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Inside Matrix, the protocol that might finally make messaging apps interoperable

Interoperability and decentralization have been major themes in tech this year, driven in large part by mounting regulation, societal and industrial pressure, and the hype trains that are crypto and web3. That rising tide is lifting other boats: an open standards-based communication protocol called Matrix — which is playing a part in bringing interoperability to another proprietary part of our digital lives: messaging.

The number of people on the Matrix network doubled in size this year, according to Matthew Hodgson, one of Matrix’s co-creators — a notable, if modest, boost to 80.3 million users (that number may be higher: not all Matrix deployments “phone home” stats to Matrix.org).

While the bulk of all this activity has been in enterprise communications, it looks like mainstream consumer platforms might now also be taking notice.

Some sleuthing from engineer and app researcher Jane Manchun Wong unearthed evidence that Reddit is experimenting with Matrix for its Chat feature — a move more or less confirmed to TechCrunch by Reddit. A spokesperson said that it’s “looking at a number ways to improve conversations on Reddit” and was “testing a number of options,” though they stopped short of name-checking Matrix specifically.

Given the bigger swing in support of interoperability — it’s happening also in digital wallets and maps — a closer look at Matrix gives some insight into how we got here.

In the beginning

View from above hands holding mobile phones Image Credits: Malte Mueller / Getty

Anyone who has ever sent an SMS or email won’t have considered for a second what network, service provider, or messaging client their intended recipient used. The main reason is that it doesn’t really matter — T-Mobile and Verizon customers can text each other just fine, while Gmail and Outlook users have no problems emailing each other.

But that wasn’t always the case. In the earliest days of electronic mail, you could only message users on the same network. And as mobile phones proliferated throughout the 1990s, people initially couldn’t message their friends if they were on a different mobile network. Europe and Asia led the charge on interoperability, and by the start of the millennium the big North American telcos also realized they could unlock a veritable goldmine if they allowed consumers to message their friends on rival networks. It was a win-win for everyone.

Fast forward to the modern smartphone age, and while email hasn’t exactly gone the way of the dodo and SMS is still stuttering along, the preeminent communication tools of today aren’t nearly as friendly with each other. Those looking to embrace independent privacy-focused messaging apps such as Signal will hit a brick wall when they realize that literally all their pals are using WhatsApp. Or iMessage. Or Telegram. Or Viber… you get the picture.

This trend permeates the enterprise realm, too. If your work uses Slack, good luck sending a message to your buddy across town forced to use Microsoft Teams, while those in human resources shoehorned onto Meta’s Workplace can think again about DM-ing their sales’ colleagues along the corridor using Salesforce Chatter.

This is nothing new, of course, but the issue of interoperability in the online messaging sphere has come sharply into focus in 2022. Europe is pushing ahead with rules to force interoperability and portability between online platforms via the Digital Markets Act (DMA), while the U.S. has similar plans via the ACCESS Act.

Meanwhile, Elon Musk’s arrival at Twitter has driven awareness of alternatives such as Mastodon, the so-called “open source Twitter alternative” that shot past 2 million users off the back of the chaos at Twitter. Mastodon is powered by the open ActivityPub protocol and is built around the concept of the fediverse: a decentralized network of interconnected servers that allow different ActivityPub-powered services to communicate with each other. Tumblr recently revealed that it intends to support the ActivityPub protocol in the future, while Flickr CEO Don MacAskill polled his Twitter followers on whether the photo-hosting platform and community should also adopt ActivityPub.

But despite all the hullaballoo and hype around interoperability spurred by the Twitter circus in recent weeks, there was already a quiet-but-growing movement in this direction, a movement driven by enterprises and governments seeking to avoid vendor lock-in and garner greater control of their data stack.

Enter the Matrix

Element founders and Matrix co-creators Matthew Hodgson and Amandine Le Pape Image Credits: Element

Matrix was developed inside software and services company Amdocs back in 2014, spearheaded by Hodgson and Amandine Le Pape who later left the company to focus entirely on growing Matrix as an independent open source project. They also sought to commercialize Matrix through a company called New Vector, which developed a Matrix hosting service and a Slack alternative app called Riot. In 2018, Hodgson and Le Pape launched the Matrix.org Foundation to serve as a legal entity and guardian for all-things Matrix, including protecting its intellectual property, managing donations, and pushing the protocol forward. 

The flagship commercial implementation of Matrix was rebranded as Element a little more than two years ago, and today Element — backed by Automattic, Dawn Capital, Notion, Protocol Labs and others — is used by a host of organizations looking for a federated alternative to the big-name incumbents sold by U.S. tech giants.

Element itself is open source and promises end-to-end encryption, while its customers can access the usual cross-platform features most would expect from a team collaboration product, including group messaging and voice and video chat.

Element in action Image Credits: Element

Element can also be hosted on companies’ own infrastructure, circumventing concerns about how their data may be (mis)used on third-party servers, ensuring they remain in control of their full data stack — a deal maker or breaker for entities that host sensitive data.

A growing array of regulations, particularly in Europe, are forcing Big Tech to pay attention to data sovereignty, with the likes of Google partnering with Deutsche Telekom’s IT services and consulting subsidiary T-Systems last year to offer German companies a “sovereign cloud” for their sensitive data.

This regulatory push, alongside growing expectations around data sovereignty, has been a boon for the Matrix protocol. Last year, the agency responsible for digitalizing Germany’s health care system revealed that it was transitioning to Matrix, ensuring that the 150,000 individual entities that constitute the health care industry such as hospitals, clinics, and insurance companies, could communicate with each other regardless of what Matrix-based app they used.

This builds on existing Matrix implementations elsewhere, including inside the French government via the Tchap team collaboration platform, as well as the German armed forces Bundeswehr.

“The pendulum has been clearly swinging towards decentralization for quite a while,” Hodgson explained to TechCrunch. “We’re now seeing serious use of Matrix-based decentralized communications across or within the French, German, U.K, Swedish, Finnish and U.S governments, as well as the likes of NATO and adjacent organisations.”

Back in May, open source enterprise messaging platform Rocket.Chat revealed that it would be transitioning to the Matrix protocol. While this process is still ongoing, this represented a major coup for the Matrix movement, given that Rocket.Chat claims some 12 million users across major organizations such as Audi, Continental, and Germany’s national railway company, The Deutsche Bahn.

“We believe that the value of any messaging platform grows based on its ability to connect with other platforms,” a Rocket.Chat spokesperson told TechCrunch. “We put a lot of effort into connecting Rocket.Chat with other platforms. We don’t have to worry about what client we use when emailing each other, and the same should be true when we’re messaging each other.”

Rocket.chat Image Credits: Rocket.chat

What’s perhaps most interesting about all this is that it runs contrary to the path that traditional consumer and enterprise social networks, and team collaboration tools, have taken.

Slack, Facebook, Microsoft Teams, WhatsApp, Twitter, and all the rest are all about harnessing the network effect, where a product’s value is intrinsically linked to the number of users on it. People, ultimately, want to be where their friends and work colleagues are, which inevitably means sticking with a social network they don’t particularly like, or using multiple different apps simultaneously.

Open and interoperable protocols support a new breed of business that’s cognizant of the growing demand for something that doesn’t lock users in.

“Our goal is not to force people to use Rocket.Chat in order to communicate with each other,” Rocket.Chat’s spokesperson continued. “Rather, our goal is to enable organizations to collaborate securely and connect with other organizations and individuals across the platforms of their choosing.”

Bridging the divide

The Matrix protocol also supports non-native interoperability through a technique called “bridging,” which ushers in support for non-Matrix apps, including WhatsApp, Telegram, and Signal. Element itself offers bridging as part of a consumer-focused subscription product called Element One, where users pay $5 per month to bring all their friends together into a single interface — irrespective of what app they use.

Element One subscribers can bring different messaging apps together Image Credits: The Matrix Foundation

This is enabled through publicly available APIs created by the tech companies themselves. However, terms of use are typically restrictive with regards to how they can be used by competing apps, while they may also enforce rate-limits or usage costs.

Bridging as it stands sits somewhere in a grey area from a “is this allowed?” perspective. But with the world’s regulatory eyes laser-focused on Big Tech’s stranglehold on online communications, the companies perhaps don’t enforce all their T&Cs too rigorously.

The DMA came into force in Europe last month — though it won’t officially become applicable until next May — and it has specific provisions for interoperability and data portability. At that point, we’ll perhaps start to see how the Big Tech “gatekeepers” of the world plan to support the new regulations. In reality, what we’re talking about are open APIs that “formally” permit smaller third-parties to integrate and communicate with their Big Tech brethren. This doesn’t necessarily mean that such APIs will be slick and easy-to-use with clear documentation though, and we can probably expect some deliberate heel-dragging and hurdles along the way.

Compliance

WhatsApp and Facebook application displayed on a iPhone Image Credits: Justin Sullivan/Getty Images

Popular messaging apps such as WhatsApp, while offering end-to-end encryption, weren’t designed for enterprise or governmental use-cases as they don’t allow organizations to easily manage any of their messaging data — yet such apps are widely used in such scenarios. Back in July, the U.K.’s Information Commissioner’s Office (ICO) called for a government review into the risks around “private correspondence channels” such as personal email accounts and WhatsApp, noting that such usage lacked “clear controls” and could lead to the loss of key information being “lost or insecurely handled.”

“I understand the value of instant communication that something like WhatsApp can bring, particularly during the pandemic where officials were forced to make quick decisions and work to meet varying demands,” U.K. information commissioner John Edwards said in a statement at the time. “However, the price of using these methods, although not against the law, must not result in a lack of transparency and inadequate data security. Public officials should be able to show their workings, for both record keeping purposes and to maintain public confidence. That is how trust in those decisions is secured and lessons are learnt for the future.”

In the business realm, meanwhile, the U.S. Securities and Exchange Commission (SEC) recently settled with 16 Wall Street firms for $1.1 billion over “widespread recordkeeping failures” related to their use of private messaging apps such as WhatsApp.

“Finance, ultimately, depends on trust,” SEC Chair Gary Gensler said at the time. “Since the 1930s, such record keeping has been vital to preserve market integrity. As technology changes, it’s even more important that registrants appropriately conduct their communications about business matters within only official channels, and they must maintain and preserve those communications.”

Maintaining an accurate paper trail, and ensuring that politicians and businesses are accountable for their actions, is the name of the game — a level of control that something like the Matrix protocol promises. However, mandating that every company over a certain size — as the DMA regulation does — has to make their software interoperable with others raises a bunch of questions around privacy, security, and the broader user experience.

The encryption elephant in the room

Concept illustration of “elephant in the room” Image Credits: Klyaksun / Getty Images

As Casey Newton has noted over at The Platformer on more than one occasion, Europe’s new interoperability regulations come with several pitfalls, chief among them, perhaps, being the hurdles they will create for end-to-end encryption — that is, ensuring that data remains encrypted and impossible to decode while in transit.

End-to-end encryption is a huge selling point for the big technology companies of today, one that WhatsApp hollers from the rooftops. But making this work between different platforms built by different companies is not exactly easy, and many — if not most — experts on the subject say that it’s not possible to enforce a truly secure, interoperable messaging infrastructure that doesn’t compromise encryption in some way.

WhatsApp can control — and therefore promise — end-to-end encryption on its own platform. But if billions of messages are flying between WhatsApp and countless other applications run by other companies, WhatsApp can’t really know what’s happening to these messages once they leave WhatsApp.

Ultimately, no two services deploy their encryption identically, a challenge that Hodgson acknowledges. “End-to-end encrypted platforms have to speak the same language from end-to-end,” he said.

In a blog post published earlier this year to address encryption concerns, the Matrix Foundation suggested some workarounds, including having all the big gatekeepers switch to the same “decentralized end-to-end protocol” (i.e. Matrix, unsurprisingly) which, by the Foundation’s own admission, would be a large undertaken — but one “we shouldn’t rule out,” it said.

To illustrate this point, Hodgson pointed to Element’s 2020 acquisition of Gitter, a developer-focused community and chat platform purchased from GitLab and used by big-name companies including Google, Microsoft, and Amazon. Within two months of closing the deal, Element had introduced native Matrix connectivity to Gitter.

Coordinating such a transition on a Facebook, Google, or Apple scale would be an entirely different proposition, of course, one that could cause all manner of knock-on chaos. In a blog post earlier this year, cryptography and security expert Alec Muffett suggested that messaging apps and social networks adhering to the same standard protocol would lead to “no practical differentiation” between different services.

“Imagine a world where Signal and Snapchat would have to interoperate — what would that look like?” Muffett asked TechCrunch rhetorically in a Q&A for this story. “Specifically, which features from one need to be presented on the other, and what are the educators which surround those features? And how would conflict in functionality be reconciled?”

This is why the Matrix Foundation proposed other potential solutions, such as adopting a TLS certificate-style warning, where the user is alerted to the fact that their cross-service conversation is not fully protected. This is perhaps comparable to how Apple’s Messages app supports both encrypted iMessage texts, and (unencrypted) SMS. But according to Muffett, it would bring unnecessary complexity to the mix.

“Apart from any other reason that I could cite, there is any amount of user interface research which explains that security-pop-up-warnings are generally not understood and not heeded,” Muffett said. “There is tons of research to back this up — popup warnings are an ‘anti-pattern‘.”

The Matrix Foundation also proposed converting communication traffic between encryption languages in a “bridge,” though this would effectively mean having to break the encryption and re-encrypt the traffic safely somewhere.

“These bridges could be run client-side — for example, the Matrix iMessage bridge runs client-side on iPhone or Mac — or by using client-side open APIs to bridge between the apps locally within the phone itself,” Hodgson said. “Alternatively, they could be run server-side on hardware controlled by the user in a decentralized fashion, ensuring that the re-encryption happens in as secure an environment as possible, rather than on a vulnerable centralized server.”

There’s no escaping the fact that breaking encryption is far from ideal, irrespective of how a solution proposes to reconcile this. But perhaps more importantly, a robust solution for addressing the real encryption issues introduced by enforced interoperability doesn’t truly exist yet.

Despite that, Hodgson has said in the past that the upsides of the new EU regulations are greater than the downsides.

“On balance, we think that the benefits of mandating open APIs outweigh the risks that someone is going to run a vulnerable large-scale bridge and undermine everyone’s E2EE,” he wrote in May. “It’s better to have the option to be able to get at your data in the first place, than be held hostage in a walled garden.”

Tip of the iceberg

It’s worth noting that the Matrix protocol, while chiefly known for its presence in the messaging realm today, has other potential applications too. The Matrix Foundation recently announced Third Room, a decentralized and interoperable metaverse platform built on Matrix. This runs contrary to a potential future metaverse controlled by a handful of gatekeepers such as Facebook’s parent company Meta.

For now, Element remains the flagship poster-child of what a Matrix-powered world could look like. The company has secured some big-name customers already such as Mozilla, which is using Element as a fully-managed service, while Element said that it signed a $18 million four-year deal with another (unnamed) company this year. Meanwhile, it also has strategic backers, among them WordPress.com parent Automattic, which first invested $4.6 million in Element back in 2020, before returning for its $30 million Series B last year.

In many ways, the ground has never been so fertile for Matrix to flourish: it’s in the right place at the right time, as the world seeks an exit route from Big Tech’s clutches backed by at least a little regulation. And Twitter, too, has played more than a bit part in highlighting the downsides of centralized control, playing into the hands of all the companies banging the interoperability drum.

“The situation at Twitter has been absolutely amazing in terms of building awareness of the perils of centralization, providing a pivotal moment in helping users discover that we are entering a golden age of decentralization,” Hodgson said. “Just as many users have discovered that Mastodon is an increasingly viable decentralized alternative to Twitter, we’ve seen a massive halo effect of users discovering Matrix as a way to reclaim their independence over real-time communications such as messaging and VoIP — our long-term user base in particular is growing at its fastest ever rate.”

Inside Matrix, the protocol that might finally make messaging apps interoperable by Paul Sawers originally published on TechCrunch

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Wire grabs fresh funding for secure messaging tech that’s big with G7 governments

More funding for European end-to-end encrypted messaging app, Wire: The enterprise-focused messaging platform told TechCrunch it’s closed a €24 million Series C round of funding led by growth equity firm Cipio Partners and Iconical, the investment vehicle of Skype co-founder Janus Friis. Existing investor UVC Partners also participating, among other returning backers.

The messaging tool — which launched almost a decade ago — was originally conceived as a fresh take on secure consumer comms, drawing on certain connections to Skype (including early backing from Friis).

But with increasingly fierce competition in the consumer space, from the likes of WhatsApp and Signal (and other E2EE messaging apps), the team pivoted focus to the b2b market — a move that caused a bit of consternation among certain privacy advocates when it emerged, back in 2019, that Wire had taken in its first ever tranche of VC funding and moved its holding company from Europe to the US. (Though the team defended the changes as just a practical reflection of its refocused b2b mission.)

Wire did not close its app off to consumer users entirely, and still offers a free version for download, but these days the tool is fully focused on the enterprise market — offering an extensive suite of collaboration, compliance and user management features, as well as the ability for customers to store the encrypted user data on premise (it says the majority of its customers opt for this) rather than in Wire’s (Europe-based) cloud.

So while Wire may have flown under the radar of many consumers, it has continued growing usage and touts a doubling of its Annual Recurring Revenue (ARR) in the last twelve months — off the back of what it dubs “significant” customer wins across private and public sectors.

It sells in to heavy-weight customers where security is very much front of mind — including governments, militaries and regulated businesses with high compliance requirements around information (such as the finance and healthcare sectors).

This explains why it’s not able to actually name those “significant” recent customer wins — though it can point to having five of the world’s G7 governments on board, including the German federal administration and the federal parliament (aka, the Bundestag). And Wire’s adoption by Germany federal authorities has garnered it some local press attention related to usage by politicians after the app was recommended by the federal office for digital security.

“The last German government was formed on Wire… and what is interesting is we didn’t have a clue about it!” says co-MD and co-founder Alan Duric, chatting to TechCrunch via videocall. He confirms the team only gleaned that particular high level gem of a detail when they read about it in the German press — which is of course a great advert for the robust privacy, between provider and user, that E2EE provides.

Duric, who has occupied a number of roles at Wire throughout its decade run — and is currently splitting the top exec job with a new hire, Andre Kiehne, following a decision by prior CEO, Morten Brogger, to step down to seek his next challenge — says that as well as robust security, “data sovereignty” is a major motivating force for customer adoption.

“Microsoft completely left that space — they are completely cloud-based,” he points out. “We enable a number of customers to run secure collaboration and communication on prem and in a number of cases… there is a number of large networks that are being built that are not even connected to the public Internet.

“For instance the German government — and also we’ve seen it with some of the other prospects — they are running a network which is not connected to the public Internet [for security reasons]. And you will see, I think, more and more of those cases.”

Adapting its product so the software is still able to function in a ‘airgapped’ network scenario, without an Internet connection being on tap, is thus something that distinguishes Wire from more mainstream business comms tools.

He also points to Wire being built on MLS, a security standard for E2EE, as another reason it’s winning government custom in Europe — support for MLS is, he suggests, being seen as important for enabling the secure messaging interoperability envisaged by the EU’s Digital Markets Act (DMA), a regulation which targets Big Tech ‘gatekeepers’ ability to leverage network effects to lock users inside ‘walled garden’ services.

“I hope… [in a couple of years we] will see MLS being a driving force to open up all those big monopolies — from Microsoft, from Google, WhatsApp, from Facebook, so that all of those systems will be able to interoperate,” he adds. “This is… one of the main premise behind the DMA, and this was also something that was very important for the German government — that the solution which they buy is based on open standards.”

Europe says yes to messaging interoperability as it agrees on major new regime for Big Tech

In all, wire says it has more than 1,800 customers at this stage — a top-line figure that hasn’t changed since it last raised, a $21M Series B round in April 2021 — but that’s down to the heft of some of the customers, per Duric, with a lot of focus going on chasing down “very large” customers, like governments, which can of course be notoriously slow at procurement. (But he confirms it’s seen double-digit growth in customer numbers since last year.)

While the relatively modest size of the Series C vs last year’s B looks to be a reflection of Wire’s rising revenues mediating its need for external capital — with turnover up 2x since last year and the co-MD saying it’s aiming to double revenues again over the next year.

Duric says the plan for the Series C is to accelerate Wire’s penetration and scale in markets “where we had a pretty good start” — such as in sectors like government and the military — as well as looking to expand its focus on regulated markets, like financial services.

On the latter, he points to some large fines that have recently hit US banks for failing to monitor employees using unauthorized messaging apps as illustrative of the opportunity Wire is spying.

It has created a compliance tool for customers who need to be able to audit employees comms which seeks to tread a tightrope between having E2EE and enabling access to comms data in the clear to meet specific legal requirements. (The short version of how Wire does this is by enabling customers to provision a regulated employee’s account to include a virtual device, running on the server-side, which operates with their same user credentials and copies all their content to auditable storage — but with the individual user being responsible for authorizing the provision, so, basically, there is no silent copying going on; the user has to be aware their data is being cloned for potential audit.)

“I hope we built a solution that is not compromising security at all — or as little as possible — and is providing full compliance to those that need it,” says Duric. “This is one of the segments where we are getting traction.”

He also suggests its approach could stand it in good stead given (potentially) new regulations in the EU, related to combating CSAM, which could put pressure on E2EE platforms to be able to scan content. “[It’s] a very, very difficult area and a question that’s ahead of us but I think there [on the b2b market side] with this Wire compliance module we nailed it,” he responds to a question on that issue, predicting consumer E2EE messaging apps will face a trickier challenge if lawmakers push ahead.

Elsewhere, the war in Ukraine is also generating leads for Wire in the energy sector, according to Duric — who says it’s had inbound from operators of nuclear plants interested in adopting the tool to be a conduit for all of their confidential comms and for “crisis collaboration” — i.e. in the event there’s an outage affecting their day-to-day cloud-based business comms platform. “Anything that is confidential cannot go on Microsoft Teams,” he argues.

On the competition front, a closer rival to Wire than Microsoft is another European startup, Element — which builds on the Matrix protocol — and is similarly touting its “enterprise-grade messaging and collaboration solution” as a fix for the ‘WhatsApp at work’ compliance problem.

Duric agrees Matrix/Element is a key competitor. “Some of the main differences are we are now getting fully based on MLS — they are jumping on that train a bit later,” he suggests. “The other thing is Wire is visibly stronger when it comes to real-time communications: Group video calls, group audio calls, screensharing, all of this real-time comms aspects because there they’ve been relying for quite a bit on Jitsi… So on that side we have [a lead].”

Looking ahead, Duric says the team is “fully focused on execution”.

“We are now tuning some of the things for this next chapter where we are going to be accelerating — and also where we are expecting some of our large customers, like the German government did the digitalization project and a number of other larger projects that they’re going to be working on that is going to be used as fuel for another inflection point,” he tells TechCrunch. “Also one of the areas that we are looking into is with SDKs where you’ll be able to embed Wire into a number of other solutions — either if it is in a banking sector or health sector or a number of other sectors so there it is really, from a number of perspectives, a completely new chapter ahead of us in the next couple of years.”

Wire’s next chapter means Duric will be entering his second decade at the startup — but he remains excited for what’s to come.

“It is kind of like my baby and it still has quite a bit to do before it grows up. And now with MLS I’m super excited because I feel a lot like with my previous startups when we were working on a webRTC technology that we started at Global IP Solutions… and then it got deployed to billions of people and now the big vision is the same with MLS — that MLS gets deployed to billions of people.

“Just before we had a vehicle — Skype — that was used first to deploy [webRTC, a billion-scale technology] and then a number of others deployed it. After [that], now the vehicle in a first phase [is] Wire — I hope that it enables the DMA to start happening and some of these big monopolies get reshaped and we have communication solutions for the next ten years which are not going to be proprietary, which are not going to be closed and they are going to be very secure and respecting users privacy,” he adds. “That’s the mission.”

Friis, Skype’s co-founder and Wire’s investor, also clearly remains bought in. “The need for secure communications is constantly growing. With its end-to-end encryption that has been independently audited and its code that is open source, Wire allows any organisation to deploy a communication product they can trust,” he said in a supporting statement accompanying the Series C.

 

Messaging app Wire raises $21 million

Element, a messaging app built on the decentralized Matrix protocol, raises $30M

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Element Finance raises $32 million for its DeFi fixed rate protocol

Element Finance has raised a $32 million Series A round at a $320 million valuation. The company has been building a new DeFi (decentralized finance) protocol on top of the Ethereum blockchain. It lets you earn predictable returns on investments thanks to fixed rates over a predetermined period of time.

Polychain Capital is leading today’s funding round. Other new investors include Republic, Advanced Blockchain, P2P Validator, Rarestone, Ethereal Ventures and their limited partners. Some of the company’s existing investors are investing once again, such as Andreessen Horowitz, Placeholder, A_Capital, and Scalar Capital. Finally, there’s a long list of DeFi builders who participated in the round.

Element Finance is still relatively new as the company launched its protocol on the Ethereum mainnet on June 30. But it has been quite successful already as there are currently the equivalent of $180 million in total value-locked.

Users can currently participate in ten different fixed-rate pools. They can contribute with stablecoins, such as DAI or USDC, with popular (wrapped) cryptocurrencies, such as wBTC, or with sophisticated deriative assets, such as steCRV — steCRV is a token that represents a stake in the Curve ETH/stETH liquidity pool.

While this is already a cool product for individual investors, Element Finance also wants to convince fund managers to invest in an Element pool. The company has launched a treasury management initiative to convince other DeFi protocol makers, funds and institutions that they should allocate a portion of their capital to Element Finance.

In order to guarantee fixed rates, some users can opt for higher returns. They contribute to liquidity pools with variable interests. But in that case you can’t predict your returns at the end of the year.

So far, 9,000 users have tried Element Finance. The company plans to introduce a governance system with different voting vaults and different incentives. With today’s funding round, Element Finance will hire more people across all areas.

Image Credits: Element Finance

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Element, a messaging app built on the decentralized Matrix protocol, raises $30M

After Element acquired Gitter last year to bring in more users and features into its own decentralized, Matrix-based messaging app, the startup is announcing some funding to invest in its growth.

Element has picked up $30 million in a Series B round of funding. Some of the funding will be used to expand its technology to continue catering to use cases among the large organizations already using it. They include the French government covering some 5.5 million civil servants; Dataport (which is incorporating it into Germany’s education and public administration systems); and BWI, which supplies the communications system used by the German armed forces — in all, some 10 government engagements, the company said.

Matthew Hodgson, Element’s CEO and the technical co-founder of the open source, non-profile Matrix protocol, also said that some will be used to continue investing in the company’s peer-to-peer architecture to eliminate any need for servers. And a third area of investment will be building out the company’s decentralized voice and videoconferencing services.

“It will be transformational in terms of security,” he said in an interview.

Element today is available as an on-premise systems or a cloud-based platform. Most public sector customers choose the former, and private sector ones opt for the latter, the startup said. Cloud revenues grew 300% in the last 12 months, and although the company didn’t disclose how much that is in actual money, it’s a sign that Element is growing (another reason for taking funding now, even though as co-founder Amandine Le Pape noted, it didn’t need it).

This round includes investments from Protocol Labs (the open-source R&D lab behind libp2p, IPFS and Filecoin) and Metaplanet (a fund set up by Jaan Tallinn, co-founder of Skype). Automattic and Notion — past investors — are also participating. No valuation is being disclosed. Element has raised $48 million to date.

Matrix, the not-for-profit protocol on which Element is based, was built to shake up how the internet worked by creating a place where multiple, siloed communications environments could be integrated and engaged with in a cohesive, single platform, and those communications in turn can be “owned” by the entity organizing it. The idea here is that by bringing it all together, it’s easier to manage those conversations from the perspectives of security and practical use.

Matrix has been growing in its own right, with usage up 190% in the last 12 months, now up to 75,000 deployments with over 35 million “addressable” users. Those deployments can be on something as small as a Raspberry Pi or a giant server run by a government. But to be clear, “active” is a significantly smaller number than addressable users. While Matrix, much less Element, cannot “see” how others are using Matrix (that is one of the security advantages that governments like), Hodgson notes that on its own servers there are 1.2 million active users.

Element — which originally had been called Riot — was set out as a kind of Slack/Discord rival that was a native messaging platform on top of Matrix, there to capture audience already doing something else with the protocol to give them a clean and secure alternative at a time when only a handful of platforms control the majority of the world’s messaging data.

“We’ve been building messaging technology for more than 15 years,” Le Pape said. “It just felt crazy that you have a few players [dominating] and keeping everyone’s data hostage. This is to open anyone’s communication. That is what we are trying to fix, data sovereignty.”

In the regard, Element (and Matrix) sit at the heart of a much bigger trend in technology, where some of the brightest minds in the field are reckoning with the defaults of how it all works, have decided that an alternative, a less centralized approach, must be a part of the bigger equation as data becomes more valuable and communications channels only become increasingly essential.

“Internet communication protocols have become fundamental for humanity. Today, most messaging happens over fickle proprietary centralized walled gardens who hold us hostage to their short-term business outlook,” said Juan Benet, CEO of Protocol Labs, in a statement. “Matrix is a beacon of hope: an open network for secure, decentralised communication, built with sound internet infrastructure principles. Element — both product and company — empowers organizations with control, ownership, and a great user experience for all their conversations.”

While there are a number of other encrypted messaging platforms on the market that are seeing mass adoption — they include Telegram, Signal and even to some extent Facebook’s WhatsApp — Element (and Matrix’s) early adopters have been large organizations. However, with Matrix, the engine underpinning Element, also doing early work with the likes of Twitter on its Blue Sky decentralized platform efforts, that could potentially give Element another boost of users, beyond those early adopters.

But just as clouds have silver linings, so too do sunny outlooks cast shadows… As with other decentralized communications platforms like Telegram and Rocket.chat, end-to-end encryption can cut both ways: it can help keep communications from being hacked, but it might also be used to evade detection when planning something malicious. Matrix (and by default Element) has been exploring alternatives to backdoors into encrypted systems, which is one route that governments are considering to fix this, the argument being that mandating one will simply move the bad actors to another.

Ultimately, the investment here, and the usage of Element, is a vote in the direction of sticking with decentralization despite those misgivings and existing issues.

“When communication is centralised it becomes a very appealing target for abuse; whether that’s through propaganda, surveillance, censorship or worse,” said Metaplanet’s Tallinn. “Consumers need rescuing from surveillance capitalism, and organisations need a secure neutral way to communicate.  Matrix is the most advanced platform to provide that missing communication layer.”

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Element acquires Gitter to get more developers on board with the open Matrix messaging protocol

Some interesting news for lovers of open, decentralized communications tech: Element, the company behind the eponymous Matrix -based Slack competitor (formerly known as Riot) has acquired developer-focused chat platform, Gitter, from dev services giant GitLab, which picked it up back in 2017.

The acquisition means Gitter’s community of some 1.7M users will be migrating to Matrix, the underlying decentralized comms protocol also made by Element — assuming they stick around for the ride with the new owner, of course. But Element is going out of its way to reassure Gitter users they’ll feel properly at home on Matrix.

In a blog post discussing the acquisition, the top-line message from Element CEO and Matrix co-founder, Matthew Hodgson, is that nothing will change in the short term. Furthermore, the pitch to the Gitter community is that, down the line, there will be plenty to gain from the migration/eventual assimilation as a “Gitter-customized version of Element” running on Matrix.

This is because the pledge is feature parity first (so, yes, that means Element will be gaining a bunch of Gitter features; such as threads and instant live room peeking, to name two). Then, once Gitter migrates to Element, it’ll get access to “all the goodies” the combination brings — including end-to-end encryption; reactions; VoIP and conferencing; widgets; all the alternative clients, bots, bridges and servers; the full open standard Matrix API; and the ability to fully participate in that decentralized network…

Another enticing promise is “constantly improving native iOS & Android clients” — which the Element team notes is a welcome alternative to Gitter’s natives ones, given they’re already being deprecated.

The migration will also mean Element will be replacing the current “creaky” matrix-appservice-gitter bridge.

“We’re going to build out native Matrix connectivity — running a dedicated Matrix homeserver on gitter.im with a new bridge direct into the heart of Gitter; letting all Gitter rooms be available to Matrix directly as (say) #angular_angular:gitter.im, and bridging all the historical conversations into Matrix via MSC2716 or similar,” it writes. 

“Gitter users will also be able to talk to other users elsewhere in the open Matrix network — e.g. DMing them, and (possibly) joining arbitrary Matrix rooms. Effectively, Gitter will have become a Matrix client,” Element adds.

So the tl;dr is that current Gitter users should have plenty of reasons to be cheerful about the acquisition. (Plus, as Hodgson points out, anyone less than happy with the direction of travel can of course fork the platform and go their own way, being as Element is an open source company. Though of course the hope is no one will feel the need to fork it.) 

The decision to migrate Gitter to Element has been made purely on resources/efficiency grounds, per Hodgson — to avoid the need for Element to maintain both apps over the longer term. He tells TechCrunch the migration will likely take around a year — “possibly more”.

Element also plans to “comprehensively” document the whole process so that it can serve as “the flagship example of how to make an existing chat system talk – and transition to — Matrix”, as it puts it, so it’s got its eye on encouraging more apps to make the move to Matrix.

While Element says GitLab approached them about taking on Gitter they confess to a long-time “crush” on the platform — saying they jumped at the chance when the other company came knocking. (Financial terms of the transaction are not being disclosed, however.)

TechCrunch can claim a teeny part in this open source love-in, being as we’re credited with accidentally introducing the teams — after they found themselves across the aisle exhibiting at Disrupt London, back in 2014 (so you truly never know who you’ll serendipitously meet in Startup Alley).

Riot wants to be like Slack, but with the flexibility of an underlying open source platform

Taking on Gitter is not just a passion project for Element, though. They saw they see the acquisition boosting growth of the Matrix ecosystem as a whole other developer community gets plugged in and — they hope — converted to evangelists for the open network.

“If developers are using it then when they need something to build on — a technology for their messaging apps — then they will naturally use Matrix. And if we want to grow this ecosystem and have as many apps as possible built on top of the protocol then we need to make it known to everyone so if they’re using it for their own comms it makes it easier for them,” Element COO, Amandine Le Pape, tells TechCrunch.

“We’re really doing this for Matrix, rather than for Element,” adds Hodgson. “We’re just trying to grow and make the Matrix network larger and healthier. So it’s not a matter of we can then sell it to governments as a communication platform more easily, it’s much more… that it becomes known to more developers so that when they build their next WhatsApp they don’t go and invent the wheel all over again. They would just obviously use Matrix because that’s what they’re already using to co-ordinate on working on React or Angular or whatever technology they already know.”

He says bringing Gitter into the Matrix fold is “obviously” a boon to developers who already use Element — such as the Mozilla community and Rust developers — as it will help reduce fragmentation.

“Half the world is on Gitter, half the world is on Element, and some poor lost souls are stuck in Discord and Slack. So by going and bringing the open guys together it will just be very concretely more useful in Element that if you want to reach out to whatever developer you will be able to find them in once place rather than having this horrible split brain between the two,” he adds.

Asked about its decision to sell Gitter, GitLab told us it has never been a core element of its business focus.

“While GitLab has contributed to Gitter’s growth in the past three years, Gitter has always been a standalone product, independent of GitLab, even after GitLab’s acquisition in 2017. GitLab and Element saw an opportunity for Gitter to grow further under Element,” it said.

“GitLab has a core business focus to be the market’s leading complete DevOps platform,” it added. “It is not a case of stepping away but seeing an opportunity for an important tool to grow further. In true open source fashion, Gitter is free to use, without limits, for everyone to create public or private communities and to contribute back to. It is currently the only developer-centric messaging platform which is an open source, free, uncapped messaging SaaS. The platform has not been monetized yet and has no commercial edition. Gitter is available on the web with clients available for Mac, Windows, Linux, iOS, and Android.”

Image credit: GitLab/Gitter

Element said it will be bringing on board Gitter’s dev team as part of the acquisition — albeit, it’s actually just one “superstar” developer running the whole thing, per Hodgson and Le Pape. So the team integration process at least shouldn’t be too challenging. 

(For the record, Element is the new name for New Vector (the company) and Riot (the messaging app) which was originally called Vector. So that’s Vector > Riot > Element; and New Vector > Element. “We decided to bring everything under one single brand — as now Element the company, Element the app and Element Matrix Services for the hosting platform,” explains La Pape on this recent rebranding.)

Momentum for Matrix

Matrix, meanwhile, has been continuing to gain momentum throughout the pandemic — thanks to the accelerated shift to remote working pushing demand for secure (and, well, sovereign) digital messaging up the public sector agenda.

“Recently we’ve had the German education system coming on board, the German military coming on board. And we have two other governments who, irritatingly, we can’t disclose yet — but suffice to say they are both very big and very exciting,” notes Hodgson. “They’re in paid trials. Once we successfully convert those it will be as big, if not bigger, than France in terms of banging on about it.” 

“In all of these instances they have gone and slightly tweaked the app. They have forked Element, they have branded it, they’ve built it into an existing tool that they have and it really ties in with the developer story — the reason that they feel happy building on an open standard is because of the wider developer ecosystem,” he adds.

“We’re also seeing a whole galaxy of little startups — nothing to do with us — who are building on Matrix successfully,” Hodgson also tells us, pointing to a German healthcare startup called Famedly as one example.

“It’s unrelated to us but it’s fun to see other companies basically betting the farm on the protocol. So, again, the happier developers are to use the protocol the more random startups like that will begin to bubble up,” he adds. “And if the next-gen of Slack killers happen to be on Matrix — whether it’s us, or anybody else, so much the better.”

Automattic pumps $4.6M into New Vector to help grow Matrix, an open, decentralized comms ecosystem

Another key factor that could accelerate momentum for Matrix is interoperability — a topic area regulators are increasingly eyeing as they consider how to ensure competition thrives in digital markets that can be prone to ‘winner takes all’ network effects.

Accusations of anti-competitive behavior are also being thrown around in the real-time messaging space specifically. Notably, in July, Slack filed an antitrust complaint against Microsoft arguing the latter is being anti-competitive by unfairly bundling its rival Teams product with its cloud-based productivity suite, Microsoft 365.

The Matrix network is no such walled garden, of course — and Element the app offers bridges to other messaging platforms, enabling its users to chat with others siloed on proprietary platforms like Slack. Slack, however, hasn’t offered the same courtesy to Element (only going so far as offering a bridge for, er, email users last year).

“It would be great for Slack, and [Microsoft] Teams and Discord to join in,” says Hodgson, arguing: “I think there’s probably more impetus for them to do so in terms of being able to interoperate with other systems, because we have so many bridges. If you were migrating from Skype for Business to Slack or something the Matrix could be the bridge between the two.”

“They have different users, right,” continues Le Pape, fleshing out the case for such platforms to open up to Matrix. “Usually Teams ends up being the one for the big companies who are actually using Office 365 while Slack might be more of the startup side of things so, in the end, if we could actually join everything together it would be good.” “If you all actually were able to talk to one another then that would solve it,” she adds in reference to Slack’s antitrust complaint against Microsoft.

Hodgson posits that if Microsoft were to expose Teams into Matrix it could help it defend against the complaint — being as it would be able to tell regulators it’s “participating in a global open standard network” that lets users pick whichever client they like. “I think that’s a very compelling solution,” he suggests, adding that Element is involved in discussions with “various parties” on the EU side “to make sure people understand there are viable open standards for doing this”. 

“Historically, before Matrix, basically there wasn’t anything that had the feature set that you would expect from Slack or Teams. Whereas now there is actually a viable middle language,” he adds.

Asked if it’s a wild idea that a polished consumer messaging app such as Telegram could ever move to Matrix, Hodgson describes it as an “interesting” thought — but admits there’s still a bit of a feature gap for Element, while also lauding the Telegram’s technical performance.

“I could see there being some friction in joining Matrix as it is today because it would be a slight backwards step for them… However the pressure is therefore on us to go and get to the point that Element is as snappy and as polished as Telegram — and [Element already] has good encryption,” he says. “At which point I think the tables could turn interestingly.

“But they’ve got hundreds of millions of users. I guess they feel they’re doing it right. They would rather, perhaps, become the next WhatsApp and be a 2BN user silo rather than play nice with other people because they’re already past critical mass. But perhaps if we do our job and make Matrix large enough and interesting enough that it is worth their while to link to it then why not?”

New Vector scores $8.5M to plug more users into its open, decentralized messaging Matrix

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Marriott says 500 million Starwood guest records stolen in massive data breach

Starwood Hotels has confirmed its hotel guest database of about 500 million customers has been stolen in a data breach.

The hotel and resorts giant said in a statement filed with U.S. regulators that the “unauthorized access” to its guest database was detected on or before September 10 — but may have dated back as far as 2014.

“Marriott learned during the investigation that there had been unauthorized access to the Starwood network since 2014,” said the statement. “Marriott recently discovered that an unauthorized party had copied and encrypted information, and took steps towards removing it.”

Specific details of the breach remain unknown. We’ve contacted Starwood for more and will update when we hear back.

The company said hat it obtained and decrypted the database on November 19 and “determined that the contents were from the Starwood guest reservation database.”

Some 327 million records contained a guest’s name, postal address, phone number, date of birth, gender, email address, passport number, Starwood’s rewards information (including points and balance), arrival and departure information, reservation date, and their communication preferences.

Starwood said an unknown number of records contained encrypted credit card data, but has “not been able to rule out” that the components needed to decrypt the data wasn’t also taken.

“Marriott reported this incident to law enforcement and continues to support their investigation,” said the statement.

Marriott-owned Starwood the largest hotel chain in the world, with more than 11 brands covering 1,200 properties, including W Hotels, St. Regis, Sheraton, Westin, Element and more. Starwood branded timeshare properties are also included. The company said that its Marriott hotels are not believed to be affected as its reservation system is “on a different network.”

The company has begun informing customers of the breach — including in the U.S., Canada, and the U.K.

Given that the breach falls under the European-wide GDPR rules, Starwood may face significant financial penalties of up to four percent of its global annual revenue if found to be in breach of the rules.

Gift Guide: The best security and privacy tech to keep your friends safe

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Austin is piloting blockchain to improve homeless services

While the vagaries of the cryptocurrency markets are keeping crypto traders glued to their CoinDesk graphs, the real potential of blockchain is its capability to solve real human challenges in a decentralized, private, and secure way. Government officials have increasingly investigated how blockchain might solve critical problems, but now one city intends to move forward with an actual implementation.

The city of Austin is piloting a new blockchain platform to improve identity services for its homeless population, as part of a competitive grant awarded by the Mayor’s Challenge program sponsored by Bloomberg Philanthropies. Austin was one of 35 cities to be awarded pilot grants, and the top city from that group will ultimately be awarded $5 million.

Steve Adler, the mayor of Austin since 2015, explained to TechCrunch that “at a high level, [the pilot] is trying to figure out how to solve one of the challenges we have in our community related to the homeless population, which is how to keep all the information of that individual with that individual.”

Identity is among the thorniest challenges for governments to solve, particularly for marginal populations like the homeless or refugees. As Sly Majid, Chief Services Officer for Austin, said, “If you have your backpack stolen or if your social security card gets wet and falls apart, or if you are camping and the city cleans up the site and takes your possessions, you have to start all over from the beginning again.” That is devastating for marginal populations, because it means that the cycle of poverty persists. “It really prevents you from going about and doing the sort of activities that allow you to transition out of homelessness,” he continued.

Austin has been on an economic tear, becoming one of the top startup hubs in the United States and increasingly drawing talent from major cities like San Francisco. But, “For everything that is going right, we have some challenges that are shared by a lot of large cities,” Adler said. That dizzying growth has raised housing prices, making it more difficult to improve the city’s homelessness rate. Some 2,000 individuals are homeless in the city according to a census taken earlier this year, with several thousand more at various states of transition.

The city wanted to improve the ability of its patchwork of government and private homeless service providers to offer integrated and comprehensive aid. There are a number of separate challenges here: verifying the identity of a person seeking help, knowing what care that individual has previously received, and empowering the individual to “own” their own records, and ultimately, their destiny.

The goal of the city’s blockchain pilot program is to consolidate the identity and vital records of each homeless person in a safe and confidential way while providing a means for service providers to access that information. Adler explained that “there are all kinds of confidentiality issues that arise when you try to do that, so the thought was that blockchain would allow us to bridge that need.”

By using blockchain, the hope is that the city could replace paper records, which are hard to manage, with electronic encrypted records that would be more reliable and secure. In addition, the blockchain platform could create a decentralized authentication mechanism to verify a particular person’s identity. For instance, a homeless services worker operating in the field could potentially use their mobile device to verify a person live, without having to bring someone back to an office for processing.

More importantly, vital records on the blockchain could build over time, so different providers would know what services a person had used previously. Majid provided the example of health care, where it is crucially important to know the history of an individual. The idea is that, when a homeless person walks into a clinic, the blockchain would provide the entire patient history of that individual to the provider. “Here was your medical records from your last clinic visits, and we can build off the care that you were given last time,” he said. Austin is partnering with the Dell Medical School at the University of Texas to work out how best to implement the blockchain for medical professionals.

Identity is a popular area for investors interested in blockchain and decentralization more generally. As I wrote about earlier this week, Element, a New York City-based startup co-founded by famed deep learning researcher Yann LeCun, hopes to provide decentralized identity to people in developing countries like Indonesia and the Philippines. Austin is exploring partnering with decentralized startups like BanQu to implement the details of the service for the city.

Majid noted that “It’s an iterative process for us, … and we need to crawl before we walk, and walk before we run.” Adler believes that the program is an example of the power of fusing government and private industry. Austin “tries to work with new industries, and new technologies, and new economies and tries to find the proper intersection of government innovation and responsibility,” he said. If blockchain can improve homelessness here, that solution could carry throughout the world.

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Element wants to give identity to the whole world, raising $12M Series A

Who are you? That’s both an existential question, and also a very practical administrative concern. Today, identity is often exchanged through the use of government ID cards and official paperwork, but what happens when someone loses that paperwork or it is destroyed? Or, as is often the case in many countries around the world, a citizen never received the paperwork to begin with?

Element wants to completely change the way banks, hospitals, and other service providers work with their customers by providing a platform for decentralized biometric identity. The company’s software runs on any mobile device, and using the device’s camera, it can identify a user’s face, palm, and fingerprints to create a verified match. Users have options on which modality they want to use.

Biometric identification is a tough machine learning application, so it shouldn’t be surprising that Element, which was formed in 2012, was co-founded by Adam Perold, a Stanford-educated product designer, and Yann LeCun, a famed machine learning researcher. LeCun was the progenitor of convolution neural nets, which today form one of the foundational theories for deep learning AI. He is now chief science advisor for the company, having taken a role as Director of AI Research at Facebook in New York while continuing his professorship at NYU.

Element is announcing a $12 million Series A round, led by PTB Ventures and GDP Ventures, with David Fields of PTB and On Lee of GDP joining the company’s board of directors. Earlier investors of the company included Pandu Sjahrir, Scott Belsky, Box Group, and Recruit Strategic Partners.

While technologies like Apple’s Touch ID and Face ID systems have popularized biometric identity, neither of these were around when Element got started. The early years of the company were devoted to solving critical technical challenges. Wireless connectivity can be limited in many developing countries, which meant that identities had to be local to the device in order to be useful. That also meant that the platform couldn’t be a cloud infrastructure solution, since identity information had to be processed on the device.

Furthermore, given the quality of hardware available, data had to be extremely compressed to be useful, and the machine learning algorithms couldn’t use too much compute power since a low-powered Android device wouldn’t be able to execute an identity match quickly enough to provide a good user experience.

That’s where LeCun’s deep expertise in neural nets, and particularly in areas like optical character recognition, came in handy. The Element team managed to reduce the amount of data required to store the identity of a single person down to about two kilobytes, according to the company.

The next challenge the company faced in building out its platform was security. Identity data, particularly biometrics, is a major security challenge, but it was exacerbated by the fact that devices would often be shared between users. A single device at a bank, for instance, might service thousands of users, all of which need independent, secured data. The company said that these security challenges have been designed into the core of the system.

Ultimately, the company’s platform lives as an SDK behind the mobile apps of its partners. It provides not only the identity layer itself, but also a secure data infrastructure that allows records such as bank accounts and medical files to be connected to the underlying identity.

Element is targeting the developing world, and Perold tole me he spends more than half of his time traveling to Southeast Asia and Africa building partnerships and doing research on how the company’s technology can improve critical social services. Among the company’s signed partnerships is Telekom Indonesia, which as the service provider for 180 million subscribers, is one of the key connections between people and their identity in that fast-growing economy.

Another partnership formed by the company is with the Global Good Fund, a joint venture of the Gates Foundation and Intellectual Ventures. That project works to create better biometric identities for newborns and infants, which is critical for health outcomes. The company is working with icddr,b and the Angkor Hospital for Children in Cambodia to build out the program.

In addition to the lead investors, the company received strategic venture capital investments from Bank BCA (via Central Capital Ventura), Bank BRI, Telkom Indonesia (via MDI Ventures), and Maloekoe Ventures.