[00:00:09] Gareth Jenkinson: Ethereum ETFs have been given the green light in America, but companies like Consensys are still locked in battle with the SEC over the legal classification of Ether and the implications that has for the ecosystem.
My name is Gareth Jenkinson, managing editor of Cointelegraph, and this episode of Decentralize with Cointelegraph features Joseph Lubin, Ethereum co-founder and CEO of Consensys. This conversation took place at DappCon during Berlin Blockchain Week. We spoke about a variety of topics, including Consensys’ legal battle with the SEC, Ethereum ETFs, layer 2 staking on EigenLayer, and Bitcoin. Let’s dive straight into it. I hate to be talking about the SEC and everything like that first up, but I mean, it’s, yeah, it’s front and center of everything, and there are many things that are happening. Perhaps we can just start with Consensys, getting involved with the legal battle against the SEC and pushing back on their sort of undisclosed move to kind of reclassify Ether as a security, as you see it, and why you guys are doing what you're doing.
[00:01:13] Joseph Lubin: Yeah, so the backdrop is that we are in the midst of a clash of civilizations. The incumbent has been running for millions or thousands of years, top-down command and control authorities operating through intermediaries, trusted third parties that operate the world through databases that are subjectively controlled. And sometimes, the agendas of the authorities or the intermediaries don't coincide with the best interests of the 99%. And so we knew from pretty early on in the ecosystem, our ecosystem, that we should just keep heads down and build and build and build, and eventually, we'll get the attention of the heavily resourced vested interests on the planet. And so this is part of that. And this is a really good thing because it gives us an opportunity. And we've been trying to get attention for a long time for the benefits of the technology. Unfortunately, certain kinds of actors in our ecosystem and outside our ecosystem have made it difficult for our technology to be perceived as beneficial to people. And we noticed the previous SEC when they came in the previous regime under Jay Clayton, and they came in, they said similar things to Chair Gensler that sure looks like everything's a security. And so we had conversations with them. We helped them understand that not everything was a security. So, there were constructive discussions on that front. Chair Gensler came in and said, I've studied this stuff. It's interesting that he managed to land himself a role teaching crypto at MIT. Maybe he was strategic or thoughtful enough to land himself that role. Maybe a senator from Massachusetts got him that role, that there are theories, yes, to be constructed potentially. But he came in, and he wasn't totally sanguine about the technology as a professor. I think he was both positive, laudatory in some ways and critical.
[00:03:22] Gareth Jenkinson: Have you watched the presentations? I mean, I haven't watched them at length.
[00:03:26] Joseph Lubin: I saw one of them. Yeah. And one of them, I saw him spout a piece of data that I knew was orders of magnitude incorrect. And it kind of turned me off at that moment. But, yeah, he's a really smart guy. Strategic, politically savvy individual. And so he could do great things if his boss told him to do great things. But you know, he's doing his job, and it's not clear who his boss is.
[00:03:52] Gareth Jenkinson: Yeah. That's fair.
[00:03:53] Joseph Lubin: Some of his bosses are clear, but he's not. It's not clear who's higher up or who's sideways where the dotted lines are. So he comes in, and he says Congress, we don't have the mandate to police the digital asset ecosystem. It gives some guidance. Politics in America is profoundly broken. And so he didn't get what he asked for. Might have made everybody's lives a little easier. And I guess either as a reaction or as an opportunity, certain factions, whether they're high-level banking factions or governmental factions, seized on the opportunity. And he and perhaps others formulated a strategy to slow or, kill or co-opt our ecosystem. So that was our working hypothesis. And by co-opt, I mean just dumbed down decentralization, make it into American style decentralization, where everybody has to come register. Maybe there's some backdoors in the cryptography, stuff like that, things the NSA has done in the past. So, we have been planning contingency strategies in case we needed to roll them out. And we spent quite a long time, maybe two years, responding politely to SEC requests. I think we're close to 100,000 pages that we've had to hand over, and we started getting quite concerned. You know, they were focusing on MetaMask. They were focusing on staking. They're focusing on the Ethereum protocol itself and the move to proof-of-stake, focusing on software developers inside of Consensys and outside of Consensys that we're just building software, not involved in buying and selling digital assets or anything like that. First, they brought actions against Sam or FTX and Binance, and they tried to go on together and make Binance look much worse in association with FTX. And so instead of open dialogue and clear rulemaking, they've been doing these.
[00:06:01] Gareth Jenkinson: Enforcement and regulate by enforcement.
[00:06:03] Joseph Lubin: …Sequence and enforcement actions well thought out, designed to set a tone, help America understand how bad and evil crypto is, and sort of paint the whole industry with Sam Bankman-Fried brush, and CZ skated. This action kind of forces them to answer some of our questions. It, in particular, draws out the idea that the SEC is trying to regulate technology and trying to, in a sense, go after individual software developers. So, the SEC, it's mandated to regulate securities and not technology. It's not supposed to regulate based on merits. So if you're a shitty company that produces a product that has too much sugar in it, Chair Gensler can't say no, my family have decided that we were eating too much sugar, and it's bad for people, so we're not going to approve this perfectly structured securities off.
[00:07:03] Gareth Jenkinson: What does the timeline look like for all of this? I mean, this could be quite a long process. And realistically, what are the costs going to be for Consensys, and are you willing to absorb all of those costs?
[00:07:12] Joseph Lubin: Yeah, for sure. Of course, we're all in. But we should think about the costs that we've already incurred and the costs that our entire ecosystem keeps incurring. So, we've been gaslit and operating under regulatory uncertainty forever. And that's very difficult for a nascent technology ecosystem. We have had to produce, search and produce an enormous number of documents, and so have so many other companies in our ecosystem because they've been carpet-bombing our entire ecosystem. And they seem to have a strategy to carpet bomb with Wells notices. Now, when you're a small startup, and you're perhaps running low on capital, and the SEC threatens to sue you, you're not going to be able to raise money very easily. It's a really effective way of slowing or killing an ecosystem. Timeline is also just, you know, retail has been leading this decentralized protocol and crypto phenomenon. Yeah. Institutions have to be more conservative because, you know, they can all be sued for the slightest mistake. And so if the major regulator of securities in, or a major regulator is having issues… And really, the U.S. government apparently is having issues with our ecosystem. So if that's the case, and it's just really hard to be successful, and so what does that cost? We'll see what it costs if the ETFs are approved, and if FIT21 moves through by some notable, we will see the most incredible amount of pent-up pressure, demand flow through the floodgates over weeks and months going forward. So that'll be interesting. We can calculate what it costs us. Perhaps from that timeline is waiting for the SEC to respond. They'll probably ask for more time for four-weeks delay or something like that. They'll probably ask to have it dismissed from Texas. We’ll probably be able to respond; probably be six months of back and forth on that. Marvin Ammori did a really nice job for Uni. Did you read his stuff?
[00:09:21] Gareth Jenkinson: I haven’t read it yet. No, no.
[00:09:24] Joseph Lubin: They have a really strong case as well. Yeah.
[00:09:26] Gareth Jenkinson: They released a statement yesterday about it as well.
[00:09:32] Joseph Lubin: Yeah, exactly. A year in discovery, something like that. The summary judgment and more. If it's not clear at that point. And so it's tens of millions of dollars now; these things are expensive. I think Coinbase has spent $100 million. That's a guess. Yep. Just check your source.
[00:09:50] Gareth Jenkinson: I will definitely. I was going to say it must.
[00:09:53] Joseph Lubin: Huge amount of support for us. So many people asking how they can help with the amicus brief. So, yeah, there's a really interesting society in the crypto space. They're pretty clever, and they have to be really careful too. So that's timeline. Total cost to the industry. Mind-blowing. Yeah, but it's also, I mean, giving legislators and regulators as incompetent as some of them may be some benefit of the doubt. If this all happened too fast in a jarring fashion, it could get really complicated in society. On this, as smooth a transition as possible to a rigorously decentralized world is good for everybody.
[00:10:38] Gareth Jenkinson: Yeah for sure. Obviously, it looks like this week, I mean the talk now is like it's just it's as good as done. Ether ETFs.
[00:10:45] Joseph Lubin: There's 19b-4s from the exchanges. I think that's as good as done. But the S1s, essentially these new companies, these ETFs going public, that could drag on for a while. It's not clear that it will. Yeah. My guess is this is now a giant political issue. The Trump campaign has been talking to people in our ecosystem, from what we've heard, for two months now. Something like that might be longer, but that's what we've heard. Just trying to formulate strategy. And now there's some really savvy supporters on the Democratic side. It still, I believe that the presidential campaign and others will want to appear pro-crypto.
[00:11:29] Gareth Jenkinson: It already looks like it's going that way. I mean, overnight, there was news that Trump is now accepting crypto for donations. You know, and Biden is supposedly maybe, yeah, maybe following suit. Exactly. And so it's a crazy giant issue.
[00:11:41] Joseph Lubin: And if that's the case, then the S1s probably fly through also.
[00:11:49] Gareth Jenkinson: What does that do for the SECs, like for the battle against Ethereum, though? I mean like surely then the writing is on the wall that they've taken the wrong stance. Right? I mean like.
[00:11:58] Joseph Lubin: Yeah, of course. So if 40%, 50%, 60% of the voting public have digital assets in their portfolios, you don't want to stomp on their portfolio. You don't want to stomp on institutions; you don't want to stomp on pension funds or other kinds of conservative funds. So it turns them into a thoughtful regulator, hopefully. And I don't know if Gary's going to be able to make that pivot. He elegantly made the pivot 180 degrees. So maybe he can figure out, he's a smart political. He is animal. And so maybe he can figure out a way to explain himself. Get more, get more positive.
[00:12:40] Gareth Jenkinson: Yeah. Does it take a post-Gary Gensler SEC to change all of this? What do you think, and when does that happen?
[00:12:45] Joseph Lubin: So by change all of this. It's a clash of civilizations. It is a multi-year, even multi-decade transition from top-down command and control, where the world works through authorities and intermediaries, to one where decentralized trust is how things work. And that's a bottom-up system. So that's a new trust foundation, that's decentralized finance. That means that everybody, every community on the planet has economic agency like they've never experienced before, political agency like they've never experienced before. And we need laws in all the nation-states enabling disintermediation to be. You know, we should be able to creatively come up with innovations in not just finance but in other spaces. And it's easy to imagine that we can build totally disintermediated systems that work better, serve people better than the ones reliant on intermediaries. Or if there's intermediation, it should be transparent and sort of shared.
[00:13:56] Gareth Jenkinson: Yeah, I guess we can kind of just shift the conversation a bit more to the Ethereum ecosystem now. And just in that vein, I mean, it really does seem like, you know, individuals like yourself really understand that you know, the powers that be are really trying to hold on to legacy systems and, you know, keep their ivory tower going.
[00:14:11] Joseph Lubin: But in their wisdom and their care for the people, they're trying to make this transition smooth.
[00:14:16] Gareth Jenkinson: Exactly. But, do you see sort of like some industry players being a lot more open to Ethereum and other blockchain protocols?
[00:14:26] Joseph Lubin: And what do you mean by industry players? Banks?
[00:14:27] Gareth Jenkinson: Oh, sure. Traditional finance players. And how involved have you been in some of those conversations?
[00:14:34] Joseph Lubin: Not really involved. But let's look at Larry Fink's statements. So BlackRock has the second largest ETF after Grayscale. Yep. We'll do the same in the Ethereum ecosystem. Our tokenizing our bidding or hodling. So, they've got, they're very interested in stablecoins and making that grow big. And interestingly, Larry Fink said it doesn't really matter that much whether Ether is a security or not. Of course, it does. But they can operate really well and maybe even better for a while if the whole ecosystem is co-opted into American decentralization. Problem is, Sharegain sort of set things up so that it's impossible to operate in our ecosystem under the assumption that Ether is a security because it's an unregistered security. Yeah. And nobody can buy it and sell it, except maybe Prometheum. But then it's got to be declared a security. It's got to be registered by somebody. There's nobody around who can register an Ether as a security. So it sits in this weird limbo situation. And going back to the lawsuit, we are led to believe that we needed to or need to register our noncustodial wallet, which has two major functions. One is helping people store their private keys and exercise their digital authority to sort of approve transactions on the network, something that I can do on a command line. So it's a gooey for all these things that I can do on first days of Ethereum. We did all that stuff on the command line.
[00:16:11] Gareth Jenkinson: Yeah. And so you'd have to register as a broker-dealer, right?
[00:16:13] Joseph Lubin: So yeah, it should have registered back then. Actually, me and my terminal. Yeah. So MetaMask supposedly, Consensys has to register that piece of software. We don't really know what that means. We don't know, as I said in the presentation, a fireside chat, we don't know whether that means that everybody, every American in the ecosystem who downloads MetaMask, has to register themselves as a broker-dealer. It's a nice way to get everybody to register. And I think it accomplishes certain faction's goals of being able to track every movement of value from source to destination to the person, not the organization. Yeah. Blackrock's happy. They can make giant amounts of money. If there's some way to Americanize decentralization, they're probably equally delighted. If there isn't, and they can just do the things that they do. They're very smart people. Entities like the big banks and the big bank holding companies are a little different. They're straight-jacketed by the SEC and others, so they can't really operate in our space, yet they're Martin chomping at the bit to operate in our space. Yeah. So to answer your question a little differently, we have over the years spoken to the big banks. And they said, look, we'd love to — can't. And so we should expect them to have very sophisticated trading desks and operations as soon as possible. We should expect that when the floodgate is lifted on the Ether spot ETFs, that a giant amount of attention and capital will flow into the ecosystem. The supply-demand dynamics around Ether will get really weird because there's much less available U.S. dollar-equivalent Ether than Bitcoin, and there will be a lot of pressure for institutions that are in Bitcoin ETFs to diversify a little bit. So, there are billions of dollars that will move into the ETFs through institutions and RIAs, etc. That's enough to move price up significantly. The world starts to take notice when our digital assets get to their all-time highs. And so that's not that far away. If one floodgate is lifted. And then you've got this feedback loop where people are flowing into it, and people realize that it's ultrasound money, that the more transactions there are, the smaller the monetary bases. And so it's deflationary rather than disinflationary like Bitcoin. And let's hope FIT21 doesn't happen five minutes later because let's hope it happens like two months later or something like that. Otherwise, it's going to go non-linear for a while.
[00:18:57] Gareth Jenkinson: It'll be crazy if that happens, I think. What are your thoughts on Ethereum's roadmap and its move to Altas? It's been really interesting to happen over the past two years. I mean, are you very much aligned with that, and do you think 1,000%?
[00:19:12] Joseph Lubin: Yeah. Yeah. So, mature engineering systems modularize for effectiveness and efficiency. Our ecosystem is modularizing, and sub-modularizing and layering, and that's great. The pains that some experience are around this divergent phase of achieving scalability. We've got a lot of horizontal scalability now available to us in a lot of vertical scalability as well. Vertical comes with improving the protocols, improving their two protocols and their one protocols, adding layers 3 and 4 and 5. And there are good reasons why higher layers will exist. And in any sort of endeavor, you’ve got to explore the solution space. And so that's what we're doing right now. We need a lot of diversity in this new information technology infrastructure that we're building for the world. The convergence space comes pretty soon where masks and software development kits enable chain abstraction, and enable just a single coherent view of the ecosystem. So it'll all look like an intense based architecture where you're talking to your wallet and saying, I want some Solana tokens, or I want to play a game X, you know, and it just goes ahead, and it does all the bridging and swapping that's necessary and puts the requisite number of tokens into your MetaMask. And so that involves a little bit of AI to translate your intent. It involves solver networks to compete to satisfy your intent. So we need this vast, highly scalable, highly diverse machinery underneath. Because if you look at how the world and the web works today, we have a very wide variety of different kinds of databases for different purposes. So whether it's a flat file, a Google Doc, Google Sheets, Excel, SQL databases on NoSQL, vector databases, graph databases, Airtable, I mean you.
[00:21:14] Gareth Jenkinson: You name it, the complexities there.
[00:21:15] Joseph Lubin: We use. How many databases do we use every day? Hundreds, maybe. And so, we need the different databases with different characteristics. So Solana has some great characteristics. Cosmos has great characteristics etc. And smart engineers or smart protocols will figure out, I guess, what the right database is to handle certain kinds of storage and or transactions or something like that. We'll get to the point pretty soon where applications are splayed across a few different of these next-generation database systems called blockchains.
[00:21:49] Gareth Jenkinson: Have you seen any sort of positive and negatives of just the amount of alts that they, I mean, like, you know, we've got too many to name, right?
[00:21:56] Joseph Lubin: Like our ecosystem is so small compared to the internet, so we can't build fast enough. I said yesterday that the political frictions will probably be the rate limiter in terms of how fast we grow. That could be wrong. I think if certain floodgates are lifted, there's so many blocks at L2 right now. Right. Bullshit. I mean, I mean, there's nothing. Yeah. If one application goes viral, it eats up a lot of block space, and that one application will be get replicated, fought, modified, etc., when games start to get really busy. That'll be interesting. Social networking and social graphs that we all own and monetize, they're going to undergird so many different things. That's going to be absolutely giant. The whole social networking is going to get flippant by people owning their own social graphs and monetizing content and applications on those things. When all that starts to be acceptable and gain viral traction, we're going to bump up against ceilings over and over. We're going to have a lot of pain in our future because we don't have enough block space.
[00:23:09] Gareth Jenkinson: You don't think things are too fragmented as it is now?
[00:23:11] Joseph Lubin: Yeah, of course they are. But it's a natural part of the divergence exploration of the solution space. And we really need fragmentation to get the kind of diversity of functionality because if we had just one kind of database and it was monolithic, we're not going anywhere. Right.
[00:23:34] Gareth Jenkinson: Are solutions like Polygon’s EigenLayer, like for you, one good example of trying to bring it all together in a unified way.
[00:23:42] Joseph Lubin: Yeah. And you're looking at it in a slice-of-time way, all these different systems are going to be pretty smoothly wired together so that their greatest value propositions are most used. If there are significant overlaps in what different systems do, maybe one of them wins over the others. But I think most of these technologies will have a lot of room to run. So every layer 2 technology, Polygons and zkSyncs and Arbitrum, Optimism, Linea, etc., they're all going to have hundreds or thousands or more networks at layer 2 or 3 and higher. They'll probably interoperate in the sense that we already have Degen, which is an Arbitrum technology on Optimism, and on Base, which is basically Optimism. And so they'll all get wired up together in efficient ways. We're going to see sequencer technology paying attention to many different networks. So, a shared sequencer technology is the future. It's a very powerful future. It's one of the ways that all these things will interoperate. And they'll also interoperate via bridges. So, they'll interoperate via SDKs and wallet abstraction views and layers. And you can imagine really powerful sequencing technology that takes into account what's going on in that layer 1 and as many things that that they can look at in 12 seconds or smaller. And you can imagine layer 4, layer 3; they're operating at subsecond block periods. And a bunch of those sequencers are feeding stuff into layer 2. They're operating at 3 seconds or 2 seconds, or one second. And a bunch of those are talking to layer 1, and they're trying to find coincidences of wants. So, if you can match some intent expressed on layer 1 with an intent on layer 2 or 3, then you can net out all that stuff and make things much more efficient. I don't know how.
[00:25:57] Gareth Jenkinson: You sleep at night with all these, with all, with all this complexity. I did want to chat to you briefly about staking ETH and just the return on investment. I mean, like for a layman out there, if you can stake 32 ETH and run a validator or whatever, you know, like there's a return on your investment, right? You know, it's a passive income stream. But you look at some of the other protocols out there, and they're offering a higher ROI, you know, how do you see that? Does it matter to the Ethereum ecosystem that there's not a higher return on investment in staking?
[00:26:24] Joseph Lubin: Again, you're looking at a slice of time, and it's fine in this particular slice of time in this particular slice of time or, let's say, let's go back three years, why would anyone invest in U.S. Treasurys? Because it's a risk-return situation very long term. So, what's your risk kind of organization? Are you how much risk are you willing to take, and how much return do you need? So if staking real Ether in the protocol is seen as the least riskiest proposition in the decentralized protocol ecosystem that has a yield to it, then that's the risk-free rate. Yeah. And when I say the word yield, Gary Gensler would choose to interpret it as something that an investment contract is throwing off. There is no investment contract there. Just to be clear, it's just people posting a performance bond or a guarantee because they're contributing resources and labor to helping up the product. And so they should get paid income.
[00:27:24] Gareth Jenkinson: Yes. Yeah, that makes sense. Briefly, what are your thoughts on EigenLayer and risk-taking? There's been some criticisms about the risks of that. I'm not too well versed on everything there, but I just thought I would pose the question.
[00:27:36] Joseph Lubin: So, Sreeram Kannan is Vitalik-class super genius. He and his team are just spectacular. We've been involved with them from very early on and in my first discussion with him three years, two-something years ago, I said, what about this contagion condition where there is this cascade of fails and the whole ecosystem goes up in flames? And he said, yes, we've been thinking about that. We'll be very careful, and we'll make sure that certain things are safeguarded. And so if you are stacking things up so that contagion is possible, that's problematic. But they're not stacking things up. They're sort of it's more horizontal than vertical in that sense. And so the Ethereum protocol can't really be harmed. And they've got safeguards to make sure that, and there is slashing that it doesn't cascade. And it's a phase shift for our ecosystem. This liquid staking is really important. And restaking is incredibly important. So it basically moves our ecosystem from requiring startups to both raise money from VCs to fund the development of their software but also build a community of miners or validators or some other committed contributors to the protocol. And that's hard. That's why Vitalik created Ethereum. That's why he wrote the white paper. Because back in the olden days, when you wanted to create a new coin, you had to fork the Bitcoin code. In some cases, you changed two lines of it, but then the heavy work starts. You've got to attract a lot of people to mine or validate your protocol. Now, EigenLayer and similar systems, you as a startup can simply provision for your elastic security needs. And it's elastic. It's an elastic resource. So you grow fast, you get more, and it's not like random people are joining your protocol to validate; the ecosystem is the LRTs are essentially attracting operators and vetting the operators. And so we're going to have probably a pretty good sense of the reputation of lots of different operators. And so the LRT will perform a really valuable function in identifying somebody that's actually checking them out, vetting different operators. And it's going to be up to the LTS, I think, to make really good decisions. There might be some blow-ups in that space among less prudent LRTs.
[00:30:13] Gareth Jenkinson: Yeah. The questions have to be asked, right? I mean, we've seen this story before, so...
[00:30:17] Joseph Lubin: Yeah, I know. But it's interesting to see all of this infrastructure, this ecosystem or a sub-ecosystem emerging and organically shaping itself.
[00:30:28] Gareth Jenkinson: Yeah. Because, I mean, like, not that it is Terra Luna, but, you know, Dogecoin was very much like, guys, don't worry, this will be fine.
[00:30:33] Joseph Lubin: And it wasn't anybody who speaks like him. He's made a great contribution to our ecosystem as an example of the kind of rhetoric not to listen to. Exactly.
[00:30:45] Gareth Jenkinson: Very, very briefly, your thoughts on Solana? I met Anatoly last year at Breakpoint in Amsterdam, and he was very complimentary of the Ethereum ecosystem. And he said he's always had good conversations with Ethereum developers. Yeah. I mean, I think we understand what Solana is, you know, highly performant blockchain. It's got a very specific goal in mind. Yeah. Your thoughts, in general, on what they're doing and its contributions to the ecosystem?
[00:31:09] Joseph Lubin: So great technology. I think of it in that not so much in the class of a radically decentralized layer 1, but more in the class of a high-performance layer 2 technology. It's super attractive when the token is at 15 bucks, or it's probably 160, 70, 80 right now; it's still quite attractive and especially attractive to VCs because you can multiply your returns as the thing grows. Anatoli’s been really clear that his goal isn't radical decentralization. His goal is to squeeze as much performance out of the protocol as possible. That's a great goal. Especially great goal that, as a layer 2 potentially. I don't even know that we're going to see this rigorous distinction between layer 1 and layer 2 in the Ethereum ecosystem. I think that that prevails. But I think some technologies will specialize in lower security needs. So maybe around gaming and memecoins and stuff like that, they have a lot of existential threats to move to in order to mature their technology. They don't have a good fee model transaction fee model. They spend maybe close to $1 billion a year on security in terms of inflating the monetary base, giving away the token if they made use of Ethereum's security, that would virtually erase that bill. So that's an option to them in the future, if that makes sense, in order to remain attractive. Their fees have to stay low if their fees stay low. Their security budget remains really high because you're just burning or sending out lots of Solana. If their fees stay very low, they're going to continue to really difficult problems with denial-of-service attacks. So there, it feels like a bit of a quandary to me.
[00:33:11] Gareth Jenkinson: Yeah, I think they're still figuring it out as well.
[00:33:12] Joseph Lubin: Yeah, sure. And they say that you know, well, all of the projects have gone through what they're going through. And so they've got things to look at and learn from, and I'm sure it'll be a successful ecosystem. Yeah. Well, unless the SVM gets real traction as actual layer 2 on Ethereum, and those projects are hot right now. So, it is possible that some great projects on Solana migrate to SVMs on Ethereum, and they don't take their token method.
[00:33:44] Gareth Jenkinson: Yeah. I mean, at least, like, I spoke to Austin from the Paris Blockchain Week, and he was like, you know, our beta tag is on us. You know, this is still a beta bit you know, we're still testing and development.
[00:33:56] Joseph Lubin: So that's a great project. There are a lot of other great projects we need parallelization of the Ethereum Virtual Machine that's happening in a few different ways. MegaETH is an amazing-looking project. We need a lot of modular, different virtual machine-based systems that are connected in some way to metropolitan Ethereum, either as layer 2 or sidechains or just bridged chains. And again, all that stuff is just going to be seen as the web because you're going to be talking to your intelligent agent, and you're going to be asking it to do stuff for you. Yeah. And it's going to go ahead and use the right infrastructure. Um, nobody ten years from now is going to give a shit what network their tokens are sitting on or where their transactions are being processed. I don't know which of the AWS installations my Google Doc is, I guess, Google.
[00:34:55] Gareth Jenkinson: That's exactly what I was going to say. That point, that makes a lot of sense. I'm just curious on your stance on Bitcoin and your history with Bitcoin. Perhaps you've addressed this before in the past is not something I've read or seen, but when did you first hear about Bitcoin?
[00:35:10] Joseph Lubin: Early 2011.
[00:35:11] Gareth Jenkinson: Okay. Were you a believer straight away?
[00:35:13] Joseph Lubin: I saw it on Slashdot. Slashdot was like Hacker News back in the day. And I think it was the second or third time I'd heard about it, downloaded the paper, and I was pretty depressed about how things were shaping up to go in the world, in terms of the size of the debts and nation-state economies, etc. But when I read the Bitcoin white paper, it was pretty clear to me right away that it would take a long time, but we could re-architect everything on sounder Foundations.
[00:35:49] Gareth Jenkinson: Yeah, I was going to just say, what do you make of some of the developments on L2? I mean, there's a lot of affinity scamming going on or, like, affinity marketing scamming, in terms of Bitcoin Altas and bridging. You know, like many Bitcoin OGs are kind of like, you need to maintain full control of your Bitcoin first and foremost. And probably Lightning's only. Yeah. You know, a lot of them are not doing that. Yeah. But you know there's some people that are doing some very interesting work there. Do you think it's going to reach the performance goals that they want, or it's gonna be very much?
[00:36:19] Joseph Lubin: I don't think it can unless the protocol evolves. And as we all know, Bitcoin is complete and perfect in the eyes of many core contributors. And that's very ossified.
[00:36:28] Gareth Jenkinson: That's a very big problem.
[00:36:31] Joseph Lubin: And so, so cool to see the spirit of innovation come to Bitcoin and the NFT Ordinal space and the L2 space. Really, sidechain space, bridges space. That's great. But they're not going to get the same kind of rigorous security. I don't think there's any sort of technological innovation on Bitcoin protocol as it stands. So without some kind of vessel control out of the hands of the reactionaries, then Bitcoin has a really great future. If not, then it'll be an uncorrelated digital asset that's really valuable. And a lot of people appreciate, one thing that I love Bitcoin for still is that it represents a lot of pretty rigorously decentralized economic bandwidth. And so, in the sense that in maker AI, you can use Ether as collateral to issue loans effectively, that is pure decentralized economic bandwidth. We don't have nearly enough of that in our ecosystem. So if Bitcoin and Ether explode in the size of their monetary bases, that enables us to do a lot more rigorously decentralized things; rigorously decentralized things are pretty much not under the control of any nation-state. Nobody really has jurisdiction over that.
[00:37:54] Gareth Jenkinson: And the way the world's going, we need a lot more of that. We need a lot, I think.
[00:37:58] Joseph Lubin: If we’re going to be in network states working, we need a lot of rigorously decentralized economic bandwidth.
[00:38:07] Gareth Jenkinson: Just the last question. How often do you see or chat to Vitalik, and how important is he still to the ecosystem? Because I know he's been talking a lot about like trying to hand off some sort of not control but direction to the rest of the ecosystem.
[00:38:23] Joseph Lubin: Jointly important in his own way. Yeah. And if he travelled to a different dimension, the ecosystem would be just fine. But he does make pretty big contributions every now and then when he thinks it makes sense to step in and write something and clarify something; he makes great contributions in terms of a high-level roadmap sketch that people can flush out. He's always considered himself probably more of a crypto economist than a computer scientist, and he’s obviously a polymath, and he's doing some of that stuff right now. So he spent a bunch of time in Montenegro. There are opportunities there and in other places of the world to proceed with this clash of civilizations and the sort of organized way by changing laws and by enabling nation-states to level themselves up with respect to our technology. So I know he's working hard on that. I was on a call with him maybe two days ago on... I don't know if he wants me to talk about that topic, but I know he's public about things that are going on in Montenegro. And so Consensys works closely with the Ethereum Foundation, and there are a handful of things around Zulu and other stuff that he and I talked about.
[00:39:37] Gareth Jenkinson: You said just last year, you said that Consensys had set up in Texas. Now, was there any temptation to leave the U.S.? Was it even possible
[00:39:44] Joseph Lubin: Consensys is approaching 200 countries around the world in terms of the people that are our customers. We like living on planet Earth, and we are excited about the natural evolution, the transformation that planet Earth is undergoing. It's probably the biggest paradigm shift in the history of humanity. And there's simply no paradigm shift possible until the United States broadly understands that decentralization is consistent with free market capitalism, which we haven't really seen in the U.S. It'd be nice to see it consistent with Western liberal Democratic philosophies. And so I think there's zero chance of us considering leaving the U.S. Like maybe there's a situation where if there was a tyrannical ruler that took over the U.S. and it didn't become the American experiment anymore. Yeah. Because we really think of what we're doing as an organic or natural continuation of the American experiment. It's got and it has the potential to go viral and to eat the world, especially the less cold parts of the world.
[00:40:53] Gareth Jenkinson: And the legal system allows you to preempt some things, like you had an hour, right? I mean, it's amazing sort of stance, rather…
[00:41:00] Joseph Lubin: As incredibly stupid… so much shit is and incredibly detrimental. So many different actors with different agendas are. It's still a pretty amazing system. It can survive tremendous attacks. The judicial branch is pretty neutral and very thoughtful. The legislative branch may activate. That's kind of funny that they're all just scurrying and worrying about their campaign contributions and their votes. But that's the way it works. So, we do what's called mechanism design in our ecosystem. And we've got some really brilliant mechanism design thinkers in our company. It's all about setting up sources and sinks for value and incentives and punishment to shape collective behavior. And the American experiment, the American system, is apparently remarkable. And that's mind-blowing that it was set up by some people.
[00:42:00] Gareth Jenkinson: A long time ago.
[00:42:01] Joseph Lubin: A long time ago. Yeah. Like, where did that genius come from? That's insane.
[00:42:05] Gareth Jenkinson: You need more of that now.
[00:42:06] Joseph Lubin: Got a lot of that. It's just a much more complicated world. Exactly.
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