“Blockchain is still an incredibly hot technology. We removed some cancers from b
The blockchain and cryptocurrency sectors have suffered their fair share of blows over the past year. Like all other technology sectors, they paid a high price for the dramatic shift in macroeconomic conditions. But in addition, they dealt with both the financial and reputational damage caused by a series of highly hyped collapses, headlined by the debacle at crypto exchange FTX, which is still hanging out in the courts these days in bankruptcy hearings and the trial of former CEO Sam Bankman-Fried.
The FTX saga came after nearly $2 trillion in value was wiped from the crypto sector last year and a downturn that eliminated key industry players such as Voyager Digital, Three Arrows Capital and Israeli-founded Celsius Network.
Blockchain and crypto have already been dismissed by many people as a technological fad of the past, but there are those who remain effusively positive about the prospects for the future. None more so than Joe Lubin, a co-founder of Ethereum, the open-source decentralized blockchain that dominates the smart contract sector, and the founder of ConsenSys, a Brooklyn-based software development studio that develops decentralized software services and applications that operate on Ethereum.
“The Internet followed the same trajectory as blockchain. Maybe it wasn’t a popular technology in 2001/2002, but that doesn’t mean there weren’t a large number of builders, just building out, enabling chips in enabling layers,” Lubin told CTech last week during his visit to Israel for ETHTLV 2023, a series of events in Tel Aviv aimed at developers in the Ethereum and crypto space. “I think blockchain is an incredibly hot technology. Everyone in the industry thinks the same. I think we removed some cancers from the body and I think we all feel a lot better about ourselves and a lot lighter. It may not be a hot technology for certain speculators right now, but go to an NFT conference and tell them it’s not a hot technology.”
ConsenSys has a significant portfolio, which also includes Israeli companies such as StarkWare, where they made an early large investment. The investment in StarkWare has certainly paid off for ConsenSys to date, with the company that develops scalability and privacy solutions for blockchain technology raising $100 million at an $8 billion valuation in a Series D round in May 2022.
“I’m not sure I need to point out that Israel is the startup nation and is extremely strong technologically,” Lubin noted. “Israel is a hotbed for cryptographers and so is our ecosystem. The future of our ecosystem is essentially zero knowledge and other cryptographic techniques.”
In March, ConsenSys announced that its valuation had more than doubled to over $7 billion after raising $450 million in a funding round that included investments from SoftBank Vision Fund 2 and Microsoft. However, macroeconomic changes still resulted in it announcing plans to cut 11% of its workforce, or 96 jobs, last month. Lubin is nevertheless optimistic.
“It’s been pretty even for us most of the way. There are certainly ups and downs in terms of the volume of interest in transactions, but the company is doing incredibly well, he said. “We’ve been surprised to read a lot about our ecosystem, but they’re related to things that we’ve been complaining about for a long time. It’s really been mostly about macro-economic and geopolitical factors. There’s been a slowdown in our ecosystem and we’ve been affected of that. There was a further decline in our ecosystem caused by a whole bunch of centralized CiFi companies that I now look back on as a self-limiting process. They basically did what so many companies in traditional finance have done in the past. It are some really corrupt projects and there are some bad projects and then there are some good actors in CiFi. I’m happy to tolerate these as I think they are a valuable stepping stone, a valuable bridge between the old economy and our economy. But essentially it’s the same old stuff, but applied to a new vulnerable area.”
Lubin insists that last year’s crash and the FTX fall will ultimately turn out to be positive for the industry. “We have the privilege and the joy and the difficulty of trying to build a new web and a new decentralized global economy on live monetary rails that has never been done before. It’s difficult and it makes things vulnerable. And what ended up being happen in my opinion was actually very good for our ecosystem, he said. in sharp contrast the difference between CiFi mechanisms and DeFi mechanisms.”
Lubin believes that the investigation of the FTX mess, which is done on an open database, can be presented to regulators and politicians as an example of the sector’s mechanisms for transparency and decentralisation. “It is our duty to help leaders of governments and regulators and companies understand the benefits of our technology, and the weaknesses of this technology. I think it’s going to be great going forward.”
As for the reputational damage to a sector that for many people was already primarily associated with fraud, Lubin has little concern. “There’s always been a confidence gap because it’s such a complicated technology. So I’m not really worried about where we are. I think we’re in a good position. We’re seeing waves of innovation and waves of innovation bring in software developers and they bring bring in speculators and they bring in new types of consumers, like those who are interested in NFTs. The software developers, the builders, stay in our ecosystem. The speculators go crazy. It’s a blow off the top. They run away for a little while, that’s okay . They keep coming back because they’re speculators. We keep building and each new wave of innovation is bigger than the last.”
Drawing parallels between the rise and use of the internet compared to blockchain and crypto isn’t as popular as it once was, but Lubin believes it’s still as relevant as ever.
“This era feels similar to the dot.com boom and bust where we had a bunch of booms and corrections because, much like the early web, a lot of people were exploring all these ideas, and they weren’t all good ideas. They weren’t necessarily timely ideas and didn’t necessarily have enough enabling infrastructure to make them viable,” Lubin said. “The pets.com of the world exists right now, but we needed 10, 15, 20 years of infrastructure building to make them work. And then it’s like because we had wicked, irrational enthusiasm and exuberance for our technology. And then a massive blow-off exacerbated by global economic challenges and geopolitical challenges similar to what happened in the markets after 9/11. At the time, I think the world was in shock, and what happened was that all these people who were in dot.com companies kept at it because they saw the power of the technology and the disruption it was creating. They basically spent the next 10 years building online, mobile and social, and the world was transformed. I think we’re in that phase right now.”
