The ethereal experiment of Joe Lubin is a disaster. How long will you propose it?

[ad_1]
<div _ngcontent-c14 = "" innerhtml = "

^A

a year ago, Joe Lubin looked like one of the most prescient people on the planet. Cryptocurrencies like ether were in the midst of the rise of a hockey stick, and Lubin, a co-founder of Ethereum's blockchain and one of its most articulate launchers, was supposed to speak at events from Davos to SXSW . In the "Ethereal Summits" of his company, he was alone standing, with the crowd looming over his utterance, no matter how bizarre. & Nbsp;

At an event in San Francisco, in October 2017, he scolded the participants for hitting their televisions and for being rude to Siri, Apple's digital assistant. "We designed Ethereum to allow machines and robots to be first-class citizens," Lubin said with sincere sincerity as he embraced visions of decentralization, self-sovereignty and a democratized global society. "So, be kind to the cars of this generation, for fear that some future general artificial intelligence that believes it has been disrespectful to its ancestors decides to turn your carbon into something more useful for the future mechanical economy." & Nbsp;

Lubin's line laughed, but in the fall of 2017 the idea that the blockchain – the database technology distributed at the base of almost all cryptocurrencies – would introduce a new world order did not seem far-fetched. The price of a single ethereal token, a digital representation of money similar to bitcoin, had just passed $ 300, compared to $ 10 at the start of 2017. It was about to reach a peak of $ 1,389 within the next three months. . Forbes I will soon appoint Lubin the second-richest person in a crypto, valued at $ 5 billion, largely based on reports that he owned between 5% and 10% of all outstanding circulation, which at the beginning of 2018 had a market value above $ 100 billion.

"The potential of this technology is enormous", Lubin, 54, tells Forbes in a recent interview. "They are many orders of magnitude more valuable than & lsqb; where the tokens & rsqb; are seated at this time, because they will allow all aspects of society." We will build everything on this technology. "

Towards the end of 2014, a few months after the ether launched by crowdsale at 30 cents per token, Lubin created ConsenSys, a holding company that describes grandly as a global "body" to build applications and infrastructures for a decentralized world. In fact, it is the first cryptographic conglomerate, comprising a network of for-profit companies that supports bitcoin's largest blockcoin competitor, Ethereum. More than 50 companies were quickly raised from its Brooklyn headquarters, ranging from a poker site and a supply chain to a forecasting market, a healthcare record company and a computer security consulting firm. & Nbsp;

But there were no fund-raising rounds or debt bids. In Lubin's version of the decentralized future, he is the architect, the CEO and the central banker, who finances all the "rays" of ConsenSys from his personal cryptocurrency. & Nbsp;

Lubin must still veer significantly from this general plane, despite the serious cracks in its foundations. For one thing, Ethereum's blockchain faces strong opposing winds. Thanks to its perceived technical superiority – largely because it allows apps to be "incorporated" into the blockchain – Ethereum has become the launch pad for hundreds of initial coin offerings (ICOs), many of which have in total caused billions of losses for their supporters. The crypto-landscape is littered with ethereal ICO carcasses, and now the SEC and other regulators are targeting some of them for law enforcement. In November, the SEC resolved the actions against two startups based on Ethereum, Airfox and Paragon, which had effectively sold $ 27 million in non-registered securities when they issued their ICOs in 2017. Both tokens are now basically without value. Meanwhile, blockchain competitors such as App, such as EOS, which process nearly ten times as many transactions a day, and Dfinity, which recently raised $ 102 million from investors like VC company Andreessen Horowitz, are challenging Ethereum. But almost all blockchain technologies remain glacially slow. Ethereum can process only about 20 transactions per second. In contrast, Visa can handle 24,000. & Nbsp;

Yet the Lubin organism continues to grow. ConsenSys has 1,200 employees and about 200 job offers are published on consensys.net. Although ConsenSys refused to comment, Forbes he estimates that almost all his activities are in red, some with little hope of profitability. The global body of Lubin seems to cash in at a rate of over $ 100 million a year. & Nbsp;

When worried employees questioned Lubin about the sustainability of ConsenSys, Lubin always had an answer: "Joe would say," This is definitely not something you need to worry about, we can keep going at this pace for a long, long time, " recalls Carolyn Reckhow, former director of global operations that left ConsenSys in May. & Nbsp;

With the price of free-falling ether, from $ 1,389 to just over $ 100 today, Lubin's fortune could have fallen to less than $ 1 billion, questioning how long he can continue to finance his dream . It all depends on how much ether has sold – and when.

^THE

The other co-founders of Ethereum, Vitalik Buterin and Anthony Di Iorio, Lubin grew up in Canada. A self-appointed computer nerd whose father was a dentist and whose mother was a real estate agent, he attended Princeton in the mid-1980s, where he played squash and was a roommate with the future billionaire hedge fund star Mike Novogratz , which, like Lubin, eventually pivot towards blockchain and crypto. After graduating in 1987 with a degree in electronic engineering and computer science, Lubin started working in technology at the Princeton robotics lab, but eventually started funding, creating software for Goldman Sachs and then managing a successful hedge fund. . & Nbsp;

The Lubin office was not far from Ground Zero during the September 11 attacks, and the excruciating experience threw him into an existential crisis. During the following decade he became deeply depressed for the state of the world. & Nbsp;

"It was foolish to rely on all those structures that, implicitly, thought we had our best interests at heart. … I felt that we were living in a global society and economy that were figuratively, literally and morally bankrupt", he stated at the ConsenSys Ether Summit in May 2017. "I was confident that our economy and society were in a slow cascade collapse." Lubin foresaw two equally catastrophic results: central bankers would have ended up weakening their currencies to repay rising debts, stifling growth for decades, or some unexpected "non-linear" event would have created great difficulties and sent the world into the worst economic depression it had ever seen. Lubin was so upset that he traveled to Peru and Ecuador looking for a land he could escape.

Then at the beginning of 2011, Lubin read the bitcoin white paper and had a lighting: "Decentralization was a turning point". & Nbsp;

The global body of Lubin appears to burn more than $ 100 million a year, but ConsenSys is still expanding. & Nbsp;

Reading everything he could on bitcoin, Lubin was finally introduced by Di Iorio to Vitalik Buterin, then creator and genius of the crypto of Ethereum, then nineteen. After reading the Ethereum Buterin white paper in November 2013, Lubin entered the ground floor of the Ethereum project and participated in the group's key meeting in Miami in January 2014. He continued as part of the central group through the 39. Ethereum's initial $ 18 million dollar bid in July 2014 and was said to be one of the largest buyers during the initial token crowdfunding, at prices well below the dollar. Ultimately, the Ethereum foundation team quarreled and separated. Buterin continued to focus on technology, while Lubin devised his plan to create a business ecosystem around Ethereum. & Nbsp;

For the ConsenSys headquarters, Lubin chose the Bushwick neighborhood, in addition to the low-waisted trousers. From the outside, 49 Bogart Street looks shabby: the door is covered with the types of stickers you would see in a bar bathroom and is surrounded by graffiti. The interior is not so different. ConsenSys occupies more lofts alongside residential apartments.

When it came to an organizational structure, Lubin had none of the typical corporate hierarchies. His consensus would be a so-called holocracy: no managers or reporting structures. Decision-making would be decentralized and employees could choose their titles. Few had permanent desks. & Nbsp;

"Every day was so relaxed that we went in and did not know if I had a place, literally, it was like Game of Thrones,"Says Jeff Scott Ward, who joined ConsenSys in June 2015 and left the company at the start of 2018. There was a bathroom for 30 people on the floor, Ward says, the company has not hired a person human resources for almost a year and a half, ConsenSys first projects or returns included accounting software for cryptocurrency transactions and a blockchain-based digital rights platform for musicians.Most of the ray ideas came from ConsenSys employees and, once a project was approved, Lubin would start between $ 250,000 and $ 500,000 to get it off the ground. & Nbsp;

The goal was for spokespersons to become self-sufficient businesses and, in an effort to facilitate this, would occasionally be projected into their legal entities. The broader goal of Lubin is to transform its Ethereum ecosystem into a so-called mesh, the strength of which derives from the interconnectivity of the rays. & Nbsp;

Only a handful of spokes that ConsenSys launched has gained adherence. Balanc3, the accounting software project, claims that it has more than 25 commercial customers (although it will not specify any of them), each paying at least $ 25,000 a year. Another, Kaleido, helps companies implement blockchain technology. It has 1,900 users and says it has just started paying for its services. Amazon Web Services recently announced that its ubiquitous hosting platform is compatible with Kaleido blockchain offers. ConsenSys has developed technical tools for Ethereum that programmers have downloaded millions of times, but the company does not charge for them. & Nbsp;

Lubin was less strict than the traditional venture capitalists in project approval. "Joe is the kind of person who tends to want to keep his options open and say" Yes, why not? "Says Reckhow, who is now head of Home's client services and operations, an encrypted company. "He's lucky to be in a position where he's doing well, but he's not so good at giving priority, he'd rather say yes to everything."

^B

eing the Daddy warbucks of the Ethereum blockchain is fine when digital money is trading at stratospheric levels, but as cryptocurrency enters another bear market (see graph, page 74), Lubin, who admits to periodically selling crypto to finance operations, may have to start pulling some caps.

In 2017, Mark Beylin, a student of the University of Waterloo in Canada, came to Lubin with the idea of ​​Bounties Network, a freelance job market similar to the popular Upwork website but uses smart-contract technology from Ethereum, which helps in billing. After a year of activity, Bounties Network has seven people working on it and only $ 250,000 in total "sizes" or job offers, ranging from $ 171 for a blog post of 800 words about the future of work to $ 67.30 in exchange for translation a white book in Portuguese. The Bounties network has generated revenue of less than $ 50,000 so far.

In October 2016, Jared Pereira, an 18-year-old graduate who lives in Dubai, launched Lubin on Fathom, which aims to somehow interrupt the business of higher education through the crowdsourcing of assessments and academic evaluations. Lubin gave the go-ahead, but two years later the project involved six people and no knock-down prototype. His website is nothing more than a few pages that claim high-minded ideals: "If individuals were free to build their own experiences tailored to their unique purposes and were able to communicate these experiences reliably to any entity in the world, there would be an order of magnitude displacement in the effectiveness of social organization at every scale. "

Other projects that have been beaten by Lubin seem even more blatant. Cellarius, a speech that Lubin often promotes wearing a self-titled T-shirt, is a "transmedial cyberpunk franchise" aimed at collaborative storytelling on the blockchain. What exactly is the collaborative narrative and why will the blockchain make it better or more profitable? The explanation of his website is all but clear.

Lubin insists that ConsenSys is becoming more selective in picking projects. But old habits die hard. In October, he bought a nine-year-old mining company called Planetary Resources. "We see it as a group of extraordinarily capable people who are interested in exploring how the blockchain could branch out into space operations," Lubin says in an abstruse way. Civil, a word that aims to put journalism on the blockchain and that should somehow increase the level of confidence in the news, recently had to cancel its ICO because it did not raise its minimum target of $ 8 million. Some of the journalists in the 18 editors of Civil say they have not yet received compensation in the form of tokens that have been promised. (Revelation: Forbes has recently announced a partnership with Civil.)

ConsenSys also offers consulting services, in particular to help companies become blockchain-literate. To date, this is the best business of ConsenSys. In the short run, these services will be successful, as long as companies do not wake up and realize that blockchain is not necessarily better for most things and sometimes worse than other technologies. ConsenSys consultants have helped create Komgo, for example, a consortium of 15 major banks that includes Citi, BNP Paribas and ABN AMRO. Komgo wants to use the blockchain to bring efficiency to the financing of goods shipped around the world, such as oil. ConsenSys consultants are also collaborating with UnionBank in the Philippines to accelerate money transfers.

Last year, the ConsenSys consortium went from 30 employees to over 250 and, according to Lubin, is carrying "tens of millions of dollars" in the form of money and shares. & nbsp; As for the ConsenSys beams, which are mostly applications and development tools, Forbes estimates that all of these will not generate more than $ 10 million in revenue in 2018. & nbsp;

So far, ConsenSys' biggest consenSys successes are its tools for Ethereum programmers. Its MetaMask product, which allows users to access Ethereum from a web browser, has more than a million downloads (all free). Truffle, which helps developers manage and test parts of their code for creating Ethereum applications, has also canceled one million free downloads. It can be difficult to charge real money for these instruments because of the community and almost anarchic nature of the blockchain developer community. ConsenSys states that it will soon begin to load Infura, another tool that facilitates access to Ethereum. & Nbsp;

"ConsenSys has done more for the Ethereum ecosystem in its first five years of development than any other company," says Meltem Demirors, Chief Strategy Officer of CoinShares, a crypto-asset management company. & Nbsp;

ConsenSys will end up in the Harvard Business Review as a case study on changing the business structure or as a disaster. & Nbsp;

None of this seems to question Lubin, who is clearly not launching projects to make profits. "The intent is not to create companies and send them and make money," he says. "The intention is to create an ecosystem, it's very familiar." However, Lubin also recognizes that changes are in order and has recently sent a note to his staff to become leaner and more focused. "In ConsenSys 2.0," Lubin says, "we will pay more attention" to the market-based obstacles that traditional startups must eliminate. & Nbsp; And he does not rule out redundancies, not even in his consulting sector.

^T

the major problems at ConsenSys may have less to do with the precipitation of the prices of the crypt and the decreasing fortune of Lubin than with the strange operational structure of its conglomerate. & nbsp;

ConsenSys would like to believe that it is reinventing the future of work and business. As you enter ConsenSys' hacker-chic excavations in Brooklyn, there are a lot of anti-establishment touches, including a large banner on the wall that reads "Welcome to the Decentralized Future". & Nbsp;

In fact, CEO Lubin tries not to tell people what to do. "He wants to be like an anti-CEO or an anti-founder," says Jeff Scott Ward, a former employee who thinks that this is partly because Lubin is a good boy who wants to be democratic. & Nbsp;

But there are some not so nice consequences of having Mr. Nice Guy in charge. In ConsenSys, there is less incentive to meet deadlines and make rapid progress. "In many ways, there is still pressure to generate revenue or target targets that normally the VCs and Silicon Valley companies would be looking for," says Griffin Anderson, head of Balanc3. A Glassdoor commentator describes ConsenSys as a place with "unlimited funding and no pressure to actually deliver something". & Nbsp;

Even the lack of a traditional structure has generated a bad policy. "It looks a little like Survivor,"Says Lucas Cullen, a former employee, ConsenSys employees who are close to Lubin get faster access to resources, says a former employee, and the responsibility varies widely from one team to another. & Nbsp;

ConsenSys has resource allocation committees, charged with deciding whether the spokes will continue to receive additional engineers or funding. But the committees are in constant state of flow. "He's always a finance person, but he's usually made up of people who have an interest in your area," says Thomas Hill, co-founder of Truset, a ConsenSys who is building a crowdsourcing corporate data platform. "Anyone can register for a RAC." & Nbsp;

According to Ward, who spent three years in ConsenSys, "There were too many cooks in the kitchen, it was like, whose ego is the strongest, and it was grueling," he says. UPort, a tool designed to allow users to access Ethereum applications, had three project managers, who could not align on a single vision. Today there are only 15 applications that use UPort and the project is divided into two. & Nbsp;

Many describe ConsenSys' culture as chaotic and the company seems to have difficulty keeping track of its projects. The ConsenSys homepage says it has "50+ companies spoken", but when reporting this story, the number ranged from "more than 30" to, more recently, 42. It's a "fluid number," says a company spokesperson. .

Lubin recognizes some of these difficulties. "& Lsqb; Accountability & rsqb; It was a problem at ConsenSys, "he says." We have worked to put in place various mechanisms to make clear who is responsible for what and to ensure clear responsibility. "But he also cites the real benefits of its mesh architecture. collaborators and silos are easily violated.The employees report that there is little stigma to question the hypotheses of others, and some insiders report feeling empowered, especially the opportunity to move sideways between projects. & Nbsp;

According to Hill, the co-founder of Truset, "ConsenSys will end up in Harvard Business Review as a case study, either as a lesson on how to change the corporate organizational structure or as a disaster. "& nbsp;

^I

There is a paradox in Lubin's quest to reinvent the business for the next era of decentralization, is that ConsenSys is actually much more centralized than Lubin would like to admit. & nbsp;

For example, when ConsenSys spokes have become widespread and become separate companies, Lubin has retained ownership of 50% or more. So, like John Pierpont Morgan and Andrew Carnegie during the America's Gilded Age and technology moguls Jeff Bezos and Mark Zuckerberg of the Internet era, Lubin is getting ready to become one of the dominant titans of the 39; it was blockchain. "This is where the whole mesh is – and decentralization falls apart," Ward says. "It was never clear who had what participation". In the case of Grid +, one of the ConsenSys projects was distributed via an ICO, Forbes he estimates that Lubin has gone away with less than 20% of his tokens, in addition to half his capital. & nbsp;

"I do not think they even have the slightest idea of ​​what decentralization is," states CoinShares' Demirors. & Nbsp;

And the problem of sharing the fairness of ConsenSys among its 1,200 employees has become a joke. The former employees report that for a long time Lubin was evasive and that the plan was always "six weeks away" if I asked him. In fact, the first series of 100 employees received their capital at the beginning of 2017 and, almost two years later, says ConsenSys, is still working on a plan to give its workforce a larger share in the company.

Lubin does not think the ConsenSys structure has contradictions. "If you can build a system that serves many people and they are all happy with the system, then the original structure does not necessarily have to be owned by many people," he says, in an answer that could only have been easily pronounced by Zuckerberg to the eve of Facebook's lopsided public offering.

In 2017 ConsenSys was able to use ICOs as an easy and profitable way to get companies out and reward internal staff. But now that the SEC is knocking down the ICOs, that window is much smaller. "While we try to make more external investments, there are specific arrangements where we need to map to a traditional VC model," says Ron Garrett, head of ConsenSys Labs, the division responsible for deciding which projects to become spokes. "In these agreements, we will take less equity". He adds that other startup incubators like Betaworks are known to take "majority shares in the companies they incubate in." So much for democratization and decentralization.

For now, Joe Lubin's great experiment in the future of business is racing against a clock: will blockchain applications achieve major success before Lubin's generosity is exhausted? & Nbsp;

Even the most successful applications on Ethereum have tiny user bases. The most widely used application is a decentralized exchange for encryption negotiation called IDEX, which is not affiliated with ConsenSys. After over a year of activity, it has a small number of daily users. "We knew that it would take a lot of work and it will take a long time before allowing massive evolution on a planetary scale," says Lubin. & Nbsp;

If Lubin is still a billionaire, he may be able to support ConsenSys for several years, even with $ 100 million plus the annual burn rate. "So how is it, ConsenSys is stable and healthy," he insists. & Nbsp;

At what point will Lubin throw in the towel? "I have no exit plan, and I've never had an exit strategy for anything I've done," says ConsenSys' San Francisco office, where he has just hosted a "demonstration day" for 16 startups eager to join his bankroll. "I'm in."

Join Jeff Kauflin at [email protected] and Sarah Hansen at [email protected]. Cover image of Filip Peraić.

This story appears in the Forbes issue of December 31, 2018. & Nbsp;

">

^A

a year ago, Joe Lubin looked like one of the most prescient people on the planet. Cryptocurrencies like ether were in the midst of the rise of a hockey stick, and Lubin, a co-founder of Ethereum's blockchain and one of its most articulate launchers, was supposed to speak at events from Davos to SXSW . In the "Ethereal Summits" of his company, he was alone standing, with the crowd looming over his utterance, no matter how bizarre.

At an event in San Francisco, in October 2017, he scolded the participants for hitting their televisions and for being rude to Siri, Apple's digital assistant. "We designed Ethereum to allow machines and robots to be first-class citizens," Lubin said with sincere sincerity as he embraced visions of decentralization, self-sovereignty and a democratized global society. "So, be kind to the machines of this generation, for fear that some future general artificial intelligence that believes you have been disrespectful to your ancestors decides to turn your carbon into something more useful for the future mechanical economy."

Lubin's line laughed, but in the fall of 2017 the idea that the blockchain – the database technology distributed at the base of almost all cryptocurrencies – would introduce a new world order did not seem far-fetched. The price of a single ethereal token, a digital representation of money similar to bitcoin, had just passed $ 300, compared to $ 10 at the start of 2017. It was about to reach a peak of $ 1,389 within the next three months. . Forbes I will soon appoint Lubin the second-richest person in a crypto, valued at $ 5 billion, largely based on reports that he owned between 5% and 10% of all outstanding circulation, which at the beginning of 2018 had a market value above $ 100 billion.

"The potential of this technology is enormous", Lubin, 54, tells Forbes in a recent interview. "They are many orders of magnitude more precious than [where the tokens] they are sitting right now, because they will allow all aspects of society. We will build everything on this technology ".

Towards the end of 2014, a few months after the ether launched by crowdsale at 30 cents per token, Lubin created ConsenSys, a holding company that describes grandly as a global "body" to build applications and infrastructures for a decentralized world. In fact, it is the first cryptographic conglomerate, comprising a network of for-profit companies that supports bitcoin's largest blockcoin competitor, Ethereum. More than 50 companies were quickly raised from its Brooklyn office, ranging from a poker site and a supply chain to a forecasting market, a healthcare record company and a computer security consulting firm.

But there were no fund-raising rounds or debt bids. In Lubin's version of the decentralized future, he is the architect, the CEO and the central banker, who finances all the "rays" of ConsenSys from his personal cryptocurrency.

Lubin must still veer significantly from this general plane, despite the serious cracks in its foundations. For one thing, Ethereum's blockchain faces strong opposing winds. Thanks to its perceived technical superiority – largely because it allows apps to be "incorporated" into the blockchain – Ethereum has become the launch pad for hundreds of initial coin offerings (ICOs), many of which have in total caused billions of losses for their supporters. Il cripto-paesaggio è disseminato di carcasse di ICO sfortunati di Ethereum, e ora la SEC e altri regolatori si stanno prendendo di mira alcuni di loro per un&#39;azione di contrasto. A novembre, la SEC ha risolto le azioni contro due startup basate su Ethereum, Airfox e Paragon, che avevano venduto in modo efficace $ 27 milioni in titoli non registrati quando hanno emesso i loro ICO nel 2017. Entrambi i token ora sono sostanzialmente privi di valore. Nel frattempo, blockchain concorrenti come App, come EOS, che processano quasi dieci volte più transazioni al giorno, e Dfinity, che ha recentemente raccolto $ 102 milioni da investitori come la società VC Andreessen Horowitz, stanno sfidando Ethereum. Ma quasi tutte le tecnologie blockchain rimangono glacialmente lente. Ethereum può elaborare solo circa 20 transazioni al secondo. Al contrario, Visa può gestire 24.000.

Eppure l&#39;organismo di Lubin continua a crescere. ConsenSys ha 1.200 dipendenti e circa 200 offerte di lavoro sono pubblicate su consensys.net. Sebbene ConsenSys abbia rifiutato di commentare, Forbes stima che quasi tutte le sue attività siano in rosso, alcune con poche speranze di redditività. L&#39;organismo globale di Lubin sembra bruciare denaro a un tasso di oltre $ 100 milioni all&#39;anno.

Quando i dipendenti preoccupati hanno interrogato Lubin sulla sostenibilità di ConsenSys, Lubin ha sempre avuto una risposta: "Joe direbbe, &#39;Questo non è sicuramente qualcosa di cui devi preoccuparti. Possiamo andare avanti a questo ritmo per molto, molto tempo ", ricorda Carolyn Reckhow, ex direttore delle operazioni globali che ha lasciato ConsenSys a maggio.

Con il prezzo dell&#39;etere in caduta libera, da $ 1,389 a poco più di $ 100 oggi, la fortuna di Lubin potrebbe essere scesa a meno di $ 1 miliardo, mettendo in discussione per quanto tempo può continuare a finanziare il suo sogno. Tutto dipende da quanta etere ha venduto – e quando.

^THE

Gli altri cofondatori di Ethereum, Vitalik Buterin e Anthony Di Iorio, Lubin sono cresciuti in Canada. Un nerd informatico autodefinito il cui padre era un dentista e la cui madre era un agente immobiliare, ha frequentato Princeton a metà degli anni &#39;80, dove ha giocato a squash ed era coinquilino con la futura stella miliardaria degli hedge fund Mike Novogratz, che, come Lubin, alla fine perno verso blockchain e cripto. Dopo essersi laureato nel 1987 con una laurea in ingegneria elettronica e informatica, Lubin ha iniziato a lavorare in tecnologia presso il laboratorio di robotica di Princeton, ma alla fine ha iniziato a finanziare, creando software per Goldman Sachs e poi gestendo un hedge fund di successo.

L&#39;ufficio di Lubin non era lontano da Ground Zero durante gli attacchi dell&#39;11 settembre, e l&#39;esperienza straziante lo ha gettato in una crisi esistenziale. Nel corso del decennio seguente divenne profondamente depresso per lo stato del mondo.

"Era follia affidarsi a tutte quelle strutture che, implicitamente, ritenevamo di avere a cuore i nostri migliori interessi. … I felt we were living in a global society and economy that was figuratively, literally and morally bankrupt,” he said at ConsenSys’ Ethereal Summit in May 2017. “I was confident that our economy and society were in a slow, cascading collapse.” Lubin foresaw two equally catastrophic outcomes: Central bankers would eventually debase currencies to pay off mounting debts, stifling growth for decades, or some unexpected “nonlinear” event would create great hardships and send the world into the worst economic depression it had ever seen. So distraught was Lubin that he traveled to Peru and Ecuador looking for land he could escape to.

Then in early 2011, Lubin read the bitcoin white paper and had an epiphany: “Decentralization was a game-changer.”

Lubin’s global “organism” appears to be burning more than $100 million a year, yet ConsenSys is still expanding.

Reading all he could on bitcoin, Lubin was eventually introduced by Di Iorio to Vitalik Buterin, Ethereum’s then 19-year-old creator and boy genius of crypto. Having read Buterin’s November 2013 Ethereum white paper, Lubin got in on the ground floor of the Ethereum project and attended the group’s foundational meeting in Miami in January 2014. He continued as part of the core group through Ethereum’s $18 million initial coin offering in July 2014 and was rumored to be one of the biggest buyers during the token’s initial crowdfunding, at prices estimated to be well below a dollar. Ultimately, Ethereum’s founding team bickered and parted ways. Buterin continued to focus on the technology, while Lubin hatched his plan to create a business ecosystem around Ethereum.

For ConsenSys’ headquarters, Lubin chose the hipster-heavy Bushwick neighborhood of Brooklyn. From the outside, 49 Bogart Street looks dingy: The door is covered with the kinds of stickers you’d see in a bar bathroom and is surrounded by graffiti. The interior isn’t all that different. ConsenSys occupies multiple lofts alongside residential apartments.

When it came to organizational structure, Lubin wasn’t having any of the typical corporate hierarchy. His ConsenSys would be a so-called holocracy—no managers or reporting structures. Decision-making would be decentralized, and employees could choose their own titles. Few had permanent desks.

“Every day, it was so lax that I’d walk in and didn’t know if I had a seat. Literally, it was like Game of Thrones,” says Jeff Scott Ward, who joined ConsenSys in June 2015 and left the company in early 2018. There was one toilet for 30 people on the floor, Ward says. The company didn’t hire a human resources person for almost a year and a half. ConsenSys’ first projects, or spokes, included accounting software for cryptocurrency transactions and a blockchain-based digital-rights platform for musicians. Most of the ideas for spokes came from ConsenSys employees, and once a project was approved, Lubin would give the startup between $250,000 and $500,000 to get it off the ground.

The goal was for the spokes to become self-sustaining businesses, and in an effort to foster this, they would occasionally be spun out into their own legal entities. Lubin’s broader goal is to turn his Ethereum ecosystem into a what he calls a mesh, whose strength is derived from the spokes’ inter-connectivity.

Only a handful of the spokes ConsenSys has launched have gained traction. Balanc3, the accounting software project, says it has more than 25 business customers (though it won’t specify any), each paying at least $25,000 a year. Another, Kaleido, helps companies implement blockchain technology. It has 1,900 users and says it just began charging for its services. Amazon Web Services recently announced that its ubiquitous hosting platform is compatible with Kaleido’s blockchain offerings. ConsenSys has built technical tools for Ethereum that programmers have downloaded millions of times, but the company doesn’t charge for them.

Lubin has been less rigorous than traditional venture capitalists in approving projects. “Joe is the kind of person who tends to want to keep his options open and say ‘Yes, why not?,’ ” says Reckhow, who’s now head of client services and operations at Casa, a crypto-wallet company. “He’s lucky to be in a position where that works well, but he’s not as good at prioritizing. He’d rather say yes to everything.”

^B

eing the Daddy warbucks of the Ethereum blockchain is fine when digital money is trading at stratospheric levels, but as cryptocurrency enters another bear market (see chart, p. 74), Lubin, who admits to periodically selling crypto to fund operations, may need to start pulling some plugs.

In 2017, Mark Beylin, a student at the University of Waterloo in Canada, came to Lubin with the idea for Bounties Network, a marketplace for freelance jobs that’s similar to the popular website Upwork but uses Ethereum’s smart-contract technology, which helps with billing. After one year in operation, Bounties Network has seven people working on it and just $250,000 in total “bounties,” or offers for jobs, which range from $171 for an 800-word blog post on the future of work to $67.30 in exchange for translating a white paper into Portuguese. Bounties Network has generated revenues of less than $50,000 so far.

In October 2016, Jared Pereira, an 18-year-old high school graduate living in Dubai, pitched Lubin on Fathom, which aims to somehow disrupt the higher-education business by crowdsourcing academic evaluations and grading. Lubin gave the go-ahead, but two years later the project has six people working on it and no launchable prototype. Its website is nothing more than a few pages stating high-minded ideals: “If individuals were free to build their experiences tailored to their unique aims, and were able to communicate those experiences reliably to any entity in the world, there would be an order of magnitude shift in the efficacy of social organization at every scale.”

Other projects that have been staked by Lubin seem even flakier. Cellarius, a spoke that Lubin often promotes by wearing an eponymous T-shirt, is a “transmedia cyberpunk franchise” aimed at collaborative storytelling on the blockchain. What exactly is collaborative storytelling, and why will the blockchain make it better or more profitable? Its website’s explanation is far from clear.

Lubin insists ConsenSys is getting more selective in picking projects. But old habits die hard. In October it bought a nine-year-old asteroid-mining company called Planetary Resources. “We see it as a group of amazingly capable people who are interested in exploring how blockchain could ramify on space operations,” Lubin says abstrusely. Civil, a spoke that aims to put journalism on the blockchain and is supposed to somehow increase the level of trust in news, recently had to cancel its ICO because it failed to raise its minimum target of $8 million. Some of the journalists in Civil’s 18 newsrooms say they have yet to receive compensation in the form of tokens they were promised. (Disclosure: Forbes recently announced a partnership with Civil.)

ConsenSys also offers consulting services, essentially assisting companies in becoming blockchain-literate. To date, this is the best business ConsenSys has. In the short run, these services will succeed—until companies wake up and realize that blockchain isn’t necessarily better for most things and is sometimes worse than other technologies. ConsenSys consultants helped create Komgo, for example, a consortium of 15 big banks that includes Citi, BNP Paribas and ABN AMRO. Komgo wants to use the blockchain to bring efficiency to the financing of goods shipped around the world, like oil. ConsenSys consultants are also working with UnionBank in the Philippines to speed up money transfers.

In the past year, ConsenSys’ consulting arm has grown from 30 employees to more than 250 and, according to Lubin, is bringing in “tens of millions of dollars” in the form of cash and equity stakes.  As for ConsenSys’ spokes, which are mostly applications and developer tools, Forbes estimates the whole lot of them won’t generate more than $10 million in revenues in 2018.

So far, ConsenSys’ biggest non-consulting successes are its tools for Ethereum programmers. Its MetaMask product, which lets users log in to Ethereum from a Web browser, has more than one million downloads (all of them gratis). Truffle, which helps developers manage and test parts of their code for building Ethereum applications, has also cleared one million free downloads. It can be difficult to charge real money for these tools because of the communal, quasi-anarchist nature of the blockchain developer community. ConsenSys claims it will soon start charging for Infura, another tool that facilitates access to Ethereum.

“ConsenSys has done more for the Ethereum ecosystem in its first five years of development than any other firm,” says Meltem Demirors, chief strategy officer at CoinShares, a crypto-asset-management company.

ConsenSys will end up in the Harvard Business Review as a case study on changing corporate structure or as a disaster.

None of this seems to phase Lubin, who is clearly not launching projects to make profits. “The intention isn’t to create companies and send them out and make money,” he says. “The intention is to create an ecosystem. It really is very family-like.” However, Lubin also acknowledges that changes are in order and recently sent a memo to his staff about becoming leaner and more focused. “In ConsenSys 2.0,” Lubin says, “we’ll pay more attention” to the market-based hurdles that traditional startups have to clear. And he’s not ruling out layoffs—even in its consulting business.

^T

he biggest problems at ConsenSys may have less to do with plunging crypto prices and Lubin’s dwindling fortune than with his conglomerate’s weird operating structure.

ConsenSys would like to believe that it’s reinventing the future of work and business. As you enter ConsenSys’ hacker-chic Brooklyn digs, there are lots of antiestablishment touches, including a large banner on the wall that reads, “Welcome to the decentralized future.”

In fact, CEO Lubin tries not to tell people what to do. “He wants to be like the anti-CEO or the anti-founder,” says Jeff Scott Ward, a former employee who thinks this is partly because Lubin is a nice guy who wants to be democratic.

But there are some not-so-nice consequences of having Mr. Nice Guy in charge. At ConsenSys, there’s less incentive to meet deadlines and make fast progress. “In a lot of ways, there still isn’t pressure to generate revenue or hit targets that normally Silicon Valley VCs and businesses would be looking for,” says Griffin Anderson, who leads the Balanc3 spoke. One Glassdoor commenter describes ConsenSys as a place with “unlimited funding and no pressure to actually deliver anything.”

The lack of traditional structure has also spawned ugly politics. “It feels a little like Survivor,” says Lucas Cullen, a former employee. ConsenSys staffers who are close to Lubin get faster access to resources, says a former employee, and accountability varies widely from team to team.

ConsenSys does have Resource Allocation Committees, which are charged with deciding whether spokes will continue to receive additional engineers or funding. But the committees are in a constant state of flux. “There’s always one person from finance, but they’re generally made up of people who have an interest in your area,” says Thomas Hill, a cofounder of Truset, a ConsenSys spoke that’s building a crowdsourced business data platform. “Anyone can sign up for an RAC.”

According to Ward, who spent three years at ConsenSys, “There were too many cooks in the kitchen. It was like, Whose ego is the strongest? It was exhausting,” he says. UPort, a tool aimed at letting users log in to Ethereum applications, had three project managers, who couldn’t align on a single vision. Today there are just 15 applications using UPort, and the project is splitting in two.

Many describe ConsenSys’ culture as chaotic, and the company seems to have trouble keeping track of its projects. ConsenSys’ homepage says it has “50+ spoke companies,” but during the reporting of this story, the number ranged from “more than 30” to, most recently, 42. It’s a “fluid number,” says a company spokesperson.

Lubin acknowledges some of these difficulties. "[Accountability] has been an issue at ConsenSys,” he says. “We’ve been working to put in place various mechanisms to make it clearer who’s responsible for what and to ensure crisp accountability.” But he also cites real benefits to his mesh architecture. Projects are collaborative, and silos are easily breached. Employees report that there is little stigma attached to questioning others’ assumptions. And some insiders report feeling empowered by the autonomy—especially the opportunity to move laterally among projects.

According to Hill, the Truset cofounder, “ConsenSys will end up in the Harvard Business Review as a case study, either as a lesson on how you change corporate organizational structure or as a disaster.”

^THE

f there is a paradox in Lubin’s quest to reinvent business for the coming age of decentralization, it’s that ConsenSys is actually much more centralized than Lubin would like to admit.

When ConsenSys spokes have spun out and become separate businesses, for example, Lubin has retained ownership of 50% or more. Thus, like John Pierpont Morgan and Andrew Carnegie during America’s Gilded Age and tech magnates Jeff Bezos and Mark Zuckerberg of the internet age, Lubin is setting himself up to become one of the controlling titans of the blockchain era.“This is where the whole mesh-and-decentralization thing falls apart,” Ward says. “It was never clear who had what stake.” In the case of Grid+, one of the projects ConsenSys spun out through an ICO, Forbes estimates that Lubin walked away with no less than 20% of its tokens, in addition to half of its equity.

“I don’t think they even have the slightest idea what decentralization is,” says Demirors of CoinShares.

And the issue of sharing ConsenSys’ equity among its 1,200 employees has become a running joke. Former employees report that for a long time Lubin was evasive and the plan was always “six weeks away,” if you asked him. In fact, the first set of 100 employees or so received their equity in early 2017, and nearly two years later, ConsenSys says, it’s still working on a plan to give its larger workforce a stake in the company.

Lubin doesn’t think ConsenSys’ structure presents contradictions. “If you can build a system that serves many people and they’re all delighted with the system, then the originating structure doesn’t necessarily have to be equally owned by lots of people,” he says, in a response that could have just as easily been uttered by Zuckerberg on the eve of Facebook’s lopsided public offering.

In 2017 ConsenSys was able to use ICOs as an easy and lucrative way to spin companies out and reward internal staff. But now that the SEC is cracking down on ICOs, that window is much smaller. “As we look to make more external investments, there are specific deals where we need to map to a traditional VC model,” says Ron Garrett, head of ConsenSys Labs, the division responsible for deciding which projects become spokes. “In those deals, we’ll take less equity.” He adds that other startup incubators like Betaworks are known to take -majority stakes in the companies they incubate. So much for democratization and decentralization.

For now, Joe Lubin’s grand experiment in the future of business is racing against a clock: Will blockchain applications achieve mainstream success before Lubin’s largesse is exhausted?

Even the most successful applications on Ethereum have tiny user bases. The most widely used application is a decentralized exchange for trading crypto called IDEX, which is unaffiliated with ConsenSys. After more than a year in operation, it has a pitiful 1,000 daily users. “We knew that it was going to be a lot of work and take a long time before you enable massive evolution on a planetary scale,” Lubin says.

If Lubin is still a billionaire, he may be able to sustain ConsenSys for several years—even at its $100 million-plus annual burn rate. “As it stands, ConsenSys is stable and healthy,” he insists.

At what point will Lubin throw in the towel? “I have no exit plan, and I’ve never had an exit strategy for anything I’ve done,” he says from ConsenSys’ San Francisco offices, where he just hosted a “demo day” for 16 startups eager to join his bankroll. “I’m all in.”

Reach Jeff Kauflin at [email protected] and Sarah Hansen at [email protected]. Cover image by Filip Peraić.

This story appears in the December 31, 2018 issue of Forbes.