Princeton Startup Offchain Labs Speeds, Secures Blockchain Application Development

For a startup that is less than a year old, Princeton-based Offchain Labs is moving fast.

The startup, founded by Edward Felten, former White House deputy United States CTO and now a computer science professor at Princeton, and two Ph.D. students there, Steven Goldfeder, and Harry Kalodner, raised $3.7 million in a seed round led by Pantera Capital (Menlo Park, Calif.), with backing from Compound VC (New York), BlockNation (New York), and others.

In June, the startup announced the alpha version of its software, called “Arbitrum,” which, according to Felten, is “an add-on for almost any blockchain-based application to make it better.” 

The company has also signed a lease on new offices in Palmer Square, in Princeton. It had been operating out of the Tigerlabs coworking space, also in Princeton.

And Offchain Labs is now hiring. The company has grown from the original three cofounders to six people, and Felten says he is looking for “software developers who have experience making reliable software.” He’s also looking for business-development and developer-relations experts.

In a release, Felten explained the product. “We have invented a protocol that sits on top of any blockchain, with the ability to execute code and transactions off-chain through either sidechains or state channels. With increased privacy and scalability, as well as much lower costs to run a contract, Arbitrum adds immense value to developers and enterprises. We believe it can create a new wave of quality, blockchain-based applications and services.”

The company grew out of work that Felten and his cofounders had done at Princeton. “We developed some of the core ideas as part of academic research and we built an academic prototype of an early version of the system, which worked as a proof of concept to show that the basic ideas worked. Then we published a peer-reviewed paper about the technology in August of 2018,”said Felten. The paper had been written in May, he told us.

As the group put their ideas down on paper, it became clear to them that the technology could be useful in solving problems in the commercial world, Felten continued. “That was the point where we started to explore starting a company, and we looked at how we could take this set of ideas and turn them into a product.” They also identified the technical and business problems they would need to solve in order to have a viable company. They formally licensed the technology from Princeton University.

The blockchain add-on software addresses some of the drawbacks of existing applications that work with blockchain, Felten explained. “The existing technology has a lot of drawbacks. It’s relatively expensive and slow. What happens inside your application isn’t very private and there are security issues. Basically, we offer a software package that will make your application faster, more private; and reduce the costs; and also offer a security benefit.”

Offchain Labs expects this software to ultimately find a home in the enterprise market, especially in public-facing applications that everyday people would use, he said. Right now, the software is in its alpha stage. “The current version is open source. We anticipate having a premium version that we would like to sell for a fee, so it’s kind of a freemium model. The free version lets people try it out and builds awareness in the developer community, while letting us demonstrate what the technology can do.”

There is logic behind making the current version open source, he said. “Because security is one of the advantages of this software, there is value in having core components be open source so people can inspect them. They don’t have to trust us.”

Currently, Arbitrum works with Ethereum, the second most popular crypto currency. “We developed a layer that sits on top of that. If someone is developing an application to run with Ethereum, by slipping our layer between their application and Ethereum we can give them a lot of benefits,” Felten said.  He added that the software is compatible with Ethereum so that Ethereum developers don’t have to rewrite any code. Eventually, the company expects to expand to other blockchain types.

During the alpha stage, Offchain Labs will allow developers to experiment with the software, said Felten. “So, rather than experimenting with real money on the real Ethereum blockchain, people will run Arbitrum on a private test chain with fake money on their own computers. … Over time, as people get experience with the product and it’s ready for full-on industrial use, we’ll transfer it over, so people can use it on the real Ethereum blockchain.” The company expects to have a beta release of the product, and have its full production-ready release by the end of the year. spoke to Felten about how he found his investors. “We started talking to venture capitalists and potential investors back in September or October. We had dozens of meetings and calls in order to find the investors that were the right match for us. They were evaluating us as a potential investment, and we were evaluating them as a potential partner.

“Good VCs bring advice, guidance, and will help you as you raise future rounds of funding and so on. It’s sort of like dating in a way. You are going to have a lot of first dates, fewer second dates, and then over time you figure out who you are compatible with. We ultimately signed the papers, and the money started coming in in January.”

Felten also discussed starting a company in New Jersey. He noted that the company’s origins were at Princeton and this is where the company’s brain trust lived when it was founded. One of the cofounders is now in New York, he added. New Jersey’s “proximity to New York is valuable,” as that’s where many of the enterprise companies they will eventually have as customers will be.

Felten said that he knows there’s a lot of great tech talent in New Jersey, as well. In fact, he and his cofounders “are hoping to contribute to the idea that New Jersey is a good place to start an emerging technology business.”

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