Joseph Lubin | The secrets behind the success of Ethereum & Consensys

welcome everyone today we have the
privilege of speaking with Joseph Lubin co-founder of Ethereum and founder of
ConsenSys, hi Joseph so great to have you here I’m great, Thank you. We are here in Tel Aviv, Israel as a part of ConsenSys investor and community events so welcome to Tel Aviv
thank you, so my first question I just want to talk to you about the amazing
organization that ConsenSys and the team and yourself created and I just want to
ask a bunch of questions about decentralization organizations because I
find it personally very inspiring so the first is you guys have a term ConsenSys
called the ConsenSys Mesh, could you tell us all about that. Sure, so we consider
ourselves an unusual kind of company we formed about three and a half years ago
about a year into the ethereum project and we formed to continue the vision of
ethereum but we formed very early we started as a venture production studio
the idea was to build MVPs, wrap companies around them put them up for external
investment and grow that way we got interest early on from companies
and governments and central banks and we had the need to educate people in our
ecosystem and we ended up doing different rounds of capital markets
activities so we basically have evolved as a very oddly shaped organization we
do a lot of things together in a single organization we also started with thesis
that the nature of business is evolving it it doesn’t make sense to try to build
a big hierarchical top top-down command and control monolith like Microsoft just
because information is transmitted so easily rapidly expertise is
shared entrepreneurs are prevalent and they’re formed inside of these companies
look at Google they’re just so many entrepreneurs that they even do their
own thing and they remain part of alumni basically and so we felt that nature of
business is changing and that we should embrace that and create a context where
entrepreneurs and serial entrepreneurs are attracted to ConsenSys
and there’s no better place in the world for them to do what they want to do and so we have
evolved as this mesh of different product projects and service circles
like HR, Rigo and etc. and regional offices and we are attempting to be as
decentralized as makes sense and that’s very decentralized using our
technologies and the fact that we are in 13 countries at this point and we are
doing our best to be as flat and fluid as possible as an organism so avoiding
rigid hierarchy therapies are great for many different things they’re efficient
for many things but not so good for decision making so you normally have
rich data and the situated awareness at the bottom of a hierarchy and
decision-making as far away as possible and from the people who’s been making
the decisions probably and and so we do our best to have the decision-makers be
the people who are in the different projects and given budget they’re really
extremely autonomous yet we are building an ecosystem or building an ecosystem of
consensus products and services we’re building at the Ethereum ecosystem and
we do a lot of infrastructure work developer tools etc and we’re building
out the decentralization ecosystem essentially web 3.0 the decentralized
world wide web and so when you do not sort of thing you need a lot of
communication collaboration and draw operation between different projects
that we work with a hard-on that sort of thing
even while we’re trying to create this mesh of autonomous projects and
companies I think that’s amazing because you know you want like-minded people
because they’re so currently so you people right maybe thousands tens of
thousands but not so many people who totally get blockchain and
decentralization and new governance models and stuff like that then you
would want whoever is attracted it is kind of has that magnet to join
ConsenSys you want to leave them within the organization but also have
autonomous and like freedom of choice and everything to really realize your
potential right in this ever dynamic ecosystem so the way that you built the
organization sounds as if you know it was just a matter of you had to do it
all on your own because there’s no other organization that you can kind of say
okay we want to be like that you’re actually spearheading this mega
collaboration between entrepreneurs and like-minded people that’s fair and we
didn’t really set out to build an oddly-shaped company it it definitely
emerged organically and I think there are actually millions of people on this
planet at this point that understand the value propositions of the blockchain
technology essentially at this point and a lot of them are attracted to
organizations i consensus to work in the blockchain space work at a company where
everything is basically an experiment willing to iterate and evolve pretty
rapidly I’m wondering in this kind of decentralized organization how do you
personally stay in the know and prioritize because you have so many projects going on in so many different divisions how do you stay on
top of things or is it things I mean is it part of your or do you have lots of
decentralized people who are kind of managing and reporting I don’t out of that how
does that work. So it is very difficult the growth of the company’s been
exponential the incoming interest is exponential the opportunities are
growing potentially and it’s not just me
experiencing that it’s virtually everybody in the company so we all have
to prioritize what we can pay attention to we are all building systems processes
larger teams in order for us to handle decision-making and information
gathering better we we do meet one another with about 850 people around the
world we do meet one another very regularly at different events we had 50
or 80 people at our corporate retreats in Portugal. We had an event called
Ethereal in New York a short while ago maybe a hundred people came in from
around the world maybe a little more in Israel now with 30 people so there’s
lots of opportunities for us to spend good quality time together
work on stuff together bond establish shared understanding language so that
when we use our communication tools like Email and Slack and Quip we hopefully
understand each other a little bit better and it’s understand misinterpret
jump to conclusions or we actually do do that a lot but we’re trying to reduce
that as much as possible so it’s we built a remote first company because we
had to because that’s where a lot of people around the world doing this sort
of thing five years ago we found that’s you know my dad always says that permission so it seems as like you know
in an experimental kind of mode you guys are exploring and discovering and
setting like new in new territories and that’s probably kind of the company
culture that you your your vision kind of supports and it consensus there lots
of opportunities to ask for forgiveness there there are a lot of passionate
people a lot of outspoken passionate people and
practice Stig Mirchi Stig Margie is this phenomenon where collective intelligence
identifies some sort of goal collectively includes it into the
species in the sense and just like ants push sand around and push little pieces
of sugar around or the collective good at the organization we see pieces of
work and we push them forward in different ways and so people are
encouraged to just act if they see something it should be done do it but if
that thing that they want to do or that they think should be done impacts other
people or potential goals and they should try to bring them into some sort
of discussion that just let somebody know that something’s going on the
company is called consensus and so we do try to form consensus amongst anybody
who would be impacted by some event or some decision some of those impact the
entire organization and so we have all that sort of thing so as I said before
there are lots of opportunities to ask for forgiveness at consensus and we’re
trying to see ourselves as an organism we’re trying to build immune systems
into that organism so we have a group that is helping us with communication
protocols nonviolent communication techniques emotional intelligence
different kinds of programs to prove us all as operators within this context as
people an amazing opportunity to you guys also have something called the
traditional management nullification tools TMT
out of it yes okey MNT we used the Teenage Mutant Ninja Turtles as the logo
for now I’m not sure we’re gonna get away with that when it goes public but
it’s a really cool project we’re sitting in a room that is labeled steel on the
door there all the rooms in this facility are different colors organizational philosopher theoretician
in Ken Wilber defines different ways how humans can organize themselves for
collective action he labeled them from red color teal red God we’re not sitting
in the Red Room or exactly the right club room right divine intelligence of
the universe in this room and so a wolf pack has the red designation and army
and machine and family and or organism are the next evolutions in how we get
better and better as a collective intelligence and so we consensus are
trying to pattern ourselves as an organism so all the people ourselves the
people constitute the elements of organs so those are you at the heart or the
brain mapped into but we have product teams service circles and regional
offices that are the various different organs we have going on inside them
trying to figure out how we measure and how we apply measurement in goal setting
and so it is essentially intended to be yet the cellular level where all the
people are healthy at the organ level and ideally emergently healthy at the
organism and also in the ecosystem itself right pack four and nine and the
blockchain no human consistent so and you can think of consensus as one of
these organisms so we have spun added a bunch of companies there’s no part of
that consensus mesh some of those companies are becoming hubs in their own
right we have what we call a hub-and-spoke system where our different
product teams are both to the consensus hub we have a team called labs which is
working with all the different product teams to wrap them in api’s and then to
assign service level agreements for those api so that you know what a team
offers and you know under which terms you can get those services we also see
our marketing team and our HR team and our finance a maybe our legal team as
potentially proto’s folks they may evolve into businesses in their own
right as we write software to enable them to do their job and as easy
centralized context and so we have this technology called
open law we’re just starting to apply inside our organization so you can write
employment contracts you can write and the A’s you can write service level
agreements with these hybrid watching basically going for some old optimist
agreements or contracts or employment contracts that are actually smart and
contracts and so these mechanisms enable agreements to be formed agreements to be
signed you can sequence different actions you can send money into a
contract escrow money in the contract pay money out of the agreement send data
into a service level agreement get paid out based on the data based on the
performance of that particular team so using these mechanisms
use understanding that different companies
that we’ve started and spun out are creating hubs in their own right you can
start to see this yeah it’s like a decentralized organization movement
because you know I think that the blockchain brings a lot of collaboration
right I don’t like to talk about competition in the blockchain space
because everyone kind of has their own taper angle and when you guys form this
thing and you have all these projects spin out and become organisms of their
own then it becomes a society right it becomes ecosystem and then this company
culture kind of has a ripple effect on the whole so we really have an
opportunity here to create the new society competition markets are
incredibly important identifying opportunities and centralizing people to
to emerge services of value products of value the interesting and the beauty of
this technology is that it enables entities who compete with one another or
entities who don’t even know one another to trust now you know to trust one
another to collaborate with one another in shared infrastructures or moving from
a world in which we’re we usually built siloed information systems as a company
as a government on old database technology to a world in which sectors
industries of value chains like supply chains are the fundamental atomic
construct of of IT systems that we built we’ve helped to build something called
the enterprise of the animal alliance which is north of 500 companies and any
of the biggest companies in the world in many different industries telecom
automotive identity health care supply chain law etc and these companies are
getting together in working groups and figuring out what they want to do
together figuring out specifications or shared infrastructure and eventually
building shared infrastructures so inspirational it’s amazing
so just in regards to you know you have over I think maybe forty seven projects
or over 40 projects that are those are just visible ones on yeah that are we
can talk about but I’m wondering you know when you’re looking at all these
projects like you had the Community Day yesterday and it was just overwhelming
you know to see all these projects every every protocol every everything that we
can decentralize it kind of things from the ground up right that like everything
is is totally being invented as we speak but I’m wondering are there like pillars
or certain topics that you can categorize and say okay these are the
things that you think are most impactful at this stage for blockchain technology
because I’m seeing all sorts of companies who are like okay we want to
do a lottery in which you centralize and you know I feel that that’s like adapt
that maybe we could have a few years from now maybe people would want to use
it but we still need the infrastructure in the ground building building it you
know there from the ground up so are there like categories of projects that
you guys look into you say okay this is what we want to invest in and nurture
and quarries in a sense it’s still an immature space we’ve got we have lots of
projects that are maturing rapidly there are thousands of projects out in the
world is are maturing rapidly so they are more building block like things
there’s identity self sovereign identity that’s going to be extremely important
it’s going to be the way we access services on protocol-based open
platforms on the decentralized world wide web web 3.0 the report for self
sovereign identity reputation systems bounty systems governance tools
accounting systems those are those are important components they’re really
useful in their own right but they’re gonna form components of more complex
solutions and other elements include the standards for
fungible tokens and non punchable tokens and atomic swap mechanisms decentralized
exchanges getting rid of counterparty risk applying those same ideas to
insurance industry to lending where instead of standing up an insurance
company that offers products and others are trying to build open open networks
protocol-based so that anybody can put a parametrized insurance product on this
protocol anybody can put a parametrized lending product on this protocol and
trying to build as many of these standards on a theorem and just like
push them down in the stack create this shared infrastructure that we can all
collaborate on and enable people to essentially get a lot of that for free
and built products of use for different consumers and businesses it’s yeah so
there’s it’s sort of core components is a category innocence protocol based open
platforms is a category and you’re gonna see essentially any industry that wants
more collaboration amongst competing actors to make use of these these
different technologies essentially we’re moving from a world in which we had
monarchs sovereigns setting the rules making the judgments and minting the
gold tokens coins and diluting the gold and just getting away with whatever they
wanted to get away with subjective governance to a world in which we have
increasingly rule-based governance but that rule-based governance in countries
where that applies is usually subjectively determined the mind and
applied executed if we can take that rule-based way of organizing our society
and we can move it from sort of subjective manual application of trust
to automated guaranteed application of trust of these role based systems then
we will have a better foundation on which to layer all the technology that
we built over thousands of years and hopefully a more equitable more
decentralized phone’s decentralized government governed better society a
meant to that so let’s just get to the you know you talked about minting coins
and everything in order to have that kind of system running we talked about a
lot about tokens right we need to have some sort of value transfer or
collateral to that round transfer side transfer energy or my brainpower whatnot
and then I want to get some sort of a token in order for the economy to kick
in so I’m just let’s just talk about just for a minute about token generation
events and you know it seems like in 2017 everyone was talking about like
utility tokens present utility tokens that was like the buzzword and now in
2018 we’re all kind of sitting and talking about security tokens but really
waiting to hear from the sec and all sorts of other regulators in different
jurisdictions and I’m wondering you know with with all this going on what is your
take because in every project you guys also have a token you have foundry
you’re building new economical models and a new token model so how do you see
kind of the evolution of all this yes or our token foundry team has helped some
of our projects and third-party external projects to token launch themselves we
have issued investor tokens one great example is a project called braid it’s a
movie that got into Tribeca so that all shows in at the Tribeca Film Festival so
very exciting project we essentially crowdfunded that founded a movie and the the people got tokens for that
and then they can’t so people about tokens for it we raise 1.7 million
dollars it’s a security and it enables people to get 15% back on top of their
that’s so like the credits the ending credits of the movie is like five
minutes long of all the contributors but more than just 15% on top of their
principal they’re getting 30% of profits in perpetuity so it’s a cool system we
have many different projects that are consumer utility tokens and would not be
considered securities even in this context at this point in time there’s a
lot of fear uncertainty and doubt that has been raised by regulators around the
world the SEC has made certain pronouncements about consumer tokens or
utility tokens early statements were the effect that all these tokens are
probably securities I think that’s like that was nice to say but I don’t
necessarily agree with that because I think that you know utility tokens are
what we set out to do we want to expand the credit and we want to have more
tokens or more ways of collaborating as a society and if you just limit it to
security token you’re just just talking about you know the financial whatever
upside and when you’re talking about utility tokens were talking about the
way that we can actually collaborate so I think that that’s like so the FCC has
this dilemma other regulators around the world have a dilemma the problem is that
there are a lot of great projects there a lot of projects a lot of fraudulent
projects a lot of projects that are selling what could and should be good
well-constructed consumer utility tokens but they’re selling them to investors in
enormous quantities and quantity is far greater than they could actually use so
they’re really selling them as an investment and so the SE C’s opinion
from what we’ve discerned is that those things constitute securities so we have
a framework that enables us to sell consumer utility tokens not in enormous
quantities not with discounts for large investors not to investors you
essentially have to be technically if the credited token buyer do answer
questions you have to demonstrate that you will use these tokens on these
platforms and so that that’s a good clean way to sell a token that
represents some sort of access or consumption of a resource on agree with
out there there have been various actors for thousands of years who take
advantage of information asymmetries in order to defraud naive consumers and so
that’s still going on in our space I think that we will have the tools to
make it a better situation so the global context of this technology the low
barrier to entry to running a token launch has exacerbated that information
asymmetry but we can make use of those characteristics to self-regulate to
build systems that protect consumers better so in the old context you can
register shares and sell them you know set up a bucket shop sell it to naïve
grandmothers via the telephone that’s a hard scheme to ferret out no in this
world in order to have a successful token launch you have to publish a white
paper you have to telegram or the website up we can find those things
easily no matter where they are in the world we are creating a system that’s
sort of like an Edgar like database or token launches it’s about to call true
set and so ideally you’re gonna be a legitimate token launch you’re gonna
have to register significant data in this database so we will all be able to
point to is in the database if so have people scrutinized that database and
determined that the disclosures are accurate and so we’ll have this wisdom
of the crowd dedicated to identifying these projects and analyze another
frontier that and that incentivizes professional analysts to share their
work so if you look at platforms like Reddit where the people just tear apart
white papers a lot of energy out there that can be directed to cleaning up this
space and in streets or they need bodies like the SEC to scare many projects
straight to create a context of concern so that many different projects in twice
and you do that are legal I think the industry matured pretty quickly right
we’re talking about like maybe now you’re seeing like better and more
experienced more serious investors and everything a lot of the legal work yeah
we did a but seven months of legal work before selling the ether token and we’re
fully confident that it’s the consumer utility token it’s required on the pop
phone to pay for running programs to pay for storage yeah um we we need to wrap
up so just a couple of questions but you know me and ezreal like to talk about
the Israel factor so in Israel we’re considered the startup nation in
traditional startup fasting and we’ve recently been acknowledged
at least here in Israel we call herself the crypto or the blockchain nation and
I’m wondering you know you’re gonna open an office in Tel Aviv what are your what
is your vision or your strategy and what are you on the look when you open a new
branch somewhere in the world so over the last three and a half years we’ve
gone places that wanted us so we spoke to people who wanted to to learn about
what we’re doing it’s getting it’s flipping a little bit we were happy to
speak to anybody who wanted to listen to this stuff now we’re pretty overwhelmed
with demand and so we have done various different projects around the world in
different nations with different central banks and governments but two places in
the world feel a little bit similar to me one is Israel because of the startup
culture because of the world-class cybersecurity cryptography mathematics
expertise the other place is Silicon Valley where you have technologists who
are building the systems that they believe effectively structure the world
and so we want to challenge that yes okay those two places especially Silicon
Valley the Silicon Valley was slow to embrace watching because of course they
know how to run the world based on Facebook and Google and there are some
technologies they’re a pinnacle of the web 2.0 world and so but some early
adopters moved into the Bitcoin space and they iterated in that space for a
while and they I think they have now realized that some pretty narrow
technology it’s really just one application of an infinitude of
applications that you can build on blockchain and so in both those regions
we felt that the people there the talent there was extreme but
so very sophisticated and we should up our game both at the Athenian platform
level and at the consensus level so that we could go into those places and answer
all the questions have respectable things to say in those particular
situations so a year ago we formed an office in San Francisco it’s going to
about 50 people now about to take a much bigger office and to really be a
catalyst there if they’re ms starting to catch fire there it’s being dated by
gdpr it’s being aided by Cambridge analytic and lots of Engineers are just
wondering what they’re doing with their lives that business model of exploiting
people’s personal information may not last that long it should evolve it’s an
awakening time as you know people are waking up to the fact that they need to
take ownership over their lives their identities their choices and we need to
facilitate that with our technology right coming to this real is really
exciting to us because the talent here is tremendous we want to build an R&D
lab here like many companies do but we really want to build a full-stack hub
some of the earliest technologists and the bitcoins based on the early colored
coins master coin Osetra projects were performed here we actually had master
coin at our offices in AB Quinn we had them sit with us that’s exactly but now
that the arms gaining quite a bit attraction here as people realize that
it is a pretty powerful technology a decentralized application button so
full-stack to us means we built an office that focuses on education through
consensus Academy we hire lots of engineers they can do consulting work we
hire we bring in projects into the mesh and incubate them we invest in projects
in the ecosystem so calling all the visitors government actors corporations
entrepreneurs investors of them all this ecosystem we’re calling
them to come and hear about in the human society yeah are invited to come and
join us in the decentralized future so let’s end on that note just I gotta ask
you you know where we’re due and you know the Israeli vibe when are you
coming back to Israel I’m guessing I will be back here in a very small number
of months to celebrate the opening of our office cool so congratulations and
thank you so much for coming here if you’re taking the time to speak with us
and it’s very inspirational and I hope for our audience also it’s been an
interesting and kind of eye-opening interview thank you so much Joe

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