There’s a narrative that’s grown up around Ethereum’s 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 blockchain’s 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 wasn’t 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 wasn’t the reason they were moved.”
Lubin’s referring to Ethereum’s infamous “Red Wedding” in 2014 when the eight co-founders and the team gathered to incorporate Ethereum as a company.Former Ethereum CEO Charles Hoskinson (right) with creator Vitalik Buterin (left) from back in the day. (Flickr)
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 it’s 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 wasn’t 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 Russo’s 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 Hoskinson’s management style and personality, Chetrit’s contribution to the project, Ethereum’s 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 who’d 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.Joe Lubin in conversation with Magazine in Tel Aviv.
“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 weren’t 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 we’re just building the foundation and the platform for a long time.”
Lubin was already planning his own for-profit company to build out Ethereum’s 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 didn’t turn into Crypto Google, its infrastructure and apps are as important to Ethereum now as Google is to the web.
“ConsenSys wasn’t formed to commercialize it. It was formed to continue the vision and the mission of the Ethereum platform,” Lubin explains.
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Who is Joe Lubin?
Born in Toronto in 1964, Lubin studied electrical engineering and computer science at Princeton in the mid-1980s, where his roommate was another future crypto billionaire, Mike Novogratz of Galaxy Digital. Amazon founder Jeff Bezos was in the same faculty, though Lubin tells Magazine they never met.Joe Lubin was almost 50 before he jumped on board the Ethereum train and made his first billion.
Lubin has had a surprisingly diverse career, working in AI, robotics and autonomous music creation for a number of different employers. He founded a hedge fund and was the vice president of private wealth management at Goldman Sachs, but nothing world-changing, according to Novogratz, as quoted in the Financial Times in 2021.
“Joe was one of the brightest among us, a forward thinker, but by 45 hadn’t done anything to stand out,” Novogratz recalled. “I don’t think any of our gang would have guessed how things would turn out.”
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The combination of his near-front-row seat to the September 11 attacks on the World Trade Center and then the global financial crisis shook him to his core. He said at the ConsenSys Ethereal Summit in May 2017 that the events had made him feel as though “we were living in a global society and economy that was figuratively, literally and morally bankrupt.”
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He believed a slow, cascading financial collapse was taking place, which made him receptive to the ideas in the Bitcoin white paper, which he read in 2011. The following year he moved to Jamaica with his girlfriend, who was trying to forge a career in dancehall music, and he became a music producer while investing in Bitcoin and waiting for the collapse.
During a trip home to Toronto in late 2013, he attended a Bitcoin meetup alongside another co-founder, Anthony Di Iorio, and encountered a kid named Vitalik Buterin, who was touting his just-written white paper for an improved version of Bitcoin called Ethereum. Lubin was “blown away,” and he became an official co-founder in early 2014.The core early Ethereum team at the house rented for Bitcoin Miami 2014, including Joe Lubin in the back row, second from right. (yanislav.medium.com)
Approaching 50, he was an odd fit with a bunch of anti-establishment 20-something-year-old coders, but his Jamaican music production background gave him just enough cachet with the team to get by. And, of course, Lubin and Di Iorio personally bankrolled around $500,000 to $800,000 of the funding necessary to get Ethereum off the ground.
Lubin’s experience also helped the team avoid potential pitfalls and roadblocks, and he insisted on early meetings with the United States Securities and Exchange Commission and hiring high-priced lawyers to minimize the extraordinary legal risks.
ConsenSys was founded in Switzerland in October 2014 for legal reasons, which subsequently led to a nasty ongoing court battle between employees and shareholders who claim they weren’t properly compensated when the assets were transferred to an American entity.
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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 don’t 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.Forbes took aim at ConsenSys in a 2018 investigation. (Forbes)
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 we’re able to bring some on board that will add really valuable pieces.”
Centralization vs. decentralization
Anyone who’s listened to Lubin speak will know that he’s 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 don’t think there’s a tension,” he says.
“It’s all about progressive decentralization. There’s 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, they’re kind of useless, and so bringing something forth, wholly and perfectly decentralized, is very difficult — it may be impossible.”ConsenSys plays a big role in the Ethereum ecosystem.
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. It’s 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 network’s projects, including Uniswap, Compound, MetaMask and Aave.
It’s also a weak point for censorship and was criticized by some for complying with the Tornado Cash sanctions.
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 it’s “extremely important” to make this happen.
“I’ve been a proponent of decentralizing Infura since the start but more actively since five years ago,” he says.
“What we’ve 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 that’s going pretty well right now.”
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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.
“It’s pretty close. There are a bunch of very sophisticated partners that are working closely with EG [Galano], the lead of the project. I can’t 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, that’s 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 there’s optionality,” says Lubin, carefully noting that different providers would operate in different nation-states and jurisdictions.
“I think that works well if there’s a lot of them and if there’s real choice, so you can always go to an uncensored service and be sure that they’ve got enough validating power so that you’re gonna get your transaction processed fairly rapidly.”
However, he adds it’s equally possible that future aspects of the protocol are obfuscated so that no one actually knows what’s 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 they’re already glommed in and impossible to read, then it’s hard to imagine that regulators will either care that much or have the ability to do anything,” he says.
“I’m sure [there is] lots of criminal activity that flows through AWS and Azure and every mail server everywhere. So, there’s a level of infrastructure that you just can’t halt because it’s doing mostly useful activity.”
The other core bit of infrastructure provided by ConsenSys that underpins the entire Ethereum ecosystem is its ubiquitous browser wallet MetaMask. It’s also being sort of decentralized by crowdsourcing the development of new features and the addition of new blockchains.
Called MetaMask Snaps, it’ll 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.Joe Lubin has arguably made a bigger contribution to Ethereum than any other co-founder apart from Vitalik Buterin.
“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 they’d crunched the numbers, there wasn’t enough activity to justify splitting its focus from Ethereum. Snaps, though, will open the doors to everyone.
Lubin is unconcerned about the possibility of Ethereum being declared a security, saying, “It’s 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.”
There’s 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 they’re 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 everything’s 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.
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“We now have the world’s attention, and smart people who care will prevail because it just makes sense,” he says.
“And sure, there will be people with agendas who don’t 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 won’t be a problem for long.
“Things don’t 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 you’re not going to want to try to dominate something, you’re 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 Lubin’s 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, we’ll run into lots of difficult problems.”
“Lots of smart people have good solutions that are being built.”
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The future of Ethereum
The big question is, where does he see Ethereum heading? Does he believe the world’s 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, it’s 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 answer’s 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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Based in Melbourne, Andrew Fenton is a journalist and editor covering cryptocurrency and blockchain. He has worked as a national entertainment writer for News Corp Australia, on SA Weekend as a film journalist, and at The Melbourne Weekly.Follow the author @andrewfenton