ConsenSys Founder Joe Lubin on the Future of Blockchain

We’ve interviewed some interesting and provocative characters on Funny as Tech, a podcast and live show I co-host alongside UCB comedian Joe Leonardo. People like Manoush Zomorodi, Baratunde Thurston, Bridget Carey, Nir Eyal, Laurie Segall, and comedian Chuck Nice. Our goal is to tackle the thorniest issues in technology with the help of experts. Perhaps because it is the thorniest, the interview we get asked about the most is the one we did in January with ConsenSys founder Joseph Lubin.

So now we’re posting the transcript.

One rewarding aspect of hosting a podcast with such talented guests is that you learn a great deal in the process — both in preparation for a show and from the guest. Blockchain has obviously grabbed the public’s imagination (and that of investors), but do we understand what is really is and what its implications are? My co-host and I were ready to learn. Cryptocurrency is an area I have expressed skepticism towards, so I was intrigued to hear about the various uses and potential of the underlying blockchain technology outside of currency.

Just a month earlier, my co-host and I were asked to emcee a large cryptocurrency event in NYC. It become clear that there was a passionate and robust world that we were not an active part of. We were a fish out of water, with the speakers and audience speaking an entirely different language. But we were curious to learn about it.

Funny as Tech co-hosts Joe Leonardo and David Ryan Polgar with ConsenSys founder Joe Lubin. Recorded at Company in NYC (formerly Grand Central Tech)

David Ryan Polgar (introduction): Joseph Lubin is the founder of ConsenSys, a blockchain production studio that develops decentralized applications and utilities for the next generation of decentralized web in theory from Joseph graduated cum laude with a degree in electrical engineering, computer science from Princeton where he worked as research staff in the robotics lab and then at Vision Applications, a private research firm in the fields of autonomous mobile robotics, machine vision and artificial neural networks. Later, Joseph moved to Kingston, Jamaica to work on a set of projects in the music industry. Two years into the music project. Joseph co-founded the Enthereum Project and has been working on Enthereum and more recently ConsenSys since January 2014.

Welcome, Joe, to our show.

Joe Lubin: Thanks, guys

Joe Leonardo: I have a question. Well, here’s the disclosure. First, I bought some Ethereum like a month ago.

Lubin (correcting): Some Ether.

Leonardo: Some Ether. Is that what it’s called?

Lubin: Ethereum is the platform. Ether is the value token, similar to bitcoin.

Leonardo: I feel like we just shined on something. A lot of people are buying this without knowing what it is. And I’m one of them I bought a little bit of after we, we did a gig while back cryptocurrency and I was told I should buy some bitcoin and ether and I did.

What is the difference between those two?

Is there an actual [difference]? I know a bitcoin takes like 15 minutes for…[trailing off]…I don’t really know. All I know is I have like a point zero, zero, zero, two [of a bitcoin]…

Polgar (laughing): You don’t know, but you still bought it.

Leonardo: I bought it. I did. I’m a sucker for all that [hype]…all the people freaking out. And I know something important is happening.

I know something important is happening. I just don’t know what. But I feel like something important is happening, you know, is this a bubble that’s going to blow up? I’m just…I’d rather take that risk and buy some.

But there’s a piece of me that feels like this technology, the way [I’m] hearing it described to me, it makes sense. This all being decentralized. Money without a government. It feels like the future. I just don’t know what the hell is going on.

Lubin: I agree that something important is happening and I think you’re being exposed to fragments of the promise of a sea change in how we organized systems on the planet.

Bitcoin was invented by Satoshi Nakamoto. Satoshi Nakamoto in 2008, 2009 invented three things, really. The bitcoin application, the money, the store value, the payment system, that was just the first application that was brought into the world.

On the second invention, which is blockchain, which is a decentralized database infrastructure to enable different actors to come together and share infrastructure that processes transactions in a trust minimized way. A way that everybody can be certain that nobody’s cheating the system basically.

Leonardo: You said this is invented by Satoshi Nakamoto.

Lubin: Yeah.

Leonardo: But from what I know, he is a complete mystery and it could be a team of people.

Lubin: It’s a group of people.

Leonardo: It’s a group of people?

Lubin: Most likely, I don’t know who they are, but there’s some educated speculation on who they are.

Polgar: Why do you think they’re so secretive? That also throws up a couple of red flags for outsiders to say, “well, wait a minute.” I thought I just read a NY Times bit….

Lubin (jumping in): Let me finish answering the first question, then I’ll flesh that out.

Leonardo (joking): This is an interrogation by the way.

Lubin: No, this is good. It’s very, very hot. Very bright lights in my face.

Leonardo: We’re all smoking.

Lubin: Disconcerting….[transitioning conversation]

So that first application on blockchain led a whole lot of people to realize that I’m this new kind of shared infrastructure — trust minimized infrastructure should be used to enable the delivery of lots of different kinds of applications. And so the ethereum project was born. And there are many other attempts made to enable software developers to build whatever they want on this shared infrastructure.

Leonardo: To clarify, when you say it has multiple applications. That mean it’s not just currency. It could be for other things.

Lubin: Exactly.

Leonardo: The technology is not tied to currency?

Lubin: Well, the first application on blockchain was built on a blockchain that is not very agile, that’s not very programmatically expressive. So it’s really hard to build other things on the bitcoin blockchain.

That’s why we built the ethereum decentralized application platform based on the same fundamental principles, a much more expressive system. It enables average software developers, who can build web applications or mobile applications, to build applications that have no server, no central server like a Facebook or a Netflix or something like that.

No place where you’re getting your front end from, or where your backend is resident. Your back end databases is resident. And so your application can be sent out into this network of tens of thousands of nodes run by anybody who wants to permissionlessly attached to the network and they can serve you your application. These applications can be anything.

So at our company ConsenSys we are building a self sovereign identity system. We’re building reputation systems. We do lots of different things with different kinds of tokens, like token launches. We’ve got a decentralized governance tool, we’ve got an accounting system, we’ve got to an adjacent music industry platform.

Leonardo: Like a record company?

Lubin: So we’re enabling artists to register their content and attach usage policies to that content. We’ve got a project called Open Law that enables us to build a hybrid legally enforceable agreements that are on the blockchain. They consist of different clauses. Some of those clauses are normal prose clauses, but some of those clauses are programs on the block chain. Those programs can take escrowed money into them, into the actual agreement and those clauses can perform actions based on conditions being met.

So it could be an employment agreement that pays out upon regular time periods or if a certain piece of work is submitted, or something like that. So you can build anything that you can imagine on this platform and it’s growing and scalability. So we’re going to be able to build more and more sophisticated applications.

The beauty of it is that it’s going to enable us to move from a world in which we’re building siloed infrastructure for businesses to a world in which sectors, industries, value chains, like supply chains, can share infrastructure. And so that’s a much more fluid I’m processing context for a lot of the things that we care about.

Polgar: Joe, you mentioned earlier that we’re only exposed right now to a fragment, a small kind of segment, of the blockchain kind of potential. So why do you think we’re only exposed to this? Is it because there’s so much heat right now on this cryptocurrency idea that we’re not focused necessarily on the underlying technology?

Lubin: Yeah, so it took about 10 years for the worldwide web and the Internet to really ramify. From 1989, 1999, when Tim Berners-Lee did some pioneering work to when my mother started hearing about email, basically.

And so it’s a very complex technology. It’s moving incredibly rapidly, but it needs to be built in layers. There are some early applications that are interesting, some early killer apps even.

So with the run-up in the cryptocurrency prices, bitcoin itself is starting to be seen as Gold 2.0, a better gold than gold, a store of value. And that’s one really interesting killer app.

Ethereum is being used for token launches, whether it’s a tokenized security or a utility token that wouldn’t be seen to be a security that provides consumption of some shared resource or consumer access to membership to shared resources. There are a ton of these projects, most of them are on Ethereum, but there are other ways of executing those token launches. They are enabling networked businesses, network services, to either pre-sell some services, pre-sell access, and essentially get some revenue, Garner some revenue in the utility token context for services that are to be delivered or are able to be delivered right on the spot there.

Leonardo: You know, this is a lot of information and I have a very small brain when it comes to this stuff. This seems like this is growing very fast and it does seem like a huge paradigm shift is going to happen. You know, I see the tidal wave coming. Do you guys foresee growing pains? Because there’s governments that are rejecting this, that are scared of this. This is basically…they’re de-centralizing corporations. You could basically do that and that’s a lot of money of a lot of old rich people that are going to freak out and they have a lot of power.

Lubin: Yes, absolutely.

There’s a sea change in how the world’s going to organize itself and it’s starting to manifest. We speak with regulators all around the world. We speak with regulators in this country, the United States of America. For the most part, regulators are really excited about this technology because it is partly about consumer protection.

It’s partly about regulator’s having a view on what’s going on in a corporation or in a sector. We’ve got an accounting system that enables these token launches to have transparent accounting. That sort of system is really valuable for a charity so that you can see the inflows to the charity, you can see exactly how that charities spends its money. [another example] In a lending platform. There’s some of those being developed in this blockchain context.

It would be great if I could lend some money to some project somewhere around the world and require that project to post their expenses in some public shared ledger so that I could track where the funds are being used. It certainly is going to require a reorganization and how certain people think and how certain businesses and governments think…

Leonardo (chiming in): Financial institutions.

Lubin: Exactly.

And a lot of intermediaries are going to be either squeezed completely out of a transaction flow or have the value that they extract from a transaction flow, right sized. So there isn’t quite so big a spread, a rent seeking spread. And that’s, that’s great. It’s just evolution that we’re all going to have to get a little more agile, a little more efficient.

Leonardo: Yeah.

Polgar: That idea that you were talking about, the shared ledger. Has, has there been any growing pains with that, the shared ledger idea? Would we need greater computing power as this scales or is that not a concern?

Lubin: Shared ledger is a term that refers to blockchain. So generically. What I was talking about was an accounting system called balanced three that we’ve built that around 30 different companies are starting to use. They’re blockchain focus companies. It’s not like IBM is starting to use that for their internal books at this point.

There haven’t been growing pains with that particular project. It’s really exciting to a lot of different projects. In the industry in general, and I know you mentioned this earlier, it’s such a profound technology and there’s such a rush to understand it on your part.

Leonardo: I bought it and then read what I bought.

Lubin: There’s a rush by organizations to wrap their heads around the technology.

There’s FOMO [Fear of missing out] in many cases both technologically and financially. And a lot of businesses that are genuinely concerned that they might be disrupted by [it], if they’re intermediaries.

Like an insurance company where you could potentially build parameterized insurance contracts on a blockchain that don’t really require human beings as middlemen. That’s an example of an industry that might have to reformat itself a little bit.

Leonardo: Let me ask you a question. This is a hypothetical. Ten years in the future from now, what do you see this world looking like with this technology? What has changed?

Lubin: So there are so many different directions that this world could go in 10 years…

Leonardo: Financially.

Polgar (laughing): Not politically.

Lubin: If things go productively…

Leonardo: Let me rephrase the question. What positive changes do you see in the next 10 years coming from this technology? To put people’s minds at ease?

Lubin: So we built amazing technology for thousands of years in layers and layers. The laws, the technology, accounting as a technology, obviously technology is a technology, computer science, etc, and it’s all sitting on a subjective foundation. So I believe that we have come up with a foundation that can be much more trustworthy, much more equitable.

We can use the blockchain foundations and take what we know of how to build systems and position them again in layers on this technology. And we’re starting to do that with these smart contracts, these programs on the blockchain. And that’s going to take quite a while.

But that moves us into a world that is, A, more equitable because you’re reducing the impact of intermediaries. You’re creating a lot more fluidity in your culture. We will take these ancient systems, these foundational elements of our society, like identity, like money, like reputation, like agreements, like certificates, land, title, a marriage license, etcetera.

Leonardo: All that need governments.

Lubin: Well, governments, a legal representation, etcetera.

So all those things are realized in what I call analog technologies. They’re technologies that are non natively digital. And so any transaction involving those technologies, involving pieces of paper or ink or subjective interpretation of rules or force, or incarceration. They all have these frictions built in They all have clearing and settlements that basically extends over some period of time as we move all these things into native digital form. We’ve already done that with bitcoin and ether.

Ether is basically a fuel that enables you to run programs on the ethereum platform. We are moving self-sovereign identity into native digital form using our uport project. Uh, we’re moving agreements into native digital form using our open law project. We’re moving certificates into native digital form. We’ve issued educational certificates and others on the blockchain.

Again, any transaction involving those things can be cleared and settled in the instance of the transaction because you’re really trading these natively digital things. And so that’s going to drastically increase the speed at which we operate our economy. We’re going to be able to create, or have value-creation events, that are bunched together much more closely in time because we’ve squeezed so many delays out of those flows. And basically just like the power of compounding interest, we’re going to be able to compound growth in our economy. So I think it’s going to be a tremendous driver of growth globally.

Polgar: What would you say some of the hurdles would be, because that was a very optimistic view of having this kind of global economy in the future. What would you say could get in the way of that, that future an ideal?

Lubin: So, as I indicated, regulators are excited about this stuff, but it’s still…we still need to bring this into our society in a way that virtually everybody is comfortable with. So the regulators certainly have the ability to put a chill on a lot of this activity. They don’t have the ability to kill it, just like they didn’t have the ability to kill bit-torrent. So it’s decentralized, so it’s really hard to kill, but you can scare a lot of people in and slow things down.

But I don’t see it going in that direction.

I see regulators being very constructive about this stuff. The power that people have, when you have control over assets and can move assets around the world, that’s going to be interesting. When you can create agreements that run automatically and are perhaps unstoppable, in certain contexts anyway, that’s going to give a lot of individuals a lot more power than they’re used to having. And so we’re going to have to figure out how that all ramifies.

Polgar: Do you think then we would also focused on this idea of a digital divide? They sometimes call it, there’s this idea that maybe everybody across the world doesn’t have equal access to the digital technology, but at the same time we’re painting a picture of saying this is interconnected society where everybody’s probably have to have pretty high powered devices in their hand, on their head, wherever. But is this something where there might not be people that are taking part in the system because they don’t have access?

Lubin: Yeah, so it won’t be as asymmetrical as a say AI would be, where you really do need access to enormous amounts of data, enormous amounts of computing power in order to gain that advantage. Around the world a huge percentage of the population does have access to a smartphone, maybe not all day long, but with a single smartphone you can connect to these networks. You don’t need to have the whole network on your phone. You just need to be able to talk to the network.

And so I think it’s going to have a much more dramatic and positive impact on developing nations then on the developed world. Not to say it’s not going to have a very profound impact on the developed world, but I think it’ll be an agent to enable the developing world to catch up and leapfrog in significant ways.

Leonardo: You need everyone to have access to the internet in order to take part in this, correct?

Lubin: Anybody who wants to be part of this, perhaps to establish their own self-sovereign identity that they are fully in control of, would have to be able to connect to the Internet, yeah. And that can be done via a borrowed smartphone. It could be done in a kiosk.

Leonardo: And that’s, yeah, that’s unstoppable. Every year those numbers go up exponentially more connected.

Polgar: And just lastly, as we’re wrapping up, Joe, you mentioned identity being changed by the blockchain. Could you explain a little bit about that? I think you mentioned uPort?

Lubin: Yeah. We built a project called uPort, which enables 7.4 billion people in the world, if they wish to, to establish their own blockchain based identity. Self-Sovereign identity. Identity in the developed and developing world is pretty broken. In the developed world we spray aspects of our identity across the Internet. They get stored on corporate servers, they get monetized by our friends at different corporations. It would be better, and this is what we built, if we could encrypt aspects of our identity. If we could maintain access to those things on our side of the browser. If we could granularly, selectively disclose these elements in situations that we designate.So if we want to get a loan, we’ll share some information.

If we want to share some of our attention on a social network, we should get compensated for that in money.

In the developing world it’s a worse situation because many people just don’t have a financial relationships or identity documents. In the developed world, we can use something called cryptographic attestations to enable the legacy identity infrastructure to assert that this blockchain based construct represents you or me and we could go to a government agency and get our blockchain identity certified as citizen or legal to drive or something like that, or get our banker to attest.

In the developing world, you can use your social contact to do the same thing, to get a friend to assert that you paid the loan back or are a good upstanding citizen, that gives people who didn’t have persistent portable identity and persistent portable reputation, the ability to perhaps reach across the world and get a micro loan and buy a piece of equipment and maybe bootstrap a business in the emerging global economy.

===

The interview can also be found on Apple, Google Play, and various other outlets. New episodes every Monday. Questions? [email protected]