IOTA Cofounders on How Past Mistakes Have Shaped Them Today

How did you two meet?

Online forum [laughs].

The thing was, way back in the day, as you can imagine, blockchain wasn’t what it is today. It wasn’t the sexy, futuristic technology and the buzzword of the day.

Both me and Dominik were early on in the pioneering stage of blockchain, and both of us saw a few different things that we thought that we could improve. Then we started working together on a few different projects and over time it evolved into IOTA.

It’s basically a bunch of random guys getting on a forum. I guess that’s the regular founding story of many of these projects.

How many times have you guys met in person since then?

I live in Norway. Dominik lives in Berlin. At the time, he actually lived in Südtirol in northern Italy. We’ve met a few times. 

The thing is, after corona, it’s been impossible to meet anyone. IOTA as a whole — even though it’s a kind of a played out pun — always said we are a very distributed team, building distributed technology. That’s always been our philosophy. We’ve always been distributed. It’s just in our DNA. Even if COVID didn’t happen, we still are built that way.

The four co-founders of IOTA — we obviously didn’t do this typical Silicon Valley way where you work out of a garage and you build up this huge project. It was more like where you are connected through the internet, we can work together. 

As David mentioned, we are very distributed. We have a hundred and ten people in twenty three countries, we don’t really have a big office where everybody goes every morning. It’s really, really distributed in that nature as an organization, it’s always been our ethos.

Do you think that working under quarantine in corona has changed your work style at all, or is it pretty much the same as it always was?

I would say it hasn’t really changed much of our organization, because obviously we are distributed and we’ve always tried to really optimize our organizations for work at home or working from coworking spaces.

That has been sort of a blessing in disguise. We were prepared for that.

I think one thing that obviously changed is that we had less physical meetings and less travel, which also has been a blessing in disguise because now you start to realize that, “Hey, most of those conferences, most of those meetings were actually just a waste of time,” and it’s better just to focus on work from home.

Just quickly to add to that exactly as Dominik said, from an organizational point of view, we’ve saved quite a lot of money, just because buying tickets for a hundred and thirty people is quite expensive to travel around the globe. Of course, there’s also downsides, because we do like to meet in person whenever possible. 

For some certain tasks, it causes some kind of a decrease in productivity. Just very briefly, because people have to adapt to how we actually do work on Zoom, Google Hangouts or whatever, as efficiently as we did in person. But overall, just given the way that IOTA was essentially conceived, it was just born in our DNA. I think we are one of the lucky ones that didn’t have to go through this huge transition.

You’ve both been in crypto for a relatively long time. Do you have any advice for people just getting into the space?

Certainly, as you can imagine, we’ve learned a lot of lessons over the years. The group, the space itself just like pretty much any domain, it evolves and it changes and you have to adapt.

I would say in 2020, you should take the lessons from 2017, 2018 very seriously. You should not get involved in the latest kind of trend. 

For instance, right now, decentralized finance or DeFi has become the numero uno. There’s been some projects that suddenly just pop up and they just jump high up on CoinMarketCap, for instance. And it’s like, “Hmm, is this really fundamentally underpinned by anything other than the hype that is going on right now?”

We saw that all the way back to 2013. You also saw that kind of hype taking over for rationality. And then in 2015, the same thing happened. Then in 2017, it really blew up when everyone — including your taxi driver or your neighbor — was talking about crypto. 

In 2020, if I was to give anyone advice, it would just be don’t jump on the fastest moving train, because most likely the tracks they’ve built underneath the train doesn’t really support the momentum and they will fly the f*** out. 

As soon as this isn’t going straight forward anymore, it will fly off. That’s my number one advice. 

And the second advice I will give is essentially get involved. When I say get involved, I don’t mean in a political sense. I mean just get into it, dive into the different technologies, get into the community, see what the community is about. What is the protocol about? Why does it even exist? What problem does it solve? Is this a solution or is it just built on hype and marketing? 

Those are the two things that I would always advise anyone that is getting even peripherally interested in crypto to take as the two fundamental pieces you have to solve before you take the next step, which would be putting your money into any of these projects.

Just to add to David’s point, I really think that “do your own research” is one of the most important lessons. 

There are a lot of thought leaders, there are a lot of YouTubers. But what people really have to understand is that everybody has an incentive to spread their own opinion.

We’re not here to get rich quickly.

It’s really important to try to be as objective and to get as much information as possible on a project that you really want to get into, on a project where you want to get a more formal opinion.

I very much agree that you should get into it, meaning maybe even trying to install a node or writing a small smart contract, just really understanding how the basics of the protocol works and also what sort of limitations there are. What does the roadmap look like, what do we enable through this technology? 

Because when we entered this space, nobody did it for the money. Everybody did it because they were fascinated by the technology and what is possible.

It’s important that we don’t lose that core belief that we are really here to change something. We’re not here to get rich quickly. And if you enter this space thinking that you will make a lot of money and you will become incredibly rich, you’re already entering this space on the wrong foot, on the wrong side.

You both earlier mentioned some of the crazy things that you’ve experienced in the early days of crypto. Are there any mistakes or lessons learned you took away from them?

That’s a very good question. I’ll take a first stab at it.

One of the things that you learn coming into this distributed crypto space is that a lot of the people are essentially just out for money. They’re not out for the technology. They’re not out for the ethos, or vision or whatever you want to call it. And if you trust those people, you will get burned. 

I would say that we’ve definitely trusted some wrong people in the past before we even established IOTA or the IOTA Foundation. 

Certainly, trusting people too easily, that’s a big mistake in a distributed environment. That poetically ties into what DLT is all about, that you remove the need for trust.

We were fortunate in the sense that crypto was still so nascent, it was still such a small group, that the money involved wasn’t that big. But if you did that today, I think you could lose a lot of money very quickly. Certainly, trusting people too easily, that’s a big mistake in a distributed environment. That poetically ties into what DLT is all about, that you remove the need for trust. That would be my number one thing.

If I were to mention a personal mistake I’ve made, it’s probably the challenge of going from having an idea, getting people into that idea, building an organization around that idea, and then you as an individual, as a leader of the project, you have to change your mindset because suddenly you’re this public figure. It’s weird, because you never asked for it. 

If you’re starting a project in crypto, just be aware that if you’re successful, you have to change quite rapidly.

You never you never asked for any of the following, all of these things. But when you are a public figure, you have to think about everything you say, because everything will be analyzed. 

Even if you’re just joking, people will take that joke out of context and they will write 10 articles about it. That’s something that I think both me and Dominik had to adjust to overnight, suddenly hundreds of thousands of people who take your joke seriously. That’s weird. 

If you’re starting a project in crypto, just be aware that if you’re successful, you have to change quite rapidly.

I’m trying to think about what to add to that, because I second all of it. 

Another important thing that obviously one could argue: all of the mistakes that we have made and all of the blindness that we’ve had has also really shaped us and has gotten us to this point where we are today, where we are really confident on where we are heading. There are no regrets in that regard. 

Obviously, going into this space, if we had known more and if we had not made mistakes, for example, with communication, we wouldn’t have had some of those setbacks. But then again, they really helped us to learn. 

At the end of the day, we really had to adjust to this new environment, which is crypto, a rapidly evolving environment.

I think the main takeaway is that you, as you’re coming into a new domain, especially one that is still in infancy, you will make mistakes. Just don’t let them beat you up, get up again and try again. Because all of us make mistakes all the time. It’s just part of evolving into delivering what you’re actually believing and the reason you got into this space. Even though that sounds cliche, that is just too true not to even mention.

Because all of us make mistakes all the time. It’s just part of evolving into delivering what you’re actually believing and the reason you got into this space.

Do you guys agree or disagree with the statement that blockchain is not as widely accepted today as had originally been expected?

My take on it is the fact that blockchain, it had all these different promises and also very interesting principles and ideas. But blockchain itself was what I would call a prototype. It’s what you build a minimum viable product. It works. It proves the different concepts, but it doesn’t really work when you want to scale it. 

This is getting into the territory of why IOTA exists in the first place. We were involved in blockchain. We were pioneers in proof-of-stake, a different consensus mechanism from proof-of-work in Bitcoin. We did all this innovative stuff back in 2013, 2014, 2015, but we realized that blockchain, as it stands, cannot scale to accommodate these real world adoption use cases. 

With Bitcoin, you have problems of seven transactions per second. How many people can actually use that system? No one. How expensive is it? You have to pay fees on all the transactions, meaning that it kind of already prohibits it from being used for micro transactions, et cetera, et cetera, et cetera. 

But blockchain itself was what I would call a prototype. It’s what you build a minimum viable product. It works. It proves the different concepts, but it doesn’t really work when you want to scale it. 

This is why we came up with this new architecture, which is the IOTA tangle, or the directed acyclic graph approach. To me, if you look at the whole space right now, the reason that it hasn’t been adopted yet is that we’re still so much in the infancy, where virtually all the blockchain projects that everyone knows about have all these grand visions, but they can’t deliver just because the technology f****** sucks. 

That is what IOTA was created to solve. That’s why we’ve been through this journey for the past five years to develop a completely new architecture that removes the fees, removes the scalability, bottlenecks and also improves the decentralization. And that takes time, there’s no doubt about it. It has taken us five years to get to this point. 

To me, if you look at the whole space right now, the reason that it hasn’t been adopted yet is that we’re still so much in the infancy, where virtually all the blockchain projects that everyone knows about have all these grand visions, but they can’t deliver just because the technology f****** sucks. 

That’s my answer to the question, that the technology wasn’t where the vision was. That’s usually the case. It’s just like electrical vehicles back in early 2000. Everyone agreed theoretically that this is an improvement on the combustion engine. But at the end of the day, if it doesn’t perform better, if it isn’t cost efficient, no one will use it. In my opinion, that’s where we are in 2020, that now that the protocol itself has to actually deliver on the promises. 

I would argue that we are really where we are supposed to be. Every technology has to go through this hype cycle where you start running through all of those crazy ideas of how this technology really changed the world. And in 2016 and especially 2017, we were really talking. We saw those headlines, how blockchain change will transform a trillion dollar insurance industry, and all of those crazy stories. At the end of the day, it was completely overhyped.

To David’s point, the technology’s not ready yet. Everything is still a proof-of-concept. We need to make sure that we are also betting on the right technology and making sure that it’s actually enterprise ready. But another major point, and this is something that really is core to this crypto space, is the naiveté. People are very naive and think that, “Hey, if I build the best, the technology will be adopted.” 

That is not the case, because you really have to think through this concept of system integration. We’re talking about having this new piece of technology, which is a distributed ledger, and integrating it into the traditional SAP or IBM system of a large conglomerate. This kind of technology, adoption cycles, they take years to really be run through. 

What has happened since 2017 is that after this hype cycle kind of started slowing down, people started questioning these use cases and doubting, “Do I even need a distributed ledger for that?” It went from “DLT will solve everything,” to “Let’s find out where DLT actually makes sense.” 

Now you can really start being more productive, where you can really conceptualize, not just to prove a concept where you install a node on a Raspberry Pi, but where you’re really starting to think, “Hey, how do I actually install IOTA into a vehicle? Which kind of use cases make sense?” And also, where are the limitations, where do we need to involve more partners? And so on. 

Now is really one of the most productive and one of the most exciting times for distributed ledgers, because now we are really being productive. It’s not just about writing a nice blog post about it or doing it as proof-of-concept, but is really about this very crucial question — how do I integrate this new technology into the existing systems of large corporations or large governments?

IOTA recently released the new Pollen testnet, that will pave the way for the eventual removal of the Coordinator. How is this bringing the technology out beyond proof-of-concept?

As we mentioned before, every technology in the space is a proven concept and they need to, for one, develop. They need to really develop to a stage where they remove some of the bottlenecks that they have and are really enterprise ready. 

Same with IOTA. We’ve also had some of these bottlenecks which are related to how the Tangle is structured and how it’s secure today. We had this Coordinator node, and this has probably been the most discussed criticism around IOTA. For the last few years, especially since the last year, we’ve been developing this new future of the IOTA Protocol, which will unleash this vision of a fully decentralized peer-to-peer payment system that has no transaction fees. 

We wrote a lot of white papers on that. And we know quite a few universities that are developing this on a research level with us. What we are launching now is the first face of this new future of IOTA. We will have 10 days in the test network where people can start playing around with it, then we’ll progressively advance the node software until it will be upgraded on the main net itself. 

It is definitely a major milestone for us.

Just to add a little bit to that, I would say that it’s also a big leap for the whole space because up until now, with the different technologies that exist, there’s this mining oligopoly or staking oligopoly, where if you have enough hardware or you have enough stake, you have a say in a network. 

That isn’t decentralization. That’s a pseudo-quasi-decentralization. In reality, it’s just five or ten big operators that control the whole network. That’s Bitcoin. That’s Ethereum. That’s how they operate, and they will always operate this way. It’s the only way that they can operate. 

That isn’t decentralization. That’s a pseudo-quasi-decentralization.

This is what IOTA did differently. We got rid of the miners. We got rid of the stakers. Instead we said, “Hey, we turn this on its head and make validation an intrinsic property of using the network.” Every single participant is equally important in executing the validation, which is the big promise of DLT in general. That’s what we’re doing. 

I’m not sure if you’re familiar with the blockchain trilemma. In very easy terms, the blockchain trilemma says that you have to pick essentially two of three different features. You can have scaling, or you can have decentralization, or you can have low cost. And in IOTA, we’re able to solve all three of them. And that’s a huge, huge, bold promise.

Of course, we’ve received a lot of criticism or skepticism around being able to deliver that ever since the beginning, and now we’re actually proving it. That’s what Dominik just mentioned. We are proving you can use it yourself. You can test it yourself. You can see for yourself. You can verify the fact that, yes, IOTA is delivering on this big promise that we can have complete decentralization. We can have zero fees. And it actually scales to the real world application network that needs it.