Blockchain, Banks & the New Web: Q&A With Ethereum Co-founder Joe Lubin

Xconomy Boston —

Ethereum co-founder Joe Lubin is calm and soft-spoken when he shares his vision of how blockchain technology and digital currencies could transform the Internet, the global economy, and many aspects of our daily lives.

But what he’s talking about could become a raging tempest, and it’s worth paying attention to—especially given the vast sums of money pouring into the sector. Companies have raised more than $1.25 billion this year through sales of digital tokens—so-called initial coin offerings or ICOs—and this method of fundraising exceeded traditional early-stage tech startup investments in June and July, CNBC reported in August.

Lubin is a former vice president of technology at Goldman Sachs, but now he’s one of the key figures trying to shepherd the growth of an emerging technology area that, if he and others are right, could reshape the banking sector, among others. Three years ago, Lubin co-founded Ethereum, a peer-to-peer platform for running decentralized software applications. The apps run on blockchain technology, a way to create a digital public ledger for transactions distributed across many computers, so that the records can be verified but are supposed to be immutable. Ethereum users can create digital tokens, called ether, that can be used as currency; it’s now the second-most valuable cryptocurrency in the world, behind Bitcoin.

Lubin is also the founder of ConsenSys, a New York-based firm that bills itself as a “venture production studio” that develops applications and tools for blockchain systems, primarily Ethereum. In September, ConsenSys reportedly launched a $50 million venture fund to provide early-stage capital to blockchain startups.

I recently sat down with Lubin in Boston, where he spoke at the inaugural Deep conference organized by cybersecurity firm Cybereason. Lubin and I talked about how blockchain technology could shift the balance of power between consumers and businesses; the global regulatory outlook for virtual currencies; and why he thinks the use of blockchain platforms will be more complicated than the World Wide Web—but ultimately have greater impact. Here are the highlights of our conversation:

Xconomy: You talked in your presentation about how blockchain technology could help consumers protect their personal information. Can we put the genie back in the bottle when it comes to how much personal data we’re sharing with social media networks and other companies online?

Joe Lubin: The genie tends to get old and less useful over time. So, no, you’re going to be out there as a known entity forever. But your aspects of identity 15 years from now or 10 years from now are going to be different from what they are right now in many significant ways, and a lot of what’s out there currently gets stale pretty quickly.

So, we are moving into a world where you’ll have your own blockchain-based identity. You’ll be fully in control of that. Everything will be encrypted and selectively disclosable by you. You’ll be able to use that to log into systems without a username and password, effectively. You’ll be able to store your own profiles on your side of the browser, and because you’re going to be hitting these applications via signed transactions or cryptographically authenticated and signed transactions, that’s the only identity that these applications will really need. They’ll know that it’s you signing it because it’s going to correspond to a public address or a public key. But the real details that you don’t want to disclose can remain under your control.

You’ll be able to interface with the world of legacy identity providers via attestations. So, your government will be able to attest to the fact that you’re a citizen. Or the DMV will attest to the fact that this person is in control of this blockchain-based identity, he’s legal to drive until January 2020. Or other people will attest to the fact that you paid your bill on time, or that you worked well together on a software project. Stuff like that.

It becomes a persistent, portable identity and reputation, and you’ll be in control of it.

And if you do want to monetize aspects of your identity or communications or other emissions—like body signals or something like that, EEG, whatever you want to attach to your body and broadcast out there—you’ll be able to monetize that yourself if you wish.

If you want to monetize your attention, you’ll be able to do that in attention markets, rather than advertising networks.

X: What do you mean by attention markets?

JL: An open market where if somebody wants to get your attention to read an ad or to interact with an advertisement in a more elaborate way, or to do a small project, perhaps—there’s sort of a spectrum there—they will pay you to do that, rather than forcing you to do that the way the Web is currently architected.

X: Investor Mike Novogratz recently said that cryptocurrencies are the “largest bubble of our lifetimes.” He’s reportedly investing in them, and obviously wants to ride the wave on the way up. What happens when the bubble pops?

JL: That Novogratz guy is a total idiot. I’m joking, he was my college roommate.

X: No way! I didn’t know that.

JL: We hang out a lot and talk a lot. Mike is correct. It is a bubble. It’s going to pop a little bit and deflate a little bit, and then we’re going to blow a much bigger bubble. And that’s going to pop and deflate a little bit. And then we’re going to blow an even bigger bubble.

These bubbles are incredibly valuable because they bring attention and value into the ecosystem. And that value can be used by people who know what they’re doing or people who don’t know what they’re doing. But the ones that know what they’re doing can build fundamental infrastructure for this new way of doing things for the decentralized global economy, [the] decentralized World Wide Web.

Bitcoin started it out with a big, speculative bubble, and then a lot of VC money poured in, and a lot of value was created out of nothing because people started believing this value token was exchangeable for goods and services. And so, it’s a wonderful mechanism, sort of unprecedented, where a lot of business and software developers are holding this thing, and they are incentivized to add value to the ecosystem.

On Ethereum, there are a lot of positive feedback loops because of all these token launches. That brings a lot of stakeholders who are interested in the project early and talk about it and build value into it, and so, the human fear/greed cycle causes essentially overshoot and then undershoot, but as long as the highs are higher and the lows are higher, we’re going to be building the decentralized economy thanks to these bubbles.

X: The SEC is starting to look at ICOs, but it has made no sweeping regulations yet. Should it step in, and what do you think regulations would or should look like?

JL: The SEC should step in in any situation that it deems to be fraudulent, or any situation where … Next Page »