Gnosis Cofounder Dr. Ernst Friederike: Stories and Wisdom on the Entrepreneurial Journey

Interviewer: Sunny, TechFlow

Gnosis: Ernst Friederike, Cofounder

I think the promise of crypto has always been a better internet and a better way of working as a society: We can build things that are genuinely better than what we currently have.

-- Dr. Ernst Friederike, Gnosis Cofounder

Gnosis began distributing crypto debit cards to early users two weeks ago (as shown below), marking Europe's first major foray into compliant payment applications following the rapid emergence of encrypted savings cards in Asia and the Americas (see previous articles in TechFlow). Behind this payment product is Gnosis. If you're not yet familiar with Gnosis, perhaps it's time to do some homework.

In addition to crypto debit cards, Gnosis SAFE is currently the world's largest account abstraction wallet, with 6 million accounts, 30 million total transactions, and $73 billion in total locked assets. These statistics far surpass competing products Starknet and zkSync. Such user statistics reflect the team's long-term dedication and accumulation of products. Gnosis' CEO and CTO were the No.2 and No.3 employees of Consensus, and the project was incubated internally at Consensus at the time. Gnosis' Cofounder Dr. Ernst Friederike is also one of the most interesting figures in the crypto world.

She, Dr. Ernst Friederike (hereinafter referred to as Dr. Friederike), is also the Cofounder of Gnosis. If you're into crypto podcasts, you'll easily find that Dr. Friederike is also one of the cohosts of the popular English podcast Epicenter, alongside other hosts such as Sunny Aggarwal, founder of DeFi Protocol Osmosis. Her background is fascinating: a physicist and professor, podcast host, crypto woman, and one of the founders of the largest projects in the crypto world.

In the following interview, Dr. Friederike shares her transition from academia to crypto entrepreneurship and some insights into the current development of crypto infrastructure. From her sincere sharing, we can clearly see how multiple identities shape a successful female crypto founder in the crypto industry.

Dr. Friederike's Transition from a Physicist to Gnosis Cofounder

TechFlow: Given your background in academia and your transition into entrepreneurship, I'm curious about the skills and experiences you believe have been most transferable or beneficial in your journey with Gnosis. Could you elaborate on how your training and expertise as a physicist have influenced your approach to problem-solving within the realm of blockchain technology and start-ups?

Dr. Friederike:

From a very young age, I've always loved building stuff and finding things out and making things work. Becoming a physicist was a natural progression of the interest that I had. I really loved working as a physicist. Coming up with hypothesis, reading other people's literature, and then coming up with your own experiments and constructing them and going home with loads of data and analyzing the data and doing statistics on it. I know it's a little nerdy, but to me, this has always been extremely fun and fulfilling.

Correspondingly, I spent a very long a time at university. I did my undergraduate and my graduate studies and then I did a PhD and then did a couple of post docs. In the end, I got a professorship in Hamburg at one of the accelerators in Europe. I had previously worked at SLAC in Stanford, not 'Slack', the communication tool, but SLAC Center for linear acceleration.

There were several things that didn't vibe well with me in academia. I found it to be fairly restrictive, and there were a lot of boxes to tick. Essentially, the incentives for discovering things for the greater good of humanity, which, for me, have always been central to science, didn't align well.

I mean, there are people who discover things solely for the pleasure of exploration, and I completely understand that. However, there are also individuals who want to witness these discoveries applied in ways that benefit humanity. Personally, I found my incentives lying within the applied field.

In academia, there was a tendency to inflate publications and disseminate findings across multiple papers rather than consolidating them into a single comprehensive work. I wasn't particularly fond of this approach, but I valued the freedom academia afforded. Essentially, you express an interest, write a grant proposal, secure funding, and pursue your research. You're not obligated to pursue anything outside of your chosen path. However, while academia suited me well, I didn't envision myself remaining in that environment for the next 40 years.

On a less flattering note, the talent distribution in physics is highly skewed. There are individuals who surpass me by leaps and bounds—perhaps a hundredfold. While I considered myself a competent physicist proficient in mathematics, I always maintained a broad skill set. I was always a generalist.

Whereas there are many people who have this talent, and I was lucky enough to actually meet many of them at Columbia and Stanford. Previously in my career, when I did my PhD and there was no way that I could have ever been as good a physicist as they were.

Being a generalist for me actually suited me much better being an entrepreneur.

Meanwhile, Martin Köppelmann and Stefan George, my cofounders at Gnosis, I had known them for a long time. We had talked about crypto stuff always because it's super interesting from a technology point of view and all physicists can code and I mean, their background is technical. They are computer engineers. We had always talked about this and the match behind it and what you could build on it.

Then, Martin had met Joe Luben (Ethereum Cofounder) at a Bitcoin meetup in New York. Joe said this is super interesting what you're building here on Bitcoin, but you should really be building this on Ethereum. Matt was asking Jose like what's easier? But at that point, Ethereum hadn't launched anything. Basically, Joe shared the Ethereum white paper with him and then we found it incredibly intriguing. Martin and Stefan started working for Joe at Consensus as employees No. 2 and 3.

After that, when I had this opportunity to pause academia because of my pregnancy, we cofounded Gnosis as its own thing outside of Consensus. That is really how everything began. I gave myself a chance to find out whether this was what I wanted to do, whether I should just go back to university.

I'm still here in Gnosis. Obviously, this worked out for me.

Gnosis: Building from the first prediction market application on Ethereum to build infrastructure

TechFlow: Could you elaborate on the evolution of Gnosis from its initial focus on prediction markets to its broader ecosystem development, including the creation of ventures like Safe Wallet, and Cow Swap?

Dr. Friederike:

In the very beginning, the idea of Gnosis was to build a platform for prediction market. Basically in a way to make information tradable and to curb this information and basically what today we would call it fake news. Back then this wasn't really a term, but that was the idea in the beginning. But because we were early, we were literally the first application live on Ethereum. We had to build lots of infrastructure. We switched gears and built foundations and infrastructure for the ecosystem for a number of years, and that yielded things: the Safe Wallet, Cow Swap and Zodiac.

This was always informed by how can we build this with technical excellency, but giving agency back to people, enabling them to do things on their own. We've always honored principles of fairness. That's why we built an MEV resistant DEX in Cow Swap and a self-custody wallet. Recognizing the importance of self-custody is something we should prioritize more, as it reduces our reliance on others. In theory, individuals should have the option to transfer custody of their assets to someone else and trust them with it, but it shouldn't be a necessity. This principle always been the foundation, I believe, that we've worked on. This is how we build several ventures and we spun them out because the North Star still holds a very significant portion of the new, of these span out projects of Safe and Cow, but you can't focus on too many things at once. It's the opposite of focusing: doing 10 things at once.

We found people internally who were ready to lead these projects, and we let them run with it. We gave them ownership. We retained ownership through GnosisDAO. Operationally, we still speak with everyone, but executionally, it's definitely no longer ours and that's been super good.

TechFlow: You have been known for your reserved view regarding scaling through L2s. Can you explain why you think L2s have limitations that prompt alternative solutions?

Dr. Friederike:

A few years ago, we asked ourselves, "What would be the thing that's really needed in the ecosystem now?" We were unhappy with the direction of the scaling discussion. Essentially, easier scaling was primarily through layer 2s, and layer 3 was seen as a backup if layer twos were stuck or costly. We believed this approach unnecessarily limited scalability from an engineering standpoint.

Looking back, there was an idea to scale Ethereum through smart contracts, envisioning 64 private execution environments with 1,028 different executions that would be trustlessly connected, collectively forming Ethereum. However, this vision was delayed by five to ten years, with a focus shifting to layer 2s to simplify life on Ethereum.

The Cancun update embodies this approach, making data storage and availability cheaper and easier for layer 2s.

We found the original vision of interconnected, trustless shards highly appealing. While there is little debate on the necessity of layer 2s and beyond, we argued for the need for additional trustworthy, interconnected chains with credible neutrality and a high degree of decentralization.

Instead of a single island for building skyscrapers, we envisioned an archipelago of islands where some might have low rises while others feature high rises, all interconnected and trustworthy. The only trade-off is the loss of synchronicity; however, this asynchronicity is inherent to the design of these interconnected systems.

TechFlow: How did the decision to merge with the X Dai chain align with Gnosis's vision for scalability and decentralization within the blockchain ecosystem?

Dr. Friederike:

For us, this wasn't a deal-breaker. Instead, we chose to merge with a well-known side chain of Ethereum, one of the early ones at the time, known as the X Dai chain. This chain had been utilized in iconic projects, such as the Burner Wallet.

Originally, X Dai was a highly centralized chain, operating on a proof of authority consensus mechanism with only 20 entities authorized to build blocks. To address this, we followed a similar path to Ethereum's transition from proof of work to proof of stake. We launched a beacon chain and focused on decentralizing the network as much as possible to attract home validators—individuals who validate transactions from their homes using simple machines. This resulted in a significant increase in validators, growing from 100,000 to 170,000, which represents approximately 20% of Ethereum's validator count.

While our chain may not be as decentralized as Ethereum, it is still highly decentralized and serves as a secondary network to Ethereum. Additionally, we have built trustless bridges to Ethereum using ZK technology to ensure interoperability and make Gnosis chain compatible with Ethereum smart contracts.

Leverage Gnosis Infrastructure to create onchain payment networks

TechFlow: What is the next step for Gnosis? Gnosis has launched Gnosis crypto debit card for crypto users. Is decentralised payment the next mission?

Dr. Friederike:

Once we had this infrastructure in place, we considered what should be done next. Essentially, we focused on building infrastructure for the present. We explored different use cases that could have a real-world impact on people. In the past, utilizing Web3 products was very challenging, and despite the fact that we now have tooling to simplify the process, it remains difficult for many. However, we believe that with the right mindset, we can make it easier. Essentially, we ask ourselves: What's the use case or arena where we can add the most value? What's the lowest hanging fruit? This led us to payments.

In the crypto world, we often refer to it as peer-to-peer cash, but in reality, regular people primarily use services like Venmo, WeChat, or PayPal for payments. While the payments use case is relatively simple compared to many others, we recognized that putting it on decentralized layers could greatly benefit a large portion of the population. In the Global North, payments are not typically a bottleneck, as most people have access to low-cost and reliable payment options. However, in countries like Argentina, Brazil, or Turkey, where inflation is rampant, people seek alternative options, such as holding dollars. This seems disconnected from the Web3 world, where holding stablecoins requires minimal effort. We believe that opening up access to these options and building bridges between the Web3 world and legacy payment systems is crucial.

In Europe, for example, we have IBANs, which are familiar to many. In principle, we can provide a wallet with an IBAN, allowing users to receive money directly into their wallets and conduct separate transactions from there. All the infrastructure is there; we just need to build it—a new on-chain bank that provides access to products that wouldn't be available with a regular bank. This includes long-distance money transfers at significantly lower costs compared to traditional methods like Wise. Similarly, accredited investor rules act as gatekeeping mechanisms, preventing certain individuals from investing in certain instruments, regardless of their understanding. We aim to democratize access to banking services and provide access to dollarized accounts to unbanked populations.

We have a partnership with Visa that allows users to custody funds in their own wallets and pay wherever Visa is accepted, which includes over 100 million merchants worldwide. However, to make this accessible to real people, we need to upgrade the user experience significantly. The current complexity, such as managing private keys, is not suitable for the next hundred million users. With the current abstraction and technical tooling, we can significantly improve the user experience.

In summary, we are currently building infrastructure for decentralized payment networks, bridges to legacy payment networks, and wallets to provide people with access to these services. These wallets should be usable by anyone comfortable using services like Wise, Revolut, N26, or Monzo.

TechFlow: How does Gnosis payment solution overcome the crypto adoption problem? Dr. Friederike: That's a problem; basically, we have to build it so that these barriers disappear.

Essentially, using something like Monarium that lets you give your wallet an IBAN makes it much simpler. Basically, you send euros to an IBAN from your Wise account or Revolut account or whatever you're using, and it shows up in your wallet. You don't have to onboard to a centralized exchange. You don't have to give up custody.

And I think, this time, getting people to use crypto, I think it's a little bit of a wrong framing here because I don't think people should use crypto. I don't think they should have to know about using crypto. To me, it's a technology that is much better than the technology we currently have. And, just as you don't expect people to understand TCP/IP if they want to browse the internet, you also don't want them to have to understand crypto or even know that it's crypto under the hood.

You just build a product that uses it. And because it uses it, it can be better than the equivalent Web2 product. My take is we have built, in principle, with account abstractions, we can do things like onboarding with an email, onboarding with a telephone number. We can add passive verification with biometrics whenever you log into your wallet; you shouldn't have to remember passwords, or you've got to remember your seed phrase. This should be an option; you should be able to look up your password for your laptop if you choose to do so, but no one should have to.

Basically, making it easy for people to use this is something that we, as an ecosystem, need to do. And I think sometimes we almost wear this as a badge of honor, that this is difficult to use and we can use it; we're special. And I think this is wrong. I think this is the wrong way of framing it. This means we need to make the user experience better for the normies, for the people who actually benefit from using this.

And, I think things like easy onboarding, social recovery, institutional recovery, things like gas abstraction, these need to become a part of apps on Web3. Whenever you surf the internet, you incur costs; basically, if you go and Google something and use Google Cloud services, they actually have a real cost for you. Sure, googling 'what to do in London this weekend' might be a service you're getting, but they would never present you with a part of their Google Cloud services bill saying, 'You incurred a 3-cent cost here for us; please pay us.' It's subsumed in their business model that is largely advertising-based. Basically, they sell ads, and when you Google 'what to do in Hong Kong this weekend,' they sell spots to people who actually provide services in Hong Kong this weekend. And they pay for the privilege of having you see this. And that way, Web2 services are very good at abstracting the business model away from the customer.

I think in Web3, you have to go the same way; basically, you shouldn't have to say, 'Okay, I'm paying 3 cents to send this transaction.' If it makes sense from a business perspective, somewhat offering you a service and you're paying for this, it should be subsumed in that, and this is what gas abstraction enables. They say we pay the gas cost for you, and we make good for it somewhere else. And then, things like batching transactions together.

I mean, when you use Web3 products now, it's 'approve this, now do the transaction, now resend approval.' And, we can't ship that to normies. Batching these together and having the seamless experience that we're used to from the apps we have on our phones and the internet as it works today, this is where we need to get to.

We don't need to convince people of using crypto, just like we don't need to convince people that HTTPS is much better than HTTP; basically, it's on the people who actually build the applications to use the better technology, but do it in such a way that people don't realize that there was a major technological lift in the background. It should just make the experience better.

Basically, if you look at the ecosystem today, you see that very large parts of it are speculation. And it's fine. I mean, people should be allowed to speculate on whatever. But as an ecosystem, I think we have to aspire to more.

We cn't just say we're meme coins and that's fine. I think the promise of crypto has always been a better internet and a better way of working as a society. I think we actually have to make that happen. And I think this is all a little bit of what people complain about who've been in the space for a while. Basically, in the very beginning, it was cypherpunks who believed that you should be able to use whatever cryptography you want and you should be able to have peer-to-peer cash and you shouldn't, and so on. And I think this ethos has been overshadowed by crypto bros who believe, 'We're here early, we should be rewarded for that.' And I think the actual ethos was, 'We can build things that are genuinely better than what we currently have.' And I think in this way, that crypto ethos has to come back in order for this to survive long-term.

Because if the promise of being early, this no longer pushes, if everyone who's interested in this at all has been put in, then everyone's there, no one's idea. I think providing actual utility, absolutely. That's what we need to do.

TechFlow：Do you think supply-driven approaches (builder-driven) are more important than demand-driven approaches in building the internet's value at this moment? Because we don't really have a lot of people who are altruistic or sharing visions like Buff Jeff Bezos, for example the effective accelerationism. Well, I understand the skewed distribution. Do you think, on the supply side, it would be more important to drive the industry forward?

Dr. Friederike:

I think a large part of it boils down to funding. I think there are a lot of idealistic people, but I think idealistic people who are also good at building businesses are rare. I think it's about holding up your ideas and embracing them all to use them to make money. And that is how you get others to invest in you; otherwise, they're just giving you donations if you don't intend to make it a business. And I think having people who have ideas but are also good entrepreneurs, this is rare, but I think it's something that, and I think there's also somewhat of a vilification on the liberal side.

Section 4: Advice for young people

TechFlow: You transitioned from academia to entrepreneurship, and you actually gave yourself a year of time. You have the patience, the tranquility to allow yourself to take the risk. I think this is very admirable. What do you think are the qualities that make a good entrepreneur out of an idealist, someone who actually makes things happen?

Dr. Friederike: I think this is an excellent question, and I don't know, I think I'd actually have to think about this more. But, making... I think one of it is the stigma of saying 'I wanna make money' because this is something that in the liberal left, this is frowned upon. But I think there's nothing wrong with it. And I think this needs to be transformed. There, you can be a virtuous person with ideas, still wanna make money.

I think it's a cultural thing, and I'm not entirely sure. And I think it's also... I would also be curious to see how this differs in different countries because, and I mean, I've been to China, Taiwan, Hong Kong, and so on, many times. And I think it's quite different. How do you think it works between London and Hong Kong? Do you think there are differences?

TechFlow: For me, I think I really like London. There is a vibe there. You can think freely and you can actually run into a lot of interesting people who struggle to actualize their ideas because London, compared to the US, is a bit conservative. People care about actually what the problem is instead of just opportunities. But it has potential, potential that's not being fully realized somewhere in the UK. For Hong Kong, there's definitely more capital, but people don't really have the freedom to think that way. It's about finding an environment with less peer pressure, more freedom where you can think freely, think out loud, with the right amount of capital. This is what we see in America. But I think in Asia, people's eagerness for money is just very strong. We operate in survival mode instead of changing the world mentality, I guess.

Dr. Friederike:

Maybe I think the universal that comes into play is this philosophy of abundance, that thing. There is enough, and you have enough, and you don't need to struggle for survival. If basically, this idea is that it's not a zero-sum game; if you give something to someone else, it doesn't necessarily mean you have less. And I think maybe this is the post-scarcity philosophy. Maybe there is something to do with it.

TechFlow: I really admire European entrepreneurs; they actually have the abundance to think really... it's really nice. I was in DeSci Berlin. It's like going to university, having lectures, very cyberpunk, very idealistic, and actually filling yourself with the actual blood of wanting to create things. As for me, I'm still in the stage of thinking if I should combine my background in biology and blockchain to do something interesting. Friederike: I think it's a good space, especially for synthetic biology, longevity research, and what VitaDAO is doing, and all this open science movement. I think it's super empowering and it's a super exciting space to be in.

Additionally, I think this is something that is generally underappreciated, and I didn't appreciate it enough when we met: having people you can work well together with, where you can bounce crazy ideas off each other and no one's worth is diminished. I think it's a little bit like finding someone to marry. And I think at that point in time, you don't ever think about it. But I've seen many founders break up over the years, and some of those breakups were super ugly. I feel I didn't appreciate it at the time, but I am fond of Martin and Stefan and working with them because we have the same mindset.

More Q&A about Federike

TechFlow: Were you a Cypherpunk back then at university.

Friederike:

I actually read this book by Simon Singh when I was still in school, and basically, it was about cryptography. I thought it was Cofounderl, the Cofounderlest thing. The things you can do with math, it's crazy. That's magic. I think I was a little bit too young to be one of the original cyberpunks, but the ethos absolutely appears to be, I think.

TechFlow: You understand languages, you understand math, you understand physics. What specifically in cryptography or crypto blows your mind? What made you choose this field over physics?

Dr. Friederike,

Basically, to me, it was the idea that you could trustlessly Cofounderrdinate with other people without actually having someone who is the centralised agent, who decides who is right and who is wrong. And I think to me, that opened the door to much new technology. I mean, cryptography really is the gift that keeps on giving. I mean, what we now have with zero-knowledge proofs, is magic, and fully homomorphic encryption is going to be even better—being able to prove that you are someone or that your funds are legitimate without actually revealing where your funds came from.

I think this is super important. Also, if you look at the way that technology has evolved, in the very beginning, the internet, which was very collaborative, and there weren't a lot of business models built around it. But now, if you look at how internet companies make money, it's data. And we have gotten used to the fact that our data is mined, and then it's used, and that we're powerless against this. And I think this shouldn't be the case. I think if people want to use encryption to protect themselves, it should be easy to do. Obviously, you can sell your data if you just want to. You can sell your blood if you want to.

But I think it should be a conscious act, and it shouldn't be abstracted away from you, saying, "Look, I want to have sovereignty over my data, I want to have sovereignty over my communication. I don't want Google to read my email and then give me advertisements based on what I wrote to my friend." And I think that's something that has become normalized, even bank account data. Basically, even banks give anonymized access to data mining companies to analyze the spending behavior of the users. They won't know it's you, but they know that a resident of London aged 22 to 30 made purchases at, for example, Pop Shop and Sephora, and then they put it, and I think, and based on that, they analyzed their data. And I don't think that should be.

I think people should know about this more, and people should be protected from this if they find this worrying because you can influence people really easily, and I mean, this is all what we've seen with the entire Cambridge Analytica scandals. If you microtarget people enough, everyone has their push buttons that you can push.

I think generally going away from this world where our data is fair game because it's inherently not protected and non-encrypted, I think this is very powerful. We can actually build a better internet. We can absolutely build a better internet and a better world for ourselves using that.

I know this sounds nutty, but it's absolutely true.

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