Original Title: "How Joseph Lubin became Wall Street's crypto whisperer"

Author: Gillian Tett, Financial Times
Translation: Linqi, Chain Catcher

Joseph Lubin
ConsenSys is a technology developer focused on the Ethereum ecosystem, with deep ties to the Ethereum Foundation and Vitalik Buterin. Its crypto wallet Metamask is also one of the most widely used products in the industry, and it has recently been reported that it is seeking financing at a valuation of $3 billion. In this report by the Financial Times, the author provides a detailed description of the development of ConsenSys and the industry philosophy of its founder Joseph Lubin, which is worth reading.
In the summer of 2016, a group of central bankers from the Federal Reserve left their branch office on Wall Street, crossed the East River, and headed to Bushwick. Their destination was a graffiti-covered warehouse on Bogart Street. This was the home of a small company called ConsenSys.
Joseph Lubin (Joe) is a Canadian programmer in his 50s and the founder of this financial software manufacturer. He waited outside a shabby door covered in stickers for the arrival of these bankers. The bankers, dressed in suits, seemed out of place in Brooklyn. Lubin wondered if ConsenSys should be worried about them.
The Federal Reserve officials were there to investigate the facts. At the time, ConsenSys had rapidly gained significant influence in the cryptocurrency space, and Lubin was turning his company into the world's first cryptocurrency conglomerate, a profit-oriented project network linked to Ethereum, the biggest competitor to Bitcoin.
For his part, Lubin is not only an expert in blockchain technology (the database behind almost all cryptocurrencies) but also a passionate advocate for decentralized finance. David Mills, an economist from the Federal Reserve group, posed many questions to the ConsenSys team.
Who can access these new financial platforms? How vulnerable are they to hacking? If so, what role do central banks play in a financial world envisioned by cryptocurrency advocates?
Lubin recalled, "It was a very lively and thoughtful conversation," although he tried to explain, "the reality you know and are part of will be completely overturned in a few years."
Trust was the real topic of discussion. The Federal Reserve and all central banks have been embodiments of trust for centuries: people have confidence in the financial system because these large, seemingly capable institutions appear to be in charge. Cryptocurrency supporters like Lubin offer a different vision: they want people to trust a financial system that is fundamentally guaranteed by computer code that can be verified by ordinary people. "This is a whole new foundation of trust in the world," Lubin said, "and a new way of integrating us."
In the five years following the Bogart Street meeting, the financial elites who once scoffed at cryptocurrency have changed their tune. For example, NYF is about to launch a new cryptocurrency research center that will incorporate some of the ideas supported by ConsenSys.
The Boston Fed has been studying the feasibility of building a digital dollar. Many central banks, especially in Asia, are exploring and researching similar ideas. Financial giants like JPMorgan have created their own digital currencies. Wall Street is now dancing with Brooklyn.
If you were to meet him by chance, you might not guess that Lubin played a pivotal role in this transformation. On one hand, he prefers to listen rather than speak. When he does speak, the intonation at the end of each sentence rises, sounding somewhat oddly self-deprecating. (An exception is when he starts discussing Ethereum, such as when analysts estimate that Ethereum will handle transactions worth about $80 trillion in 12 months.)
Before he turned 50, there was little indication in his career that he would play a key role in answering one of the most important economic questions of this century: Is cryptocurrency a revolution in global finance, or merely a natural evolution?
Along the way, Lubin has become the go-to person for central bank governors interested in cryptocurrency, not to mention the billionaires who are all talk. (In 2018, Forbes ranked him as the second richest person in the cryptocurrency space, with an estimated net worth of $1 billion to $5 billion.) All of this means that this mild-mannered Canadian is increasingly capable of navigating the future currency interchange without the glare of the spotlight.
Lubin was born in 1964 in Toronto, the son of a dentist and a real estate agent. As a teenager, his main hobbies were squash and mathematics, and it was this combination that helped him gain admission to Princeton University, where he studied engineering and computer science. On campus, he made a close-knit group of friends, including billionaire hedge fund investor Michael Novogratz. Novogratz recalled, "Joe was one of the smartest people among us, a visionary thinker, but by the time he was 45, he still hadn't emerged. I don't think any of us would have guessed how things would turn out."
After graduation, Lubin found a job managing the Princeton Robotics Lab, where he became fascinated with artificial intelligence. As a software and AI consultant, he worked for two computer companies in New York before landing a job at Goldman Sachs, where he stayed for nearly two years. "I was never really a Wall Street person; I was into software," he said.
The 2008 financial crisis intensified his disillusionment, as he said at a ConsenSys summit, he realized that "essentially, it is foolish to believe in all those structures we think are in our best interest. I feel we live in a global society and economy that is bankrupt in every sense—figuratively, literally, and morally." He was convinced that "a slow, cascading collapse" was underway.
Lubin briefly fantasized about becoming an outdoor survival trainer in Latin America for a while. But in 2012, he moved to Jamaica with his girlfriend, who was trying to launch a career in dancehall music. For several years, he dabbled in music production while also investing in Bitcoin as a hedge against the traditional currency collapse he anticipated.
At the end of 2013, Lubin visited Toronto to see his parents for the holidays. On New Year's Day, he attended a gathering of Bitcoin enthusiasts at a warehouse downtown, where he met a teenager named Vitalik Buterin. Now 27, Buterin is a legendary figure among crypto enthusiasts. He is the founding myth of the Ethereum tribe.
Buterin is a prodigy born in Russia who immigrated to Canada as a child and grew up in Toronto. He became so fascinated with Bitcoin as a teenager that he dropped out of college to live in anarchist computer coding communities in Spain and Israel. Then, at the end of 2013, at the age of 19, he wrote a white paper on Ethereum and subsequently gathered eight software enthusiasts from around the world to build it.
Two years after he launched Ethereum through a nonprofit foundation at the age of 21, in 2017, Vitalik Buterin attended the Ethereum conference in Seoul. Lubin said, "Vitalik really doesn't care about material things; he just wants to change the world." Lubin and Buterin only spoke for a few minutes on the day they met. Lubin said, "But he gave me the white paper, and I read it that night and was blown away."
Thus, he joined the geek group that Buterin recently likened to Tolkien's "Fellowship of the Ring," working to turn his vision into reality. In the following months, they lived together like students in a series of shared houses in Miami, Toronto, and Zug, Switzerland, creating the computer code that underpins Ethereum.
Lubin seemed to be the odd member of this group, as he was more of an older generation, while many others were in their early twenties. Then there was his background at Goldman Sachs, as if Gandalf showed up in a three-piece suit on the way to Mordor. Lubin recalled the free-spirited atmosphere in the hacker house, saying, "Those attracted to paradigm shifts and wanting to influence them are often unconventional thinkers and on the fringes of society."
Many in the group had a strong anti-establishment bent. One faction wanted to run Ethereum as a commercial, profit-oriented enterprise, while another faction wanted to shape it into a mission-driven nonprofit, leading to endless tensions between the two camps. Buterin belonged to the latter, while Lubin wanted to build a business. The first CEO, Charles Hoskinson, felt the same way but was ultimately ousted from the group. Chief Technology Officer Gavin Wood also left after multiple disputes. (Hoskinson and Wood are now competitors to Ethereum.)
"Lubin's interests don't completely align with Vitalik's because he is more of a finance type pursuing commercial interests," commented Alexander Lipton, a finance and mathematics professor who recently published a book on blockchain. "Vitalik is a visionary pursuing the public good."
Lubin "survived" the "struggle" and established a close connection with Buterin. This middle-aged man admired the young man's vision. Lubin said he "really doesn't care about material things; he wants to change the world." In contrast, Buterin seemed to value gaining some experienced advice in politics and high finance. Lubin was prescient in insisting that the Ethereum team negotiate with the U.S. Securities and Exchange Commission (SEC) early on and hire high-priced lawyers from Manhattan's Pryor Cashman to minimize legal risks. "Joe is behind the scenes," Novogratz said, "but he is as important as Vitalik."
Another advantage Lubin had before Ethereum's launch was his ability to enter the background and remain calm when personal grievances erupted. "With Joe, you'll never know more than 5% of him," Hoskinson said. Or, as Lubin observed, "I'm not reactive like most people; that's what makes me different."
He also describes himself as "meta," referring to an idea promoted by lifestyle guru Deepak Chopra. (In Greek, meta means "beyond.") "You can free yourself from dramatic patterns and not react emotionally to things immediately," Lubin said, "so when others react intensely and collide with each other, I have a different perspective." "Meta-ness" seems to influence not only Lubin's interactions with colleagues but also shapes his views on how cryptocurrency will ultimately reshape finance and business.
In the summer of 2015, Buterin finally launched Ethereum through a nonprofit foundation. Lubin was by his side at the time, but he also found a way to realize his business dreams. His company ConsenSys is a for-profit enterprise that provides infrastructure and plays a role in the products and services surrounding Ethereum. Today, he describes ConsenSys as "just a software company." Pure "software" is not typically subject to SEC regulation. This unassuming label conceals a larger ambition.
As the concept of crypto moves from the margins to the mainstream, the claims to make money have also changed. To make an imperfect analogy, once people clearly understood in the 1990s that the internet was a useful way to store information, the business race quickly turned into a struggle among multiple companies trying to help people easily find things online. In a sense, Ethereum is trying to do for blockchain what Google did for the internet: a service provider that creates order in digital chaos.
Earlier this month, Joe Lubin was at the ConsenSys office in Brooklyn, New York. His cryptocurrency journey was sparked by the financial crisis of 2008: "I feel we live in a global society and economy that is bankrupt in every sense—figuratively, literally, and morally." But the early days of Ethereum and ConsenSys were rocky. Shortly after the platform launched, a hacker attempted to steal about $60 million worth of Ether. Lubin said, "These attacks were conducted with a deep understanding, and their design caught us off guard."
The hacker's attack ultimately failed. But this incident, combined with the ICO controversies surrounding Ethereum in 2017 and 2018, led to volatile valuations for Ethereum. When ETH prices plummeted, Lubin had to lay off about one-tenth of the staff he had hired at ConsenSys. By the end of 2018, an article in Forbes noted that "Lubin's Ethereum experiment is a mess," "a crisis-ridden crypto utopia," and questioned how long this enterprise, largely funded by Lubin's substantial Ethereum holdings, could survive.
Lubin insists that ConsenSys is "almost intentionally decentralized." It aims to seed and launch numerous Ethereum projects rather than control them. This approach also creates a sandbox where mainstream companies can dabble in hot new technologies without much risk. Santander had previously begun testing Ethereum's payment capabilities. BHP Billiton attempted to use it as a means to track mineral supply chains; American investment firm John Hancock explored creating a vaccine registry.
Then there is JPMorgan. Since 2016, it has been running two competing experiments to build proprietary versions of blockchain systems while collaborating with ConsenSys to integrate Ethereum technology into its operations. Umar Farooq, head of JPMorgan's Onyx project, said, "We want to test all the different options and see which one works."
The financial institution ultimately chose the Ethereum system and continued to collaborate with the Monetary Authority of Singapore (MAS), Temasek, and Singapore's DBS Bank to create a digital currency. MAS senior official Sopnendu Mohanty stated, "We believe that as a central bank, the easiest way to understand this new technology is to participate in building a system ourselves." Lubin said, the central bank in Beijing has also been in contact with ConsenSys.
This behind-the-scenes activity marks a striking turn, especially for long-time cryptocurrency advocates. When the mysterious figure or group claiming to be Satoshi Nakamoto first described their vision for Bitcoin in the 2008 white paper, their rallying cry was that it should eliminate all intermediaries and gatekeepers controlling global business and finance, allowing everyone to participate equally in the financial system. By the way, this was also the principle young Buterin set for Ethereum.
The idea of an open system for everyone is referred to as "permissionless" (a computing term meaning anyone can inspect or add code without permission from authorities). As institutions like JPMorgan begin to get involved, the 'permissionless' system has proven to have several significant issues. First, the larger the scale, the slower it runs, as every new transaction recorded on the network requires computers to synchronize their records. The more participants on the platform, the greater the risk of hacking and data breaches.
While this system is supposed to build trust through transparency, as anyone can check others' records, this is contrary to how banks have traditionally operated: their customers typically want to keep their financial situations confidential.
Last year, JPMorgan sold its first relatively open blockchain version, Quorum, to ConsenSys for an undisclosed amount and began building a private system that is only open to specific clients (a quasi-crypto club). Theoretically, this seems like a betrayal of the overall ideals of blockchain. But Lubin and Buterin acknowledge that until breakthroughs emerge that allow "permissionless" systems to run faster, private chains are a more practical solution for companies.
Indeed, many blockchains today are so-called private chains or permissioned chains. Users' trust in the system often comes from the organizers behind the chain (such as brands like JPMorgan) and from the code itself or the theory of decentralized finance. The experiments by central banks are similar. Hoskinson stated, "Today, distributed finance is not truly decentralized finance; it is actually very centralized." In other words, large central institutions, those old embodiments of trust, still matter.
Lubin believes that historically, "when someone brings down the tablets and we see something profound and beautiful on them, that is revelation. Then everyone starts arguing about what the correct interpretation is, and we are now at that moment." Words clash with reality. He said, "We have always been very interested in this integration strategy, where revolutionaries build this infrastructure and then meet with evolutionaries in their comfort zones." He believes these private blockchains will ultimately interconnect. "We have always been pragmatic," Lubin stated.
At the end of summer, I was living on Long Island, just a few miles from Lubin. On a sunny day, as we strolled along the vast beach, I asked him about the future direction of cryptocurrency.
In many ways, the future is almost as bright as the summer sky: Ethereum's activity is exploding. Last year, with a $65 million investment from JPMorgan, UBS, and Mastercard, ConsenSys underwent a restructuring. The company is currently engaged in a series of expanding projects with financial institutions and central banks. It is also developing new tests with non-financial companies. Artists like Damien Hirst are starting to use the platform to sell unique, timestamped digital works. Hollywood is also considering doing the same.
"We've made a lot of money," Lubin said. Since ConsenSys is a private company, it cannot be verified in detail. You wouldn't guess this from his scruffy jeans and T-shirt. Lubin avoids the flashy toys of most Wall Street financiers, saying that when he occasionally takes time off, he enjoys simple pleasures like cooking and taking care of their pet turtle with his fashion designer girlfriend. He doesn't even own a car. "There are many people like me with lots of houses," Novogratz said, "Joe doesn't do anything."
Lubin explains that he "has never done Ethereum or anything else for money," but because "I had the opportunity to build something profound that I believe will change lives in this world for a long time." Maybe. He also knows that the vision driving him and Buterin is still in its infancy, and circumstances may change again. On one hand, regulators are increasing scrutiny; on the other hand, Ethereum still faces unresolved technical challenges, such as its limitations in processing large volumes of transactions at high speeds.
Supporters argue that this issue will be resolved when a significant technical upgrade occurs early next year (transitioning from a PoW system to a PoS system will greatly reduce energy consumption). But mathematics professor Lipton counters that Ethereum is difficult to "fix."
"Ethereum introduced the brilliant idea of smart contracts, but I don't think Ethereum is the final word on this," Lipton said. "Other blockchain systems, like Cardano and Polkadot, use more advanced payment systems and are cheaper; they will be the winners." Cardano and Polkadot are competing platforms launched by Hoskinson and Wood, former members of Buterin's "fellowship."
Lubin insists that he is not troubled by his colleagues becoming rivals or doubts about Ethereum's long-term viability. "When people say Ethereum won't scale, that is very naive; one should never have such thoughts about technology," he said. History shows that people always overestimate how quickly new innovations will become popular and underestimate the disruptive scale and speed that may occur when these ideas are ultimately accepted. "Look at the internet," Lubin continued, "decades ago, no one could have imagined this, but its scale supports all economically viable use cases. Blockchain will be the same."
As I listened to him speak, I remained partially skeptical. No matter how many books I read about cryptocurrency and blockchain technology, something always feels opaque.
Perhaps sensing my uncertain attitude, Lubin asked, "Why would I do this instead of going to a nightclub? We are establishing a new organizational principle and a new foundation of trust for the planet. Don't you think that's a good thing for humanity?" I was curious, and then I remembered that many central bankers seemed to find Lubin's words quite reasonable.
Source: https://www.ft.com