize proper behavior with Proof of Stake economics powering our decentralized network.

The Umbrella Network uses Merkle Trees to bundle multiple transactions into a single node. Could you briefly explain what Merkle Trees are and how this solution effectively reduces costs?

At this point, most people can see the benefits of decentralization. The question is how to do decentralization in a scalable way. That’s where Merkle Trees make a huge difference. Umbrella uses a system of Merkle trees to solve the scalability problem. For example, in Umbrella’s Merkle Tree, each leaf stores a key-value pair, like Key: ETHUSD; Value: 2000, represented by a hash. Using Merkle Trees, Umbrella takes all of the leaves and all of their associated hashes and rolls them up to create a single hash (called the root hash) that is a unique representation of all the data sitting on that tree. This foundational technology, used by some of the most popular blockchains including Bitcoin and Ethereum, enables Umbrella to store thousands of pieces of data in one transaction providing the high volume scalability and broader diversity of data that escapes other oracle solutions.

Where do you personally see DeFi in the next 5 years?

Blockchain is a generational technology that has already begun to change the way we communicate and transact in fundamental ways. Over the next five years, I think we will see more and more mainstreaming of the technology. More people will take advantage of decentralized solutions that put them more in control of their money and their data and I fully expect that Umbrella will be a significant part of that ecosystem.

Is there anything else that you would like to share about the Umbrella Network?

We are really pleased with Umbrella Network’s trajectory so far, proud to have engaged with a community of developers, validators and our strategic partners. We are very much looking forward to our mainnet launch and continuing to expand our community-owned oracle solution.

Thank you for the great interview, readers who wish to learn more should visit the Umbrella Network.

Antoine Tardif is the founding partner of Securities.io, the CEO of BlockVentures.com, and has invested in over 50 blockchain & AI projects. He is the founder of Unite.AI a news website for AI and Robotics. He is also a member of the Forbes Technology Council.

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