Ethereum co-founder on the use of the cryptocurrency in India for e-governance, the implications of the recent ban on virtual currency in India and the use of blockchain
New Delhi: Canadian entrepreneur, Joseph Lubin, is the co-founder of Swiss-based Ethereum and founder of ConsenSys—a US-based blockchain technology firm. The Ethereum blockchain network is the world’s second-largest blockchain network after Bitcoin—even Google co-founder Sergey Brin and his son have been mining Ethereum.
In an interview on Monday, Lubin who is in India to open the India branch of ConsenSys, spoke about the use of Ethereum in India for e-governance, the implications of the recent ban on cryptocurrency in India, the use of blockchain and building a decentralized web 3.0 on Ethereum. Edited excerpts:
What brings you to India?
ConsenSys is already in 30 countries and we do advisory work, education work, build infrastructure for financial companies and have a large team to help launch projects that issue tokenised securities or consumer utility tokens. Now we are building an office in India. We will be a full stack hub or regional office--we have done a lot of educational work in the country, running hackathons and interacting with IITs (Indian Institutes of Technology). We are also working to set up a multidisciplinary blockchain research institute.
What role is Ethereum playing?
Ethereum is a new trustworthy database kind of technology that we use in consortia and corporations and with banks. We will apply that technology in all different contexts. On the corporate side, it is probably going to be the private use of the database technology. On the startup side, it is often going to be use of the public blockchain system--the Ethereum world computer.
Won’t the recent ban on cryptocurrency in India impact you?
Cryptocurrency is a very narrow niche of something called crypto assets and there are many different kinds of crypto assets like crypto equity, crypto derivates, crypto derivates and so on. A cryptocurrency like Bitcoin is kind of only useful in payments and international payments. But a crypto fuel or crypto commodity like Ether is useful for paying to use programmes on Ethereum or paying for storage on Ethereum. All these elements are necessary for the decentralised IT infrastructure we are building.
There will definitely be issues around who is sending how much value to whom because certain governments want to know who the person is on both sides of the transaction. So we have to address those issues but the value of the technology is really profound. Other issues are around securities law and, in the US, this is getting worked out very well where the Securities and Exchange Commission understands that this technology can be used for investor tokens or shares but can also be used for something that is different.
Do you believe governments should regulate blockchains and cryptocurrencies?
Sure. When people live together they need some sort of governance. But we are moving into a world where we are going to be able to organize ourselves for collective action much more granularly and effectively. If we have mechanisms by which we can govern ourselves, I think we will rely less on governments.
More than 80% of all transactions take place in Ethereum. What would you attribute this popularity to?
First of all, Ethereum is much less expensive than Bitcoin and second is that you can do so much (more) on Ethereum. It is the only radically decentralised platform outside of Bitcoin. It is also a substrate for building applications, while Bitcoin is just used as money. Also, it is just easy for projects to come to Ethereum and build what they want there with some of the tools that are readily available. And if you build one of those projects, all the wallets will recognise that format and the exchanges can easily incorporate that format.
But critics say there has not been a single large-scale blockchain implementation in the world...
Ethereum is a very large-scale blockchain implementation. Many of the token launch mechanisms are large-scale blockchain projects. The atomic swap trading mechanisms are fairly large-scale implementations. On the private side, we are building a supply chain network, an advertising technology project, an adjacent music industry infrastructure called Ujo and an open publishing platform called Civil.
Ethereum-based predictions platform such as Augur and Gnosis allow users to create and make bets on virtually anything. What’s the purpose?
The purpose of prediction markets are to essentially surface information that wouldn’t otherwise be surfaced. So if I’m interested in understanding something about a corporation, I might put some money into a prediction market that incentivizes somebody who knows the truth about that situation, to basically bet on whatever the proposition is, and surface that information and collect some value for sharing that information.
How will you scale them and how soon will it happen?
Both Gnosis and Augur will scale with mechanisms that will scale any sort of Ethereum application. We are moving into Phase Two of your ecosystem. Phase Two is where we use different technologies to handle higher transactional throughputs. Technology such as state channels will enable lots of transactions that are organized on the blockchain and finalized on the blockchain, but carried out off the Blockchain.
Another technology called Sidechains that you link into the main Ethereum network will be linked in through a technology called Plasma, which enables you to just do tons of stuff in a game or decentralized exchange system. If anything goes wrong on this blockchain, or if you just want to move your tokens out of that blockchain, you can reach it and pull it to the safety of Ethereum and put them in a different Sidechain. Then there is Phase Three in our ecosystem, which is ongoing right now. We will be using Sharding--a technology that will help us scale at a massive level. We will shard Ethereum into a whole lot of different Etheria.
Will it speed up the transaction speeds on Ethereum-based networks? Will it match or be faster than Visa?
Yes, we will get to the point where transactions are incredibly cheap and extremely fast. The time taken for a round trip will be much, much smaller, allowing millions of transactions per second in different applications. It can’t compete with Visa in the context of a public blockchain. But in a private system, if you optimize certain things, you can actually make it go very, very fast.
How important is mining in the validation of transactions?
Mining is just the way that all those modes are kept in sync. And the miners share their resources, validate transactions and secure the network for payments. So you can’t think of a blockchain without people contributing resources to validate transactions. But it doesn’t always have to be mining. Ethereum is in the process of moving from Proof of Work, which wastes lots of hardware and electricity in computation, and replacing that with something called Proof of Stake, which enables people to place a security bond in the form of money in a smart contract on Ethereum and participate in validation process.
Is Blockchain-based social media network going to be the new trend?
It is going to take some time. Essentially, the internet is broken in some ways, because it doesn’t have its own native identity construct. So corporations created internet identity, and they created it in a way that they can make money off it and they could essentially exploit the product. And so our self-sovereign identity system enables me to establish my identity on the blockchain and encrypt my information. If I want to disclose that information, I can designate who I want to disclose that to. If I want to monetize that information, I can do that too. It will essentially be a better system.
Tell us about Civil. How does it work?
Civil is an attempt to power independent and sustainable journalism throughout the world using an open publishing platform that is owned and operated by journalists and citizens. Its biggest advantage is that it will use blockchain to record the news and put it beyond the reach of censorship. While travelling through Asia, one of the things I heard was when stories published by local journalists were picked up by some of the major foreign media brands they were not given any kind of accreditation or compensation. We can use blockchain to fingerprint content so people would know the original author of the piece regardless of where it is republished.