Fireside Chat with Ethereum's Founder: Joe Lubin | ETHDenver 2023

okay so thank you again to the opposite to the observation Aubry Strobel coin artist and all of their wonderful guests so we're gonna kick right into the next fireside chat with a good friend to eat Denver in fact I will say right now we owe a lot actually to Joe Lubin to or four I should say supporting eat Denver since the beginning so a little quick story I had met you I'd been to Bogart in Brooklyn Joe and I tease kind of doing business together for a while and then when I called him asking them about supporting eat Denver he was like absolutely didn't even didn't even bat an eyelash he was the first sponsor to actually put their marker down aside from me to actually build this thing back in 2017. so without further Ado Joe Lubin and his uh moderator interviewer Astra Dorner from Hondo splat did I get it thank you very much [Applause] sounds good good evening everybody I see you brought a special guest Joe I like it who is this Buffy Buffy Buffy The Buffy corn all right soon everybody will walk around with their own Buffy or other character uh John has done some pretty profound things um at denveropolis but look out the best is yet to come all right so let's Jump Right In l2s are one of the Hot Topics here and in the crypto space right now and you made a bit of an announcement today so tell us what's new with the consensus L2 sure so ethereum um started out as a modular protocol where everything was in the protocol and over the last few years we've seen it sorry a non-modular protocol we've we've seen it modularized into an execution layer that's getting teased out and a security layer that that's more dedicated and soon we'll see a module for guaranteed data availability and different kinds of data availability and so data availability is is what will make the execution layer really scream work better work bigger and faster the in the last few years we've seen Layer Two Roll-Ups either optimistic Roll-Ups or or now zero knowledge Roll-Ups um hit the scene and and bring greater usability and greater scalability uh to ethereum there are a bunch of projects out there that are taking the ZK evm approach um so we we have a project that we're going to launch pretty soon uh polygon has a mainnet launch on March 27th Scrolls coming there are other ones out there and I'm really hoping to see a lot of competition in the space because that makes us all better but our teams are talking our teams are collaborating and similar to layer one ethereum where we had a bunch of competing and cooperating client teams essentially building the same protocol with uniform interfaces for for the developer and user ecosystem we're hoping to uh to have these projects compete and cooperate in in perhaps some sort of unifying protocol as well all right but so just so we are on the same page the L2 will make transactions faster cheaper way cheaper many more transactions per second throughput way more usable um and it'll enable because of the number of transactions per second and because of the uh inexpensive cost for transactions it will enable far more use cases that currently aren't economically viable on on the more expensive slower layer one do you have an example I think games all right yeah just anything that uh um that requires um faster um frequency of response and uh um so there there are things that we're going to be able to do in uh Layer Two networks and layer three networks and layer four networks that are anchored into the lower layer the same way that a Layer Two Is Anchored into ethereum for security uh so one could imagine uh what we've been talking about for years which is uh sub-second uh transaction throughput you may not get a full finality uh for the for that those blocks and those transactions but uh for lower value transactions you'll be able to see the thing processed extremely quickly and you'll you'll get your response back extremely quickly okay coming bethurium so most of the l2s or even all of the l2s will be virtually as safe as ethereum they will they will get 99.9999 of the security guarantee of layer one ethereum uh there are things that that you can imagine on the edges um so first of all there is centralization in these Layer Two protocols and we we need to get things out and working uh find product Market fit uh for the for these different products essentially and then identify the elements of of weakness slowness vulnerability centralization and and fix those things and usually fixing them will involve creating a decentralization of that functionality so sequencers uh sequencing transactions uh for instance uh to create blocks is something that that will be centralized for a while um but it is absolutely it it's very clear to every team that they they need to build a decentralized sequencer okay and the sequencer they bundle all the transactions and then sort of send them to the layer one right yeah you know okay um but I hear you say it will be possible to fully decentralize the L2 yeah so our our ecosystem has been progressively centralizing the technology um since the start we need to get things out there and working we need to build platforms that developers can can use and learn what they need to learn to find their own product Market fit and um in sequences or stages uh both the layer one and higher layers and applications will progressively decentralize themselves okay two do you have a timeline for us first to main net with a testing Network yeah uh do we have a timeline I think we'll we'll be not too far after our polygon friends okay but for the full live on mainnet Layer Two yeah so um we might just be in March um okay well we'll see all right sounds good um moving on to like the more bigger picture it's been quite of a wild year um last year so the FTX Fallout is still happening silvergate may not make it what um how risky was and is the FDX Fallout for the crypto ecosystem how risky was it um how dangerous how dangerous was so the existence of FTX was dangerous um the was very good news I think so so first let me say that uh the demise of FTX hurt a lot of people and it hurt a lot of companies it heard a lot of projects in our ecosystem just uh sort of follow-on cascade cascading effects and and that is terrible um but it would have been far far worse far far more dangerous for our ecosystem if C5 continued to grow and persisted and even worse if if C5 had captured regulators and installed regulation that uh um that made proper decentralization um difficult or unacceptable in certain nation states so if I did some interesting things it uh it brought a lot of people into our ecosystem far more than uh would have been um there are benefits and and cons to to that so there was a lot more activity are irrational exuberances and surges were way bigger than they would have been if if C5 wasn't so enticing and didn't lower the bar for naive consumers to to get into the space so we could have had a sort of smoother trajectory in the development of our of our ecosystem without C5 so you're saying if you only had dexes and decentralized organizations absolutely we would so underlying all of the these surges and wicked Corrections has been essentially a logarithmic curve or semi logarithmic curve that's been very very straight and that means that our our ecosystem has been growing pretty smoothly exponentially if you look at what we call Tech crypto so Tech crypto are the people who think of decentralization as a design Principle as something to strive for and continually perfect or move towards greater decentralization money crypto are the people who are interested in in separating naive consumers from their money they essentially glom onto our ecosystem and they treat decentralization as a as a marketing strategy and and they don't build um with respect or with decentralization in mind uh and so if if we were a purely Tech crypto ecosystem we'd have a very smooth um exponential growth of our ecosystem but because people operate by fear and greed uh quite often we've had a bumpy road so that the.com boom and bust is is very similar and uh um I'm hoping that uh that Regulators will um will make C5 or money crypto much better behaved and protect consumers much better and I'm hoping that Regulators will recognize that Tech crypto is just Innovation we're building mechanism and don't mess with innovation all right um you're saying this as a CEO of a centralized company that has Banks as clients and investors so how do you see like do we are you saying consensus will also decentralize at some point or like how does that go together yeah so we it's 2023 um it's hard but possible uh to be a purely decentralized organization um and decentralization largely looks like mechanism autonomous mechanism there will likely always be people either operating in a quasi decentralized fashion in decentralized organizations like Dao's they're certainly elements of vertical organization uh the way we see in in the traditional economy combined with elements of horizontal organization which we see in protocols and decentralized organizations and um so that's increasingly going to be the way that uh that people operate in the economy as a company that started in essentially 2014 when there was no ecosystem we did what we did to initiate ourselves and to grow and to do things that fostered adoption for the ecosystem and to experiment with lots of different applications and build infrastructure so many people could do more experimentation and find product Market fit and then we're on a a rapidly accelerating Progressive decentralization Arc right now so for projects like inferior for projects like metamask we're very actively working to decentralize but consensus will always be a company just sort of it's the projects so it's 2023 and there are there are projects that have exited to community or decentralized themselves um I can imagine some of our products possibly exiting to community even while we continue to play a big role in the evolution of those projects and I can certainly imagine uh consensus maintaining its Brain Trust of amazing talent while making use of the technology that we've developed and we sort of become more natively decentralized over time I think for quite some time there will be traditional Banks and certainly nation state money and uh we will be part of the traditional economy and the Next Generation economy this is not our first rodeo pun intended when we talked in 2021 in Hamburg at a conference you said there's a great Divergence where defy and Wall Street are sort of moving closer together is that still the trajectory or post FTX are we maybe [Music] going apart a little bit yeah so ultimately uh decentralized finance will just be called Finance because traditional finance will make use of these much better mechanisms and decentralized finance will will grow exponentially to serve people and organizations Better Than regulated centralized Finance can it's going to take quite a while possibly maybe not but uh Regulators in the United States and the United States itself sees um sees this phenomenon of decentralization as as potentially a national security threat The Regulators and law enforcement see the technology as something that they need to either slow down or curtail in some ways or help help to fit into the laws of the different nations and the laws of the different nations are going to evolve in time so cities used to have roads and there used to be horses and horse-drawn carriages on those roads and and the automobile technology came along and there it was there are some odd things like there's a law where you had to walk in front of a car uh when when the car was was moving down the road and so the laws changed the infrastructure evolved and matured and and we'll see that do I hear you say the defy idea of having permissionless smart contracts where you don't need a bank you don't need kyc that that will not be possible in the US yeah 100 and I don't think that's going to be that controversial um smart contracts arm mechanism um so you don't want to regulate technology you don't want to regulate mechanism nation states will want to regulate usages of that mechanism so if you're using it in a way that that's clearly not healthy for the citizens then I imagine that governments will have something to say about that but uh I'm much more sanguine about what's happening uh with Regulators at least in the in the United States so it sure looks like there's some selfish things happening uh either maybe on the Bank lobby side maybe on the regulator side but I also feel like um hey there's some terrible projects um some uh fraudulent um Insidious projects and it's good that Regulators are going after them and making it uh making people think twice about doing things like that it's also true that a lot of things look a lot of tokens look like Securities it's also true that uh many offerings that at first glance don't look like Securities are are doing subtle things um that um that the SEC I think rightly is pointing out are um are not purely decentralized so Kraken big fan of Kraken but they did offer um a staking product that that had significant elements of centralization and and it they were in control of a lot of stuff and so that essentially makes it a security if you advertise your very decentralized thing in such a way that it sounds like people are going to be able to make money based on your effort than just that language can make it a security so I actually think that uh and this will be a little controversial I think that uh Gary Gensler and the SEC are doing a great job of driving projects in our ecosystem to radically decentralize themselves um I could even call Gary the uh The Shining Knight of decentralization oh boy he he's thick so I I agree that uh there may be ulterior motives and I'm not a fan of those things but uh we need to um get very serious about uh being decentralized um full stack is that possible though then a realistic time frame within a realistic user interface that enough people can use for it to be oh sure um so uh the layer one um slow um enabled a tremendous amount of innovation it's enabled or we were building scalable systems we're building more usable systems that results in in many more use cases so the usability is improving dramatically and we will uh I don't know if we'll ever get to perfect decentralization but we just have to strive we have to identify uh everything that that can be further decentralized decentralized you're not going to touch it I'm not the SEC but uh um uh so let's say if the SEC thinks Bitcoin is sufficiently decentralized that's an interesting bar because it's not extremely decentralized okay and it needs it has a lot of work to do as do we and if staking in general was declared to Security in the United States would that be an issue for ethereum so you can't declare staking a security uh you can declare certain kinds of offering around staking a security staking can be perfectly decentralized projects like rocketpool are doing a great job of that and it would be conceivable that we can just be decentral like have decentralized staking 100 so it's only fast in metamask we enable people to we give them a little bit of assistance uh but but essentially they're going straight into Lido or rocket pool um if they if they choose to do that so we're not we're offering we're sort of like uh a infrastructure platform like AWS or or Azure and just enabling people to uh to make their own choices um and get the yield that that they would get otherwise will crypto survive in the U.S now that the SEC is so adamant about things will crypto survive in the U.

S does this worry that the industry will just go elsewhere yeah so um from my perspective our ecosystem um the broader blockchain ecosystem and in particular the Metropolitan ecosystem has never been healthier there is so much Innovation going on there's so much activity going on you go to a place like this there are 20 000 25 000 people um throughout the whole event the pace of innovation is astonishing at Layer Two account abstraction the nft space so again it it's it's been a pretty smooth trajectory if you uh if you squint and you ignore the the waves of speculation so I don't believe that uh Regulators or politicians in general are trying to kill innovation in America uh some of them may be trying to slow it down so they can catch up but uh things are are looking reasonably good there may be a little issue in maintaining bank accounts but uh I'm hoping that uh that that's more um fud than actual okay if there were when what will drive the next bull market assuming there's one um so Innovation um Clarity or lack reduced uncertainty with respect to regulation I really think that um there are politicians that want to help with the uncertainty around regulation they want to make it hard or impossible for the SEC to regulate by enforcement actions and fund and when you have the SEC trying to scare people it partially means that they're not that they don't have anything on people so if they can scare people into coming in and registering or or settling in a lawsuit um that's that's different from a slam dunk where they they have you dead to rights and they they sue you or or um it's just obvious that you need to settle so that's happening in the SEC context in the interest rates context which is I think a really big one I think we're um we're getting close to the end of that particular particular trajectory and uh just the way traditional monetary systems operate they're they're going to have to keep printing for a long time and so we have uh ultrasound money uh so even in the face of of the US dollar going down by eight percent or something in the last six eight months the ethereum token was maybe at around a Thousand Eleven Hundred and were floating around sixteen hundred in that period there's a good chance that it was the result of just Innovation uh solid people solid teams in our ecosystem that won't be budged there's also a decent chance that because we took two two million ether I think um out of the regular issuance by the protocol so two million ether that it would have been issued if we didn't move to proof of stake were not issued and then I think we're around 43 000 ether that have actually been burned um if that hadn't happened I think we would have had we obviously would have had a less sound money um but we've really had a a solid base around 1200 for quite a while and uh when things start to run in terms of excitement and Innovation maybe it's an nft project maybe it's a the ZK system evm system really starts to roll um then more and more transactions will cause more and more ether to be burned which will get more and more excitement including from institutional investors and I think we'll see a a very interesting positive feedback loop and I will put a a 23 handle on that sometime this year interesting I have to point out that ether also has been at 4000 and at ninety dollars right compared to the US dollar I don't think so of course and let's look at the stock market uh while you're doing that so that that was partially a result of another one of our irrational exuberances and time that with a a wicked macro economic collapse and geopolitical crisis and yeah all the assets are down it up what projects are you excited about there's a lot of innovation in web 3 also so where where do you think like what what's exciting there's so many projects in the ethereum ecosystem that that I'm excited about especially inside of the consensus so I'm going to go way off script and I'm going to say the ordinals project on bitcoin okay I'm partly joking but I'm also very serious because if ethereum goes up it takes the whole ecosystem with it if Bitcoin goes up it takes the whole ecosystem with it Bitcoin has has been conservative in its young life it was sort of the the older brother to an entire ecosystem and it uh it couldn't really stretch its wings and uh and explore its creative potential but uh with this new ordinals protocol with nfts getting minted on bitcoin uh Bitcoin is starting to get its Groove it's starting to get expressive and I would love to see um block space for Bitcoin get really really expensive um because that'll that'll lift all boats all right not the most the thing I'm most excited about but I which what are you most excited about most excited about uh consensus CK evm of course bringing it full circle thank you so much Joe Lubin cool thank you everybody enjoy the rest of your conference so extinct