Joe Lubin: The truth about ETH founders split and ‘Crypto Google’
Joe Lubin explains what really happened in 2014 when two co-founders were pushed out and how Ethereum really is becoming the “World Computer.”
Theres a narrative thats grown up around Ethereums two most important co-founders, Joe Lubin and Vitalik Buterin, to explain how they went in different directions almost a decade ago.
It suggests the pair fell out over the blockchains future direction, with the idealistic 20-year-old Buterin determined to turn Ethereum into a nonprofit foundation, while Lubin and others wanted to commercialize the technology via a for-profit company.
That wasnt really what happened, the billionaire founder of Ethereum infrastructure and software firm ConsenSys tells Magazine during an in-depth interview in Tel Aviv.
What happened was people were looking for a way to explain why these two people were bumped out of the project. And that was a convenient way to label it. But that wasnt the reason they were moved.
Lubins referring to Ethereums infamous Red Wedding in 2014 when the eight co-founders and the team gathered to incorporate Ethereum as a company.
The meeting descended into bickering and infighting over internal politics that saw a devastated CEO Charles Hoskinson pushed out of the team, along with underperforming co-founder Amir Chetrit.
I think its true that I and several people on the team like maybe everybody else believed that you need to draw businesses in, you needed economic, commercial validation in order to build better things, even open-source software, the 58-year-old says in his slow, measured tones.
But that wasnt the root of why I started ConsenSys or why two people were bumped off the project.
Red Wedding and Crypto Google
As documented in Camilla Russos history of Ethereum, The Infinite Machine, the co-founders had gathered in Zug, Switzerland on June 7, 2014, to sign a document transforming Ethereum into a for-profit company. But instead of signing the contract, tensions boiled over Hoskinsons management style and personality, Chetrits contribution to the project, Ethereums future direction and other internal political issues.
After much back and forth, the decisions were all left to the gangly 20-year-old math genius whod created the project in the first place. After some time alone on the terrace, he returned to say Hoskinson and Chetrit were out, and Ethereum would become a nonprofit foundation instead of a company.
Vitalik wrote an amazing white paper it was right place, right time, incredible vision and it attracted lots of people of disparate backgrounds, and we worked together well for chunks of time, Lubin says by way of context.
We had differences of opinion, at times, those differences of opinion boiled over famously… infamously. And there was a moment where two people were bumped out of leadership, and up to that point, we were having discussions about whether we were going to be purely nonprofit, or whether we were going to pursue a nonprofit track, put it under a foundation, and then the same group of people who worked so nicely together would build Crypto Google together.
And it became apparent to all of us that we probably werent going to build Crypto Google. But it was also clear to all of us that nobody was even close to being able to build Crypto Google and that were just building the foundation and the platform for a long time.
Lubin was already planning his own for-profit company to build out Ethereums application layer when the decision was made, and it spun into life not long afterward.
While other co-founders, such as Gavin Wood (Polkadot), contributed more to the early protocol itself, arguably none of them, apart from Buterin, has since contributed as much as Lubin to what Ethereum is today. While ConsenSys didnt turn into Crypto Google, its infrastructure and apps are as important to Ethereum now as Google is to the web.
ConsenSys wasnt formed to commercialize it. It was formed to continue the vision and the mission of the Ethereum platform, Lubin explains.
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But it actually operated from a graffiti-covered warehouse in Bushwick, Brooklyn. The aim was to build out applications and infrastructure for Ethereum by investing in startups, incubating projects and consulting with firms like JPMorgan and BHP Billiton on how to incorporate this new technology. It spawned more than 50 businesses early on, including a poker site, a prediction market and a healthcare records firm. But by all accounts, its early years were pretty slapdash, with no real corporate structure.
MetaMask software developer Dan Finlay spoke about the early days on the Epicenter podcast.
ConsenSys was this wonderful, just kind of chaotic incubator at the early stages. I dont know, there must have been hundreds of different experiments getting validated and tried out there. And there was a really exciting energy, he says, adding that a lot of projects got built before Ethereum could support them:
Back then, it was very normal to just kind of build your application as if the blockchain was going to scale or did scale already.
In 2018, a Forbes investigation suggested that pretty much all of ConsenSys projects were in the red, and the company was burning $100 million a year on non-profitable projects, including an asteroid mining company.
Not long after, Lubin axed a bunch of underperforming projects, culled the 1,200-strong headcount and reset the company into ConsenSys 2.0 with a much more corporate and accountable culture.
Despite being worth $7 billion after its most recent $450-million fundraising round in 2022, ConsenSys let go of another 11% of its staff in January of this year. Lubin tells Magazine it was readying itself to survive bad conditions as macroeconomic and geopolitical storm clouds gathered.
We wanted to ensure that we had significant runway so that we can stay strong and build, he says, revealing it was eyeing a number of acquisitions that if were able to bring some on board that will add really valuable pieces.
Centralization vs. decentralization
Anyone whos listened to Lubin speak will know that hes genuinely committed to, and a proponent of, the benefits of decentralization.
So, is there tension between running a centralized company like ConsenSys that provides the crucial infrastructure to a decentralized blockchain?
I dont think theres a tension, he says.
Its all about progressive decentralization. Theres nothing wrong with having an entity that is organized in one way that is trying to build something that is organized in a different way.
Lubin explains that the products ConsenSys is building need to achieve product-market fit; otherwise, theyre kind of useless, and so bringing something forth, wholly and perfectly decentralized, is very difficult it may be impossible.
ConsenSys most crucial infrastructure is called Infura, which offers Ethereum nodes as a service, making it easier for developers and users to connect to the network. Its basically an intermediary service between decentralized apps (DApps) and the blockchain that projects rely on to stay up and running.
Infura probably works a little too well, as much of the Ethereum ecosystem is dependent on it. That means if Infura goes down, so too do half the networks projects, including Uniswap, Compound, MetaMask and Aave.
Its also a weak point for censorship and was criticized by some for complying with the Tornado Cash sanctions.
Decentralizing Infura
ConsenSys has been working on a plan for some time now to decentralize Infura. This will take the form of a marketplace of competing infrastructure providers that offer similar services, of which Infura itself would be one.
Lubin believes its extremely important to make this happen.
Ive been a proponent of decentralizing Infura since the start but more actively since five years ago, he says.
What weve run into is that our ecosystem keeps having these wicked growth spurts, he continues, adding, It was a sub-priority to keep things going rather than to start a parallel project to parallelize and decentralize and thats going pretty well right now.
The protocol will either be called XFura or the Decentralized Infura Network Protocol.
The idea is that we believe now that we can take a high-performance product and federate the protocol, initially do a lot of hand-holding with other providers and then we situate Infura on the protocol, he says.
Its pretty close. There are a bunch of very sophisticated partners that are working closely with EG [Galano], the lead of the project. I cant give you a date.
Although Infura researcher Patrick McCorry went out of his way in an interview with Cointelegraph to say censorship resistance was not the point of decentralizing Infura, thats certainly one of the benefits.
A decentralized network would enable DApps to pick and choose providers, allowing them potentially to get around censored protocols or addresses like Tornado Cash.
I like the idea that theres optionality, says Lubin, carefully noting that different providers would operate in different nation-states and jurisdictions.
I think that works well if theres a lot of them and if theres real choice, so you can always go to an uncensored service and be sure that theyve got enough validating power so that youre gonna get your transaction processed fairly rapidly.
However, he adds its equally possible that future aspects of the protocol are obfuscated so that no one actually knows whats in a packet or a transaction. He says he knows of people already working on protocol enhancements who will make this happen, and the explosion of layer 2s and layer 3s makes it even more likely.
If theyre already glommed in and impossible to read, then its hard to imagine that regulators will either care that much or have the ability to do anything, he says.
Im sure [there is] lots of criminal activity that flows through AWS and Azure and every mail server everywhere. So, theres a level of infrastructure that you just cant halt because its doing mostly useful activity.
Decentralizing MetaMask
The other core bit of infrastructure provided by ConsenSys that underpins the entire Ethereum ecosystem is its ubiquitous browser wallet MetaMask. Its also being sort of decentralized by crowdsourcing the development of new features and the addition of new blockchains.
Called MetaMask Snaps, itll turn the browser wallet into a permissionless platform for others to build on one proof-of-concept Snap enables MetaMask to act as a Bitcoin wallet.
The MetaMask Grants DAO [decentralized autonomous organization] will get increasingly decentralized and will incentivize people to build cool things, to start companies that permissionlessly innovate that we have nothing to do with, says Lubin.
He explains that over the years, MetaMask was approached by numerous blockchains looking for support, but after theyd crunched the numbers, there wasnt enough activity to justify splitting its focus from Ethereum. Snaps, though, will open the doors to everyone.
Crypto regulations
Lubin is unconcerned about the possibility of Ethereum being declared a security, saying, Its as likely and would have the same impact as if Uber was made illegal.
There would be tremendous outcry from not just the crypto community but different politicians, certain regulators.
Theres a sense of frustration from Lubin that this ground even needs to be covered again, saying that ConsenSys has been through all of this in discussions with the SEC and Commodity Futures Trading Commission over many years.
We went in there on a voluntary basis five years ago or something like that, when theyre just trying to wrap their heads around what tokens were, he says.
They thought back then that everything was a security; we think [we] helped them significantly understand that lots of tokens are not securities and then they went away, and Gary and his team now think almost everythings a security.
But he believes that the renewed focus on regulations in the wake of the FTX and stablecoin collapses will ultimately be a good thing.
We now have the worlds attention, and smart people who care will prevail because it just makes sense, he says.
And sure, there will be people with agendas who dont want to see it that way. Maybe the banking lobby will help them not see it that way. But in terms of finally paying a lot of attention to trying to regulate an important space, I do believe that clear heads will think through this and that people will start to understand the benefits of decentralization and make good regulation for CeFi [centralized finance] and no regulation for tech, crypto.
Crisis equals opportunity
In fact, Lubin is remarkably philosophical and sanguine about all the regulatory, game theory and technological challenges facing Ethereum. For example, he concedes centralization of staking on platforms like Lido could become a concern, but because progressive decentralization is baked into the nature of the ecosystem, it wont be a problem for long.
Things dont start very decentralized, he says. These are still pretty new innovations, and our ecosystem is pretty exacting. If you want to be in the Ethereum ecosystem proper, then youre not going to want to try to dominate something, youre not going to want to operate centralized for very long. The ecosystem will identify that as problematic and come up with solutions for it, which is great.
In Lubins world view, problems are just short-term issues you deal with as part of the process of making the project better.
I see things as processes. I hope we run into lots of complications in the near term, and all the way through, because every complication just points out how we can build a more robust platform and a more decentralized platform. Yes, hopefully, well run into lots of difficult problems.
Lots of smart people have good solutions that are being built.
Also read: Ethereum is eating the world You only need one internet
The future of Ethereum
The big question is, where does he see Ethereum heading? Does he believe the worlds entire financial system could end up running on Ethereum using ZK-Rollups?
Lubin says the founding conception of Ethereum was that it would become a world computer, and he suggests that was still in the cards.
I think several of us thought early on that we were building the Star Trek computer essentially, he says, explaining it handled pretty much anything and everything.
And so, I think that decentralized protocols will be the underlying trust foundation for lots of heterogeneous architectures. So, its possible that Ethereum will scale sufficiently so that we can have one trust foundation and then build lots of layer 2s and layer 3s and up.
There have been many computer revolutions for the last 200 and something years and this is another one.
So, the answers yes. And the answer will take time to unfold. It would be impossible to rearchitect the global economy or global financial system in a short period of time.
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Author: Andrew Fenton
