Ethereum’s Joseph Lubin: “I Have a Really Cool CryptoKitties T-shirt”

So hi Joseph, it’s very nice to meet you here. Thanks for being here with us Tell us please a little bit about the story behind Ethereum in around 2012 Things were gaining momentum and lots of different people around the world in the Bitcoin space started thinking Hey, this is an amazing Database technology breakthrough. Not only does it enable people to Be incentivized to share their resources to validate transactions and secure a network But it provides this trust layer that we’ve never had before so radically decentralized trust layer so that people could interact with one another transact with one another If they were competing or if they didn’t even know one another and still have full trust in those transactions, so Bitcoin contemplated that sort of thing only for money basically cryptocurrency and Lots of people in 2012 felt. Hey, we should be using this for all of our software systems. And so different Things were tried colored coins Meta protocols other blockchain systems metallic blue Turin was working on he might be right down there He’s somewhere somewhere in the vicinity He was working on a few different They were called Bitcoin 2.0 projects. They later evolved to be called blockchain projects That he was working on Bitcoin 2.0 and came up with the description for the Ethereum platform. That was Essentially the most elegant most powerful description of a blockchain platform up to that point it Contemplated having a computationally complete virtual machine at every node of a peer-to-peer network Separating the protocol layer from the application layer in Bitcoin up to that point There was no separation of application from protocol really if he wanted to build some new app Into Bitcoin or into another blockchain system yet to do it at the protocol level You needed a protocol priest to figure out how to fit a bunch of bits and architect things and create a new operation code In there and then you’d have to create some user interface for it. So separating the protocol error from the application layer enabled Essentially millions of software engineers to not worry too much about what’s going on at the protocol layer and just build with tools similar to what they’re used to using when building web applications and mobile applications and identify their own problem and Build their own solution and that ended up working out pretty well because the Ethereum application layer developer base is about 40 times larger Currently according to Gartner then the number two blockchain system, which is IBM’s fabric And how did you meet Vitalik? So I’m from Toronto? Vitalik from Toronto. I was home in December 2013 a visiting family over the Christmas break and Met Vitalik about a month after he wrote the white paper describing Ethereum Talked for a while that day. I read the white paper that night and stayed close to the growing group of people that was excited about the project and a few weeks later we all got a house together in Miami and We structured the project a couple days later. We were basically there for the North American Bitcoin conference in Miami and Vitalik was scheduled to deliver the Ethereum paper that he’d written first phase the project was structured there What was the most challenging time for the Ethereum network so far? I think there are lots of challenging times for the project. So it’s it was unprecedented many people said it couldn’t be done many people said it was stupid to do it because the attack service would be so big in and fuzzy and It’s turned out To be a remarkable success in my opinion and it’s still very immature. It’s still very young We are in kind of phase one of the blockchain space still where we have These networks where and you know, all the full nodes basically have to hold all the data and process all the transactions We’re just moving for ethereum into Phase two where we keep that not very scalable radically decentralized trust layer and we add a layer two for scaling on top of that so that We can have 20 transactions per second in this trust layer But we can have hundreds or thousands of transactions per second and state channels or side chains at layer two And so that’s available now lots of projects are building that out some projects are released already using state channels and plasmas available different sizing mechanisms are available if there have been Difficult times for the Ethereum project. Let’s say technically difficult times. It’s absolutely necessary Though the Internet Protocol has evolved the web protocols Evolved because software developers were pushing on them For decades we’ve had scalability concerns in information technology And so we need to keep throwing too much at the network so that we know exactly Where the weak spots are where the bottlenecks are and how to architect things so they can handle bigger better applications There are a lot of projects right now that move from Ethereum network to create their own like Tron for instance Yeah, what does it mean for Ethereum? Well, I guess it establishes. Ethereum as a Great birthing or launching ground for a whole lot of projects that are exploring the solution space and I think that’s really valuable the Ethereum ecosystem is orders of magnitude larger than other ecosystems and The mechanism is is much more expressive much more powerful than any other block chain out there right now the Ethereum Set of teams the many set of teams that work at the protocol layer are very open and agile and have demonstrated that they can take technologies like ring signatures or ZK snarks that are Developed elsewhere and move them into Ethereum as as it makes sense So I think there should be many different projects in our ecosystem exploring How to do things and it doesn’t need to be on Ethereum, but we’re paying attention What about the recent SEC hearing in establishing the is not a security There wasn’t a hearing Bill Hinman just delivering a talk at San Francisco event. And so how did you feel about that where you feel? Stressed about what’s what might happen if it were established as a security We were extremely confident that it would never be seen to be a security We did a huge amount of legal work about seven months of legal work back in 2014 before We launched the ether token launch so we’re confident that it never was a security the sale did not constitute the sale of an unregistered security to Americans and we’re confident that the ether token Has never been a security We understood the ramifications if they declared it a token, then there’d be some issues around where the ether token could trade but the Ecosystem is already so enormous Established decentralized that you can’t really stop that sort of thing. There would have had to have been some adjustments But we also been talking to regulators around the world for a long time And the SEC knows what they’re talking about. We were confident that they would understand how we test maps on to this particular instrument and how the nature of the decentralized ecosystem ramifies on on their decisions and so What was even more exciting? about what director Hinman said was that I think they sort of consider Ether to be in a new class of tokens consumer utility tokens that Essentially enable this new networked business model to be pioneered so a different way of humans, organizing for collective commercial action Where I’m not necessarily Making an investment in relying on a third party To increase the value of my investment. I am buying something a utility and Participating in a network of activity. I’m adding value to that network of activity and if we Together create these product that’s protocol based open platform and we’re building a whole lot of those things at our company consensus and It is held together logically by a token that you know has certain characteristics on that platform None of which constitutes securities Then if that token or if the network itself Gets utilized heavily then supply and demand will cause that network to become much more valuable So if we’re all contributing in our different roles to that network business model, we can all make it more valuable together So if it’s transforming to this consumer network, right and if it’s an asset of consumer utility You said the new asset should it be also regulated or just you feel like the regulator is not really sure about how to Approach this new asset? so it is regulated in the sense it is there are laws in lots of countries there are money transmission laws KYC AML This kind of activity does not currently fall under any specific detailed Requirement for regulation or guidance? And so Unless it’s operating say in the pharmaceutical industry or something like that there doesn’t seem to be any reason to regulate it any more than you would regulate a Bowling club or something like that What about Consensys? Can you tell us a little a little bit about ConsenSys? What does the company do what’s your role in it? So ConsenSys was started about three and a half years ago one year into the Ethereum project we’re getting to the point where it looked like we were going to Release version 1 of the platform, but there weren’t a lot of people building applications So we started it to start building applications. We started building a few applications We realized it was hard to build applications with no developer tools for a platform. That wasn’t really yet released in an ecosystem that didn’t exist and We started building those developer tools. We started building infrastructure to support applications things like Metamask and Infura which currently handles about eight billion queries per day from the public Ethereum and IPFS systems So Ethereum is a network that handles somewhere between 800,000 and a million transactions a day currently That’s about 80% of all the transactions in the blockchain space But those are rights against the database so transactions change some sort of data on the blockchain But there’s so many applications that read data and do logging events and other kinds of queries on the data And you don’t have to do a transaction for those things. So that’s how you get from say 1 million to about 8 billion and so we built that infrastructure we Build other products like Uport self sovereign identity and reputation systems and accounting systems and governance tools And we build many of these protocol based open platforms so from the adjacent music industry and in longitudinal health data in Bounty’s network and so a lot lots of these things that are Essentially, they’re not all Running with a token right now, but they’re all moving towards Basically defining a protocol And turning it into an open platform. So lots of businesses can operate on these on these platforms So that’s the product side of the company. We also do enterprise and government consulting. It’s nearly all on Ethereum So we do a huge amount of Ethereum focus work for the public blockchain ecosystem But wait, we use the exact same technology in work with corporations. We’ve done work in energy banking insurance Healthcare supply chain and education and lots of work with government as well. So a couple different central banks and Zug where we are right now our identity System Uport is being used for for citizens to access government services and to vote on plebicites and Done a bunch work in Dubai and the smart device smart city project and Land Registry work and We sort of manager of the European Union blockchain observatory where were interacting with lots of member nations and helping drive thought leadership there and Our education group ConsenSys Academy We’ve graduated 120 blockchain engineers and a bunch of lawyers and a continuing legal education course other kinds of learners from different institutions we currently have about 800 people in an online cohort right now and another Hundred or 200 people in a course based in India right now, so we’re and on the capital market side of a group that’s building a foundational layer for custody, so custody of value tokens is essentially the big issue that’s holding a bunch of Serious legacy world financial institutions from jumping heavily into the space They need a really good narrative around how their value tokens are being stored so we’re we’re building a product so some people from sophisticated banks some of them organized in this country Switzerland and some organized in America and It’s an outstanding team and we think we’re gonna have a breakthrough product for custody That can serve as the foundation for lots of things. You can build exchanges on top of that. We’re Working on that sort of thing We have a group called token foundry. So we’ve done token launches of investor tokens securities we’ve done token launches of consumer utility tokens and we are Beefing up our ability to do a lot of both of those and so we’ve actually pioneered this notion of a Technologically accredited token buyer so that essentially director Hinman in that That talk that he gave He pretty much indicated that if you architect your token correctly you market it correctly Then it would not be seen by the SEC to be a security and and every situation is different So we can architect it correctly. But if you take a well architected token, and then you sell it in huge quantities to investor types at discounts and you put billboards up in Times Square and Exactly so that might be seen to be an investment if people are led to believe that they’re going to Have their purchase grown and monetary value by the agency of others then that could be considered a security so we have this infrastructure that Will ensure that we’re not selling tokens or the different projects aren’t selling tokens In excess quantities to investor types, you’re gonna have to know the technical details of how to use the tokens You may have to pledge that you are using the tokens tokens may not even be tradable Until you’ve actually used them on the platform. So we’ve built that infrastructure If you want to find your own company is an initial cone offering the best way to do that in your opinion It’s too general a question If it makes sense You know talk with some experts so you think so we we don’t really think about these token launches as Ideal funding mechanisms. We think about them as ideal mechanisms for Doing what we call incentivized mechanism design. So mechanism design is Is the pursuit where you have system designers? Defining the goals of the system setting up rules for the system Such that the different selfish actors in the system according to game theoretic principles act selfishly and ultimately Interact with one another to accomplish the goals of the system So these crypto tokens are incredibly valuable for incentivizing that sort of behavior and Enabling these rules to work and a really nice side effect is that You can architect your project such that you sell a bunch these tokens To participants in your system and you can use that money Indeed to build your project During the interview a Bitcoin developer Jameson said he has a feud with you He said that in a five years recent few. Yeah, I would you called a feud We’re not feuding ok is what’s that? Is that a dialogue? So we get we at at the ConsenSys event in New York We’re on stage together and we decided that we would enter into a bet. We haven’t figured out the terms of the bet And He believed that nothing significant would be built on blockchain systems except Bitcoin that’s the Bitcoin is sort of the the final word in sophistication for blockchain systems according to Jimmy and I said there will be lots of sophisticated systems built on blockchain and we have To figure out the details of the bet. I’m I kind of figured he’d drop it because it’s just so Overwhelmingly obvious that sophisticated systems will be built but then I think he went on Laura Shin’s podcast and I I was asked to be on it sorta at the last minute and I couldn’t make it, but I think we’re trying to arrange for Laura to Help us negotiate the terms of that Vitalik was speaking at the at the tech ranch here Earlier, and he said that and I quote. I hope that centralized exchange has would burn in hell as much as possible So my question is, where do you stand on crypto exchanges? so I think that there are lots of Different applications that humans need to build some of them should be architected All of them should be architected appropriately and centralized systems are Appropriate architectures for certain applications. I think what Vitalik is trying to get at is that there are certain vulnerabilities that centralized exchanges have in insert and now certain ways to take advantage of traders on those exchanges and There’s also better user experience on those exchanges right now So you can’t do high-frequency trading on blockchain systems yet, but I think we’re going to get there. So I think we should keep adding more decentralized mechanisms into these exchange systems We can also partition the different trading use cases. So there are lots of people that don’t need a high-frequency trade executed They just want to buy a token and hold it for a long time they should probably use decentralized mechanisms with better pricing mechanisms so you can get rid of a lot of the vulnerabilities on those kinds of exchanges, but we still need more efficient architectures for other kinds of traders and so hopefully all those applications move into Decentralized mechanisms over time when when the technology can handle it. So are you a Crypto trader yourself? No, no I’ve done because I work for living. Oh No, I mean it’s like I work 16 to 20 hours a day and don’t have time to day trade. Ok, but I know how yeah you do now I know how to move to tokens around before ok and any promising project except of course Ethereum, and ConsenSys that you look up to, There are many so many. I mean we have a lot of projects going on. So Solarius Ujo Uport GovernX Metamask Alethio, Infura, Achain the list goes on and lots of these things are are coming alive to I mean There’s a couple high compute Platforms Golem, Sonm, iExec a lot of Ticketing mechanisms are coming alive. So it’s a it’s a pretty exciting year, I think from here on we’re gonna see a lot of deployment of Systems that have been under construction for a while on the main chain and a huge number of sort of fun applications that mostly in the gaming space that because it’s a safe space to play in so we’re gonna see a lot of that at the end of 2018 in into 2019 that Will really drive a lot of interest on the network. So I guess there is no point in asking whether you have Cryptokitties My girlfriend has some cryptokitties and I have a really cool Cryptokittie’s t-shirt Like/subscribe

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