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We were able to sit down with the founder of Ethereum and ConsenSys Joseph Lubin last week at TechCrunch Disrupt SF and talk to him about some of the projects ConsenSys is working on.
[Editor’s Note: This interview has been edited for clarity]
CCN: What is ConsenSys?
Joseph Lubin: ConsenSys is a venture development firm with some different sides of the company. We have the product side of the company, we are also a consulting company. We work as a consultant and write many software for companies, governments and central banks.
We also do a lot of educational work. ConsenSys Academy has trained about 1,500 working engineers and many lawyers and other types of students who have gone to places like companies and the World Bank and run half-day or one-day programs.
we have built a housing solution, not yet live, which should be a fundamental element in bringing institutions into space. We invest in venture capital and invest in just over 20 companies, excluding the accelerator we have started, which will bring the total to over 20 companies. We also have token launch projects.
Whether it is an investor token, a security token or a consumer utility that would not be considered a security. Bill Hinman, director of corporate finance at SEC, gave us very clear guidelines about 10 weeks ago and worked with regulators like them around the world.
We have the ability through our token foundry platform to issue utility tokens for consumers. This is the essence of ConsenSys. It's a really weird company because we had to build the Ethereum ecosystem ourselves. We started building products and we needed to build infrastructures, people started calling us from companies and governments and we activated our branch of advice and educated people because we could not hire fast enough.
CCN: One of the things I'm curious to know with ConsenSys the Amazon effect, right? You guys have like 50 projects on this hub and spoke model and they're doing it all. They are doing science, legal. You're worried that you're discouraging startups that might say "Oh, ConsenSys is doing this." ConsenSys is Amazon. "You know, you guys are the best. We will not do it.
JL: Could you give an example?
CCN: I actually did an interview with a company called Orvium that works on Ethereum and somehow competes with what you guys do in your Conscience project. I think it would be a good example of a space in which they would compete with a startup in the ecosystem.
JL : There is so much you could do in the scientific phase. The conscience speaks of scientific journals and how the model of publication or perishing is broken and the type of correction is this way. It's a really amateur space and if you're not talented and you're convinced in your ideas, so that if you hear about another project that is somehow on the Internet and you close, you probably should not pursue your project. Fundamentally, this technology will enable a different form of trust.
We are moving from a world of rule systems built by people, and implemented by people in top-down command and control systems, some are doing well. In some cases through the oligarchy, sometimes through the monarchy, sometimes through elected officials, in a world where we have automated trust.
We can make agreements or create laws and these things are guaranteed for execution. It will take a long time to build a well-functioning mature system using this, but it is a paradigm shift. In the whole world the economic, social and political systems in the coming decades will be influenced by that change of paradigm, trust and the execution of all systems. There is plenty of space for startups too.
CCN: Can you tell us a little bit about how your acceleration program is comparable to the hub and spoke model you set up?
JL: Our accelerator takes only 5%. We started as a hybrid company. We started as something between Microsoft-Apple-Google and VC and we were much closer to a software company. It was just like the people we hired were employees and were building their projects we owned.
Normally, ConsenSys would own 100% of the project, right? But we wanted to change that model. We wanted to create a situation where the people who were building it were ConsenSys employees.
But it had the potential to possess fundamentally, ConsenSys would have retained 50% of the project in the first cases and we would have enabled a cap table in which people were founders of the project or who contributed significantly to the project. to run the project and in this world where we can make throwing coins, it is interesting to turn projects.
Give them their own independent legal entity and create a network business model. In this situation, instead of being just an employee of the company, people have the potential to remain in ConsenSys in some way, but they still have a big share.
CCN: Internally, how does it work? ? Do the founders come to you with a project or start as employees at ConsenSys and come up with an idea?
JL: Many projects have been created by me or by us, in-house. We hired people to build those projects. Some people were already ConsenSys employees, they had ideas. We have brought some projects in advance. MetaMask was a project that Baron Davis was doing, Boardroom was a project that Nick Dodson was doing, but they've been with us for three years or something. They are completely ConsenSys projects, but if those projects extend from ConsenSys, they will have a big share.
CCN: China has become such an important part of the cryptocurrency market. What is ConsenSys' strategy in China?
JL: We have concrete plans for Hong Kong. I do not know if you were aware, but at Xiongan we signed an agreement in this special economy in China near Beijing to dampen the pressure in the coming decades. We had a press conference a little while ago, signing an agreement with them to make us essentially reflect.
CCN: Was it a PR event?
JL: No, the real work is over. I do not know that they will let us write software for their infrastructure, but we have a group of people who are helping to lead the thinking leadership for the Smart City project there.
There are other things we can We talk about big continental companies close to the signature. We are in the middle of establishing a presence there. We have, I believe, 19 people at ConsenSys who are not located there but are of Chinese nationality or have significant skills working in the country and this is kind of our Chinese strategy. We will have a presence, let's do a little bit, but yes, we will have a real presence.
CCN: did some Chinese projects enter the ConsenSys group?
JL: So far, no. I've talked to some and probably there will be some who will be joining above all because we can hire people there. At the moment, we can not legally assume there, but we are getting close enough to be able to do it.
CCN: In which areas do you see the biggest, the best potential for your technology to stop? Then you talked about something before, you know, the supply chain, clearly the financial services industry, that's where it all began.
JL: It's really everywhere that different societies are people who do not trust each other, they want to increase trust in their interactions. Maybe I do not even know anyone and I want to make a transaction with them.
I could do it on the blockchain and I could be comfortable that unless the math is wrong with incredible certainty of that transaction with an entity that I do not know is guaranteed to work properly.
It also has serious implications for reducing or eliminating counterparty risk. Situations where companies compete with each other but want to do something collaboratively need reliable shared infrastructures, so for fixed income reference data systems, instead of a lot of financial industry companies that fix data from prospects purchased from Bloomberg or Thomson Reuters, and maintaining their teams to do so, we actually have a team called TruSet that stands the system to allow collaboration, data set-up, new data entry and incentive to share and control them.
There is more: finance and supply chain when there are many different actors who can share the same network. It also has applications in the music industry. For example, there was a project called The Global Repertoire Database around 2008, I think about seven or eight million pounds was burned by the major players in the music industry on this failed project.
Essentially, they were trying to create a database that could be shared by the entire music industry. They went down the road but in the end they could not figure out who would own the IP and who would load the machines with the sets and the project fell apart for this reason.
We are now seeing the formation of many different consortia because with blockchains you essentially get rid of your infrastructure problems on a public blockchain, all the infrastructure is there and you are just reading the front end and you can distribute the back- end to the public blockchain and to the transaction validators of the miners they are responsible for managing the infrastructure, they are paid for it.
For a consortium, you can keep it private and authorized and you can essentially have everyone and nobody on it. You can set up governance policies, but you can run them in a cloud. We raised the team that built one, two and three blockchain as a service for IBM.
They created it for Fabric, and now they built a four version, in collaboration with AWS for Ethereum. In the free level, they have about 1,000 consortia that handle stuff to set up their systems. It was only live for about five months. But it is an example of how companies want to collaborate or even companies want to put part of their internal infrastructure on a blockchain so that different departments can collaborate more effectively with more reliability and / or transparency. This system allows for the very simple implementation of cloud blockchain systems.
CCN: Can you talk a little bit about Fabric?
JL: Fabric facilitates collaboration and you can use it in a corporate context. You can use it in a consortium context. You can not really use it as a public blockchain because the crypto-economy is missing.
There is a lack of ability to encourage many different actors around the world to share their resources and make it a very decentralized system. When using something like IBM's Fabric, you have virtually centralized control over that system, which can result in more collaboration and more confidence.
However, it is not yet the full decentralized support of real blockchain support. But we have a project called Viant that is doing a great job in space. I am authorized to mention GlaxoSmithKline, and there is another major consumer goods company, an important energy company, and they are building a supply chain using Ethereum technology.
They can do it on the public blockchain that can create private versions authorized of this. They also have a project of origin that we did with the World Food Program all over the world. It is basically a project in which the tuna has been traced from being landed on the boat, tagged, getting its documents when it is brought ashore. The next phase will plot the temperature.
If it falls below a certain temperature in the chilled plane, or in the truck then a certain alarm will shift to the app we have, and it would be considered perhaps a dangerous piece of fish.
CCN: What is the advantage of performing this function on the blockchain?
JL: The reason you want to do it on a blockchain is that you have many different companies and many different actors, some of which are competing.
They are all part of a network that everyone needs to trust, so there should not be an opportunity to fundamentally cheat the system. However, in the margins, you could potentially enter invalid data into the system. But we are really pushing the confidence of potential improper manipulations to the periphery and perhaps try to control that in the future it will also allow us to build more trust in these systems.
CCN: Can you describe your current relationship with Ethereum and Vitalik in particular?
JL: We have ardent debates to the end.
CCN: Do you see any impact from these conflicts on ConsenSys?
JL: We are leaving the first phase of the blockchain experience. The first phase is basically a set of projects that come together and build what I call a blockchains layer – basically, blockchains where all the actors in the system must contain all the data and have to process all the transactions and there are some optimizations that can be done there.
We need to change and the truth of the matter is that the current system is too secure. We need to get to much more scalable architectures in terms of the number of transactions per second. On the internet, we've got millions of transactions per second for certain types of database architectures shared like Facebook. But we have no confidence, Mark performs many experiments on us. We can not really stop it and we do not know exactly what they are doing.
It's a slot machine, in which we are really manipulated to become a product of Facebook. We have thrown away the millions of transactions per second replaced with 20 transactions per second on level one of Ethereum, but now we have a reliable basis, we can begin to rebuild the scalability. As we move from phase one of this ecosystem to phase two, we are seeing layer 2 technologies that enable hundreds or thousands of transactions per second, they are not decentralized like those of an Ethereum layer.
We have technologies like state and plasma channels along with other types of side-chain mechanisms. There are many at the moment that are being explored online by companies and exchanges of games, etc. And that will allow us in the next phase to have very significant applications to which consumers are interested, traders are interested and link them to Ethereum
That link with Ethereum will ensure that no, but if one of these two levels two systems a little Less reliable, if they fall on foot, for any reason, or if the people who run them are corrupt people Will, without the permission of the people managing these layers, two systems will be able to pull their tokens safely and do not lose money. This is a new exciting architecture for our ecosystem.
The Level One Spike and Sharding Test is the point at which scalability is incorporated into layer one. We will still have two second-level solutions, we will still need it.
What is our relationship with the Ethereum Foundation? Still very hot … Well, it was not hot for a while. There was a previous executive director who did not allow a great interaction between our company and the Ethereum Foundation, while the Ethereum Foundation is much more open now and much more collaborative.
They publish everything and despite the main developer's meetings have been in public for good after the first year or so. We have people in these meetings all the time. We have people participating in events in Taiwan and other places. We have our 40 protocol engineers at ConsenSys. We are helping to build Casper. We have a Plasma team in advance so we are not doing a lot of work on Plasma right now.
CCN: So would you say it's okay?
JL: We see them in different places all over the world. The Ethereum ecosystem, in my opinion, is rather warm and friendly. Many people love each other and spend time together around the world. I went to Burning Man last week and I spent a lot of time with people from other projects.
Vitalik has not yet gone to the Burning Man. It would be nice if he did, but it is still a very communicative and collaborative group of people. Ethereum was not formed in the same way as Bitcoin. Bitcoin was essentially a crypto-anarchist response to concerns about monetary infrastructure and centralization through the financial industry and governments, etc.
Given that it was proposed as an alternative monetary system, had that money and commercial ethics, Ethereum came because we thought people had to build everything on this new decentralized database technology, not just on a narrow monetary system. We've always been a community of developers and the open source developers community are traditionally quite open and collaborative, so it stayed that way.
CCN: One of the questions I have is that I could see a coming conflict if you guys have a really killer app oriented to the company. Let's say it's for the DTCC and you guys really start pushing for Proof of Stake and Sharding because you need it. Do you see any problems arising between ConsenSys and the Ethereum Foundation beyond the speed and method of downsizing?
JL: I do not think so. It's about getting consensus at the end of the day, coming to consensus every 15 seconds now, every four or five seconds early when the next version of consensus algorithms comes to the fore. If you're not coming to an agreement with other Ethereum customers, you're not Ethereum.
The Parity team and the Go team have a new client we are building. We were involved in some clients as the first Java client that Roman Mandeleil and his team created, was a ConsenSys member. If these clients do not solve their problems and agree on the fundamental aspects of the protocol, then it is not Ethereum.
Ethereum is partially defined by the Ethereum Foundation, but is truly defined by many others. If you look at the reduction of the debate on the issue, there are many people with different programs that have given weight to that debate. There were different signaling mechanisms, different voting mechanisms and the same thing happened with the DAO (decentralized autonomous organization).
A lot of different signaling, voting and other mechanisms and so there are many different actors who have to agree things or the project are fucking, because you can forge it and if the majority do not like what the developers are looking for to force on them, then Ethereum no longer exists as it is. We really need to reach a consensus on a human level to continue to reach consensus every few seconds on the blockchain.
If we want scalability, we can build it ourselves in the second level.
CCN: You said earlier to give you that scalability but it does not give you enough level confidence. Because?
JL: You could create a blockchain Proof of Authority where there is a single entity that creates blocks and tells everyone what the system status transitions are. What it would do is to check the system every block or every block in public of Ethereum and by checking the system people could essentially do the following:
Let's say it's a game on this blockchain authority test with a gaming company in control of the blockchain, connect it through a technology called Plasma and release collector crypts, cards, digital swords or other things.
Those things can trade on a market. I could buy one of those. I could move it in the game from public Ethereum. I could get it out of the game, not because I'm worried or anything, but maybe because I want to transfer it to an exchange on a different paradigm or plasma system, so I can sell it. Provides companies or entities with the ability to run applications with higher transaction throughput. It gives people the comfort that no one can steal their value tokens, whether they are fungible tokens or non-fungible tokens.
CCN: Would not you consider the ideal for out-of-chain scaling, or not?
JL: This is where we have to move forward, to understand that the online chain or the level one of the downsizing are complicated. I think two projects will come in radically different ways. It's very limited on what you can do on Bitcoin, but I think Ethereum will arrive there. DFINITY is working practically on the same mechanisms. Cardano will probably arrive after the first two
CCN: what about Zilliqa?
JL: Maybe, yes. I know a little bit about that project. They're looking at creating charts differently, but it's incredibly difficult to support a blockchain ecosystem.
CCN: How do you finance all these different projects? Do you do it through ICO or is it more a traditional financing model?
JL: Yes. We have many lines of business. Our academy makes money. We have a Coursera course which I probably should have said something about when I was presenting. He went live yesterday. For non-technical people, $ 99 for a course. We have sold ebooks and many types of training all over the world.
We have a security audit team, one of the best teams in the world. They turn 99% of incoming work because we can not grow that team fast enough. They make a huge amount of money by checking smart contracts. We have a group of consultants who make many millions of dollars around the world on various projects.
CCN: Is it mostly with governments?
JL: It is mainly with companies. We have done government work in Dubai, a military job in Singapore and other jobs that I can not talk to the South African Reserve Bank.
We are managers of the Blockchain observatory of the European Union. It is a contract that we have won and which allows us to work with all member countries by writing white papers and leading the leadership.
Other business lines include the token foundry. We are able to tokenise and launch our internal projects and we also do it for third parties. If it is a significantly profitable business and when we make our projects tokenize, some of these projects have brought a large amount of revenue for consumer utility purposes. A large amount can be tens or hundreds of millions of dollars.
CCN: How does market volatility affect your ability to finance these projects?
JL: It is natural. We see it in the legacy financial world. We see overshoots and directions, people operate on cycles of fear and greed and when you see something exciting, you want to accumulate for various reasons. Most people accumulate just to make money and do not understand what is happening.
We've seen great overshoots, we've seen five or six since Bitcoin started. One looks amazing and unsustainable and inevitably corrects the first to around $ 31 or $ 32 and bitcoin has it corrected up to $ 2, and everyone thinks it's all over and then will go up to $ 200 or something, then up to $ 1,000 or something and then up to $ 20,000. The beauty of all this is that it brings attention to the ecosystem.
It brings value to the ecosystem in the form of money, in the form of entrepreneurial talent, in the form of technical talent, in the form of IT security talent and each of these surges causes a huge amount of activity.
Companies are formed, companies grow faster, the more consumers begin to pay attention and use these systems and then go further. There is a correction, but there are so many other people who are building a fundamental infrastructure that basically causes the next event.
CCN: Of all your projects, which one do you think will be the greatest?
JL: I think of many of them. Two of the company's most important are the open law that allows legally applicable hybrid blockchain agreements. You can basically have an agreement. People can sign it cryptographically and companies can sign it cryptographically.
The whole of the agreement is on the blockchain, it's not a piece of paper that you can lose or an email that you can lose. You can deposit money in the same agreement. It is possible to send the data in the agreement itself, it is possible to have the agreement, an act of programmatic clause when certain conditions are met.
Perhaps payment on a purchase agreement or an employment contract. It will really be transformational. We are starting to use the open law in the NDAs in our company and we have just partnered with a company called Rocket Lawyer to allow their 35 million customers to sign agreements on the blockchain infrastructure.
Instead of being stored on Rocket Lawyer's servers, the agreements can be partially or completely stored on ethereum and the arbitration systems we are building can be brought to fruition and we can build a tokenized ecosystem around it.
If you are agreeing on the open law, it can be either completely transparent on the blockchain or in the decentralized memory, or you can sign something called digest (an hash) of the chord. A digest is basically the execution of the text of the agreement through a program that transforms it into a unique string that makes no sense to anyone, but verifies a sort of agreement as it existed at a given time.
The counterparties of the agreement can only sign the digest a long alphanumeric string and signing that long alphanumeric string, everyone can show that they have signed the agreement just like a signature, but they allow the contract to be private.
That is a project potentially of social importance. Probably also commercially interesting. Civil is another project that is making a token launch very soon.
Civil is a platform for ethical and sustainable journalism. It has a constitution, has a lot of editorial offices that the companies have already joined, many professional journalists and fifty focused newsrooms.
Vivian Schiller actually left the NPR to direct the civil foundation. Associated Press is our partner, and there is another important partner that we will announce in a few days and some other important journalistic institutions could be involved as investors and / or partners.
The partner means that either they use the ecosystem or they can use the infrastructure. With Associated Press, they are licensing all their content to all editors. Most of it is initially free and even the infrastructure will allow AP to track licenses better than we can do, it's pretty exciting stuff.
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