Joseph Lubin | The secrets behind Ethereum & Consensys

As a part of the fourth episode of our Podcast, We had the privilege of interviewing Joseph Lubin, co-founder of Ethereum, founder of Consensys, as part of Consensys Tel Aviv community and Investor events. We had to chance to hear about the exponential growth of

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You run quite an amazing organization and have a forward-thinking approach on how to manage it in a decentralized fashion and at scale. It’s often referred to as The Consensys Mesh, can you tell us all about that?

We consider ourselves an unusual kind of company we formed about three and a half years ago, about a year into the Ethereum project. We started as a venture production studio and

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. 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 the thesis that the nature of business is evolving, it doesn’t make sense to try to build a big hierarchical top-down command and control monolith like Microsoft, just because information is transmitted so easily and 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.

So we felt that the nature of a 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. So we have evolved as this mass of different product projects and service circles and regional offices,  and we’re attempting to be as decentralized as it makes sense and that’s very decentralized using our technologies. The fact that we’re in 13 countries at this point, while doing our best to be as flat and fluid as possible as an organism. Rigid hierarchy parities are great for different things, they’re efficient for many things, but not so good for decision-making. So you normally have the rich data and the situated awareness at the bottom of a hierarchy and decision-making as far away as possible from the people who are making the decisions. 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’re building an ecosystem of Consensys products and services we’re building at the Etherium ecosystem and we do a lot of infrastructure work, developer tools etc. We’re building out the decentralization ecosystem, essentially web 3.0, so when you do not think you need a lot of communication, collaboration inter-operation between different projects that we work with hard on that sort of thing, even while we’re trying to create this mesh of autonomous projects and companies.

We didn’t really set out to build an oddly-shaped company, it definitely merged organically and I think there are millions of people on this planet at this point that understand the value propositions of the blockchain technology. A lot of them are attracted to organizations, like Consensys, attracted to work in the blockchain space, at a company where everything is basically an experiment, willing to iterate and evolve pretty rapidly.

I’m wondering in this type of decentralized organization,  how do you personally stay in the know and prioritize, because you have so many projects going on and so many different divisions, how do you personally stay on top of things?

The company’s growth has been exponential, the incoming interest is exponential, the opportunities are growing exponentially. 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 what we are all building, systems, processes, larger teams, in order for us to handle decision-making and information gathering better. We do meet one another, we have about 850 people around the world, we meet one another very regularly at different events. So there are lots of opportunities for us to spend a good quality time together, work on stuff together, bond, establish a shared understanding language so that when we use our communication tools, like Slack, for example, we hopefully understand each other a little bit better.

My dad always says that in a company’s culture, it’s better to ask for forgiveness than to ask for permission. Is this you approach as well, at Consensys, since you’re talking about this experimental environment where people are exploring new ideas?

At Consensys, there are lots of opportunities to ask for forgiveness. There are a lot of outspoken passionate people and we practice Stigmergy. This phenomenon where if 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 for 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 and do it. But if that thing that they want to do or that they think should be done impacts other people, other potential goals,  then they should try to bring them into some sort of discussion, get help or just let somebody know that something’s going on.

The company is called Consensys, and so we do try to form a consensus amongst anybody who would be impacted by some event or some decision, some of those impact the entire organization. So we have all that sort of thing so as I said before there are lots of opportunities to ask for forgiveness. 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, communication techniques, emotional intelligence, different kinds of programs to group us all as operators within the Consensys context as people.

You also have something called the Traditional Management Nullification Tools, could you please describe what this means?

It’s a really cool project. The organizational philosopher and theoretician, Ken Wilber, defines different ways how humans can organize themselves for collective action. He labeled them from

Red color to Teal. So a Wolfpack was the red designation and army and machine and family and organism are the next level evolutions, in how we get better and better as a collective intelligence. At Consensys, we’re trying to pattern ourselves as an organism, so all the people constitute the elements of organs. We have product teams, service circles, and regional offices that are the various different organs. We’re trying to figure out how we measure and how we apply mission and goal setting and so it is essentially intended to be healthy at 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.

You can think of Consensys as one of these organisms, we have spun out a bunch of companies they’re still part of the Consensys 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 spokes to the Consensys hub. We have a team, called Labs, which is working with all the different product teams to wrap them in APIs and then to assign service level agreements for those APIs 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 team, maybe our legal team, as potentially proto- spokes, they may evolve it to businesses in their own right, as we write software to enable them to do their job in this new decentralized context.

We have this technology called Open Law, that we’re just starting to apply inside our organization, so you can write employment contracts, you can write NDAs, you can write service level agreements with these hybrid blockchain based legal enforceable documents. 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 and 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, understanding that different companies that we’ve started and spun out are creating hubs in their own.

Consensys runs over 40 projects, even more, at any given moment. Are there pillars or certain topics that you can categorize and say that these are the things that you believe are most impactful at this stage for blockchain technology

It’s still an immature space, we have lots of projects that are maturing rapidly, there are thousands of projects out in the world that are maturing rapidly, so they are more building blocks. 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. Reputation systems, bounty systems, governance tools, accounting systems… 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 standards for fungible tokens and non fungible tokens, and atomic swap mechanisms, decentralized exchanges, getting rid of counterparty risk.

Applying those same ideas to the insurance industry, to lending, where instead of standing up an insurance company that offers products, we and others are trying to build 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 Ethereum and 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 build products of use for different consumers and businesses.

Essentially we’re moving from a world in which we had monarchs, sovereigns setting the rules, making the judgments, 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, defined and applied and executed. If we can take that rule-based way of organizing our society and we can move it from subjective manual application of trust to automated guaranteed application of trust of these rule-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.

Let’s talk about Token Generation Events. In 2017, utility tokens were the buzzword and now in 2018, we’re all kind of sitting and talking about security tokens. I’m wondering what is your take because in every project you guys also have a token, you have Token Foundry, you’re building new economic models, so how do you see the evolution of all this?

The 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 Brade. It’s a movie that got into Tribeca so that at all it shows in the Tribeca Film Festival so very exciting project we essentially crowdfunded a movie. The people got tokens for that, we raised 1.7 million dollars, it’s a security and it enables people to get 15 percent back 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 your 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. Regulators around the world have a dilemma, the problem is that there are a lot of great projects there, 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, in quantities far greater than they could actually use, so they’re really selling them as an investment. So the SEC’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 a technically accredited token buyer, you have to answer questions, you have to demonstrate 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.

There have been the various actors for thousands of years who take advantage of information asymmetries in order to defraud 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 and sell it too naive grandmother’s 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 get a telegram or the website up, we can find those things pretty easily in a matter where they are in the world we are creating a system, that’s sort of like an editor, like database for token launches, it’s a project called the True Set, and so ideally if you’re going to be a legitimate token launch, you’re going to 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 analyzing them.

We have a project called Frontier, that incentivizes professional analysts to share their work, so if you look at platforms, like Reddit, where people just tear apart white papers, a lot of energy out there that can be directed to cleaning up this space. We may need bodies like the SEC to scare many projects straight, to create a context of concern so that many different projects think twice and do their legal homework before releasing their token.

In Israel, we’re considered the Startup Nation in the traditional startup scene and we’ve recently been acknowledged as the Crypto or the Blockchain Nation. You’re about to open an office in Tel Aviv, I’m wondering what is your vision or your strategy and what are you on the look when you open a new branch somewhere in the world?

Over the last three and a half years, we’ve gone places that wanted us, so we spoke to people who wanted 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. Those two places, especially Silicon Valley, was slow to embrace Blockchain 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. But some early adopters moved into the Bitcoin space and they iterated in that space for a while and 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 the blockchain. So in both those regions we felt that the people there the talent, there was extreme, but also very sophisticated and we should up our game, both at the Ethereum platform level and at the Consensys 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 grown to about 50 people now to pave a much bigger office and to really be a catalyst, Ethereum is starting to catch fire there. It’s being aided by GDPR, it’s being aided by Cambridge Analytica, 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.

Israel 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 in the bitcoin space in the early colored coins, Mastercoin projects were

performed here. Ethereum is gaining quite a bit of traction here, as people realize that it is a pretty powerful technology, a decentralized application platform.  Full stack to us means we build an office that focuses on education, through Consensys Academy, we hire lots of Engineers, they can do consulting work, we bring in projects into the Mesh and incubate them, we invest in projects in the ecosystem.  All elements of human society are invited to come in join us in the decentralized future.


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