Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Eric Larchevêque: Ledger – How to Build an Industry-Leading Cryptocurrency Security Company

Episode Date: June 27, 2018

Before founding what is now one of the most successful companies in the cryptocurrency industry, Eric Larchevêque and his co-founder opened La Maison du Bitcoin, a Bitcoin education center and co-working space in the second district of Paris. It was through chance encounters in this space that Leger was born in the basement of 35 rue du Caire, where the company also operated a Bitcoin exchange desk and a handful of crypto miners. Eric Larchevêque, CEO of Ledger, joins us again since his last appearance as a guest 200 episodes ago. We discuss the meteoric rise of Ledger from a ten-person team to now nearly 150 people across three continents. This fascinating discussion is a master class in product development, scaling at lightning speed, and staying true to your vision when everyone is pushing you to change course. Topics covered in this episode: Eric’s background and how he became involved in the Bitcoin space La Maison du Bitcoin and the early days of Ledger in Paris The meteoric growth of Ledger and how the company managed to scale without imploding The appointment of Pascal Gautier as President how to hire the right people when scaling fast Ledger’s various funding rounds and lessons learned from working with corporate investors The particularities of building products for the crypto community Ledger’s product lineup (Nano S, Blue, and Vault) and target clients The upcoming release of the revamped wallet app Ledger Vault as a security solution for institutional investors Ledger’s hardware technology and rock-solid approach to security Episode links: Ledger Wallet Website Ledger Corporate Website CoinHouse (formerly La Maison du Bitcoin) Announcing the new Ledger Wallet desktop and mobile applications Former CRITEO COO joins leading security player in Cryptocurrency space Ledger raises USD 75 million to secure cryptocurrency assets This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/241

This is Epicenter. Episode 241 with guest, Eric Larchovek. This episode of Epicenter is brought you by Shapeshift.io, the easiest, fastest, and most secure way to swap your digital assets. Don't run a risk of leaving your funds on a centralized exchange. Visit Shapeshift.io to get started. Hi, welcome to Epicenter, the show at Stachalks about the technologies, projects, and startups driving decentralization in the global blockchain revolution. My name is Sebassinkwood. And my name is Brian Favent Crane. We're here to, today with Eric Larshevec.

He's the CEO and co-founder of Ledger. Of course, Ledger, many of your listeners will be aware of because they've been a long-time sponsor of the podcast. And actually, Eric, I totally forgotten about it, but he was on the podcast before, which was in 2014, episode 40, so that's like 200 episodes away when Ledger was just getting started four years ago.

And of course, Epicenter. Also just getting started, I guess it was about the same time. So yeah, thanks so much for joining us today, Eric. Hello, thank you. Thank you for having me. I'm very glad to be back four years ago. It's true that it's a lot of time that has passed. And amazing things have happened since this time.

Yeah, I mean, Ledger has grown tremendously as a company. Back then, it was a little startup. And today, I mean, you were mentioning, right, you already moved to new offices, over 100. the people there now and already need to move to the next place because it's not big enough. So you've had, of course, a big impact on the industry. But maybe looking back, so tell us, how did you originally become involved in the Bitcoin space?

Well, I've been an entrepreneur most of my life. I made my first company in 96. I did so a few startups. And in 2013, five years ago, I saw the price comparison in Jin. and I was looking for my next adventure, and I stumbled onto Bitcoin. In the beginning, I really didn't understand anything about it, but I was curious.

And so I spent time to read about the white paper, the blockchain technology, the mining, and I got struck by my lightning. For me, it was clear that it was the fourth industrial revolution, that it would change everything, and I had to do something in the space. But I didn't know what to do. It's like doing an internal startup or a mobile app.

It's very wide. And I didn't know the ecosystem very well at the time. So with my co-founder, Toma France, we decided to start by something very horizontal. And we opened the physical center in Paris, La Maison du Bitcoin, the House of Bitcoin, with the idea of just being, there doing stuff, having metapacathon, and with the hope that something will happen because

there wasn't any business model, it was just taking position on the subject and transmitting people and letting the flow go. That's how it started, original. And what happened is that since we were doing these hackathons meetups, we met a few startups, and there was two startups that we met that was quite interesting. The first one was Bethechip from Nicola Bakka, who is now our CTO. He and his team were coming from the smart card industry, the security industry, and they were doing this first version of the hardware wallet, which was called HW1,

which was at the time extremely technical, very, very difficult to use, no documentation, no user interface. But very interesting because they were really starting to solve the problem, the issue of endpoint security. And there was another startup from Joel Pobeda, who is now our co-founder, and he was selling Bitcoin through postal services through UPS to solve the KOWIC and make sure that there couldn't be any fraud with a credit card when you were paying. And he needed media, he needed something to send the private keys, and he didn't want to use a USB stick because it wasn't secure. And so they started to work together.

and they did the first implementation of a hardware wallet that you could use. And it was really really the beginning. And I saw them working together. We did an Akathon. And then we saw that we not only were all working well together, but we share the same idea, the same vision that blockchain technology, cryptocurrency, couldn't scale without endpoint security.

And so we decided to merge the three startups, the three teams. and this is how Lager was born at end of 2014. Yeah, I mean, I remember those early days in Paris. I mean, I wasn't living in Paris at the time, but I mean, this is exactly the same time that I was getting involved with blockchain and starting episode with Ryan, and I remember those early days

of coming at Las Mesa Mezzo de Bitcoin, and it was sort of like the hub in France of like where everybody would just sort of come together, you know, there were meetups there, There were a couple of companies sort of starting there. And in sort of my, also getting into this space, it was very pivotal in that time. So it's still there today, although Ledger has moved out from there, obviously.

So what role does Amazon Bitcoin play now in sort of the broader Ledger strategy? So when we created Ledger, we created a new business model and line of products, which was not really related to a Bitcoin space or a Bitcoin Roker. And what happened is that we, La Maison du Bitcoin is now a spin-off of ledger. So it's not the same company. It's a different company with some of the shareholders that are shared with ledger, but they are really distinct. And so La Maison du Bitcoin, which has been rebranded, Coin House, because it's more international, is now living its own lives.

There is a team, a CEO, and their strategy is completely decorrelated from Lager. So really we branched out because it was too complex, to have two completely different business model in one. And so now Lager is living its life, and the Coenhouse is living its life on its own. But there's still a physical exchange counter there. There are events and like regular meetups and sort of regular educational events there are happening.

Yes, Amazon to Bitcoin, Coin House, it's continued to fulfilling its mission of education, of getting easy access to cryptocurrencies. So now they are 27 working there and also working on the website on Coin House. and they are still doing events, still doing some meetups, and also doing a lot of education on Bitcoin, cryptocurrencies in general. So they are really continuing their mission in the same way that what we started almost four years ago. One of the things I'm curious about, so you started Ledger back then, right,

which was a hardware wallet. And I can remember maybe that a lot of people at this conception that, you know, hardware is hard to scale and, you know, it's hard to make a profitable business out of it and you're doing kind of software-based businesses. You have much more potential. Did you also have concerns like that when you started ledger or how did you think about the choice of, you know, doing a ledger and these hardware wallets versus, I don't know, maybe other ideas that you considered back then? Well, we really understood quickly that all the identity system, all the security of Bitcoin and cryptocurrencies was based on the security of private keys.

Basically, it was a bearer bond and you had to secure it. And the only way to secure it is through secure hardware. And so it was clear for us that it was needed to have this hardware wallet, that there wasn't any good alternative. And that's also true because we had this vision. because from a long time in France, we have this chip-and-pin credit cards. We use this smart card technology for decades. So it's a little bit in our culture

to understand the importance of secure hardware. But from the point of view of early customers or even investors at the time, no one really thought that it would work because we are speaking about the cloud, about so-called virtual currencies, And so everyone was saying, why do you need a hardware? Why do you need a piece of hardware when everything now is completely dematerialist?

Everything is in the cloud. So we had a hard time at the beginning to convince consumers and investors because it's hardware. So hardware is also not very popular. It's hard to scale. And it wasn't at all fashionable. So I would say that for the first years of ledger, it was quite difficult. We didn't encounter the success immediately.

We spent two to three years to do a lot of education regarding the importance of hardware. And during that time period, I mean, so I sort of, you know, based in Paris and knowing you personally, you know, sort of followed the evolution of ledger and saw Ledger go through different phases. Can you talk about some of the, I mean, obviously now you're on. on a good track now to become success in this space. Can you talk about some of the things that you learned along the way, perhaps some failures that you can point to, where you thought, you know, okay, we're going in this direction, but in the end turned out to be not the good strategy

or the good direction to take? Well, the key learnings are about resilience. It's about not dropping the ball, not dropping the projects, even though everyone is telling you that it's not going to work, that everyone is not telling you that hardware is not good, that Bitcoin is dead. We had a very hard time in 2016. It was the time where we had this blockchain good, Bitcoin, bad. And to survive, we had to do like everyone.

We had to pitch blockchain. We had to pitch about all insurance companies, banks are going to change the way they work using the blockchain technology. So it was a lot of bullshit, but it was the only way for us to survive. And it was a hard year, because we had to stop speaking about hardware. We had to stop speaking about security.

We had to speak about blockchain. And we all knew that it didn't make a lot of sense, but that was the only way to capture the imagination of investors and potential customers. We were still selling, of course, our hardware wallet, but the revenues were quite, well, not really material. And so we had to, we did the first seed round in early 2015, but soon we had again to raise some money. We did a series A, and this is at this time that we had to pitch our investors, and we had to pitch the blockchain story. And what happened is we found some investors

who were quite interested about the blockchain technology and not so much about cryptocurrencies. And at the time, it looked like it was the only way forward. So we had to adapt a little bit our strategy to close the round. And what happened is that a few months after we closed our Series A round, it was in early 2017, the world of cryptocurrency started to... scale. It was everything about ICO, Bitcoin was growing. And so our lead investor was a big insurance, big French insurance legacy, got quite scared, scared because they thought that

they invested into a blockchain company and the business of crypto and hardware wallets and ICO and everything started to scale. So they really got scared and exited the company very quickly. So it's just a story about the importance of resilience. And when we did our series B, one year after, the deck was exactly the same than the seed. And it was striking because our series A deck was a little bit, you know, bullshit-y, blockchain. Because we didn't have any other choice, we had to mask

our real ideas. But the series B and the seed was identical. So it's it's good to see that at the end, we didn't pivot at all. We adapted, of course, our products and technology, but the vision was exactly on spot on from the beginning. And at some time, we almost went out of it because we didn't, we felt that we didn't have any choice. But luckily, we were able to come back on that and now scaling,

really focusing on endpoint hardware security. Wow, this is fascinating. Super interesting. I mean, I remember that time well, right? Then I think, you know, I was also working sort of in an enterprise blockchain thing and say, well, see, also, it's right? Absolutely. So we all had some time in that. But what's striking, just to point out, what striking is that, going back, I mean, I don't know how you feel about it, but going back,

I think that in my mind for a while, I actually did think that this was the way that things were going to go, right? But, like, enterprise adoption was going to be like how blockchain would come to mass adoption when, but yeah, we have to keep our focus on the true vision. Yeah, no, no, absolutely. This was the same with me. I mean, I did, I just felt like the first there would be this enterprise adoption and that was more where you could get to like revenues and business models. And then later that it would more like branch out and into consumer use cases.

But with you, Eric, it seems like you always felt actually with cryptocurrencies and and the more of a consumer-focused thing was where it was most interesting. So you never were like sold on the kind of blockchain story. Is that right? Well, we always, we are true believers at Leisure of the decentralization of cryptocurrencies, of Bitcoin and what we can call the vision of Saturdays. Nakamoto even if it's hard to see exactly what was his endgame and it's true that enterprise blockchain was not really something that we really liked because it didn't

feel like it made a lot of sense however we always saw that enterprises or banks or financial institutions was part of the equation and today we are having products that are catering for enterprises, but in a different way. It's more about helping these enterprises, these financial institutions, to go into cryptocurrencies, and it's less about

enterprise blockchain, but ultimately, we think that there are going to be some use cases and valid use cases where we are going to see this consortium blockchain or things which are going to have real help on some business model, but it may take a while

to go to, it may take while to go to market. Yeah, I agree. There's a lot of pieces that need to come into play that before it starts to happen. And I think it's quite likely that when that does happen, there will be a lot of components of that infrastructure that will be more on the decentralized side that will be facilitating or helping or somehow taking part and building other ecosystems that are more permissioned or consortium-based. So let's come back to this period of 2017, end of 2017, early 2018, the price of cryptocurrency reaches new all-time highs. Bitcoin reaches almost $20,000.

And all of a sudden, you're faced with this influx of new customers. Can you talk about that period? And what was it like within ledger to go from selling maybe a couple of hundred or a couple of thousand units a month to, you know, that order of magnitude on a daily level, on a daily basis. Yeah, it has been a crazy and amazing year. That surprised us a lot because, of course, we are always a believer of crypto and our technology and everything, but I would never have thought that it would have gone that fast.

And in 2017, we were forecasting to sell about maybe 60,000 nano-s, 60,000 units of our hardware wallets. and ultimately we sold about 1 million units. So it's another of magnitude difference, and it has been a mayhem. I mean, we had to scale the company in months, in weeks. We had to hire a lot of people. We had to change the way we were working.

And also, it's not just about software. It's not about piling servers and ranking new servers. It's also about industrial production. about shipping. It's about people putting stuff into boxes and then shipping them. And it's about also supply chain. It's about being able to source all the chips and everything. So it was very hard to scale. And that's why we had a lot of weeks and months where we were completely out of stock, where basically the nano-s, this device, the price of, because it was rare and it was very demanded.

You could find some nanoS at $500 on eBay or even on Amazon. The normal price is about $100. So it was really crazy. And everything had to scale. The customer

support, our infrastructure, we were all the time having a lot of problem because it was impossible to scale as fast as the market was. But it was amazing. It was six months of craziness where, you know, you are energized like crazy because when you, you know, they say you build it and they will come, you know, this is something what we say about

products, but yeah, they did come and they did come in masses in a way that we could never have predicted. And so I think it was maybe so far the best six months of my entrepreneur life because when you build a product that becomes some kind of worldwide phenomenon that everyone is trying to buy, we had to shut down our phone lines, we had to remove our address from the website, we had to lead to hide because people were taking place. I remember there is one trainee from a hedge fund in New York,

their boss told him to take the plane to go to Paris, to go to our office, and to buy a box of 100 nanoists, you know? So the guy had to do, take and go. and we didn't have the stock because we were completely sold out so the poor guy did all this trip for nothing and we had a lot of people like that trying to enter to call to source our devices because there were so much in demand

that it was also an easy profit. We had tutorial on the Russian website about how you can buy from our website and resell at double or triple the prices so to make money. It was completely crazy at this time. time. Now the situation is different, of course, because the market has slowed down and now we have stock and we are completely in position to fulfill the market demand. But at some point in February, in December, I couldn't believe my eyes when I was seeing the level of orders. It was madness. But it was a very good time, for sure.

Of course, as any sort of Bitcoin blockchain or people are coming to you at this time saying, like, how do I secure my crypto? I remember at this time, quite a few people were asking me saying, oh, you know Eric, you know, ledger, you know, can you just go to their office and try to get some extra units? Like, there's no units? There's nothing. Everybody sold out. And actually, I was in Asia recently.

And I walked into someone's office and they had a stack of about, I don't know, 25 or 30 ledgers just there on a shelf. I think they maybe had bought them prior and never ended up selling them. them, but they're holding them for a rainy day. If ever you need extra leisure stock, some guy in Asia has a bunch on his office. Yeah, that's fascinating. And so what are the... Do you have any other interesting anecdotes about some crazy things

that happened during that period? Well, we had to scale. We had to hire. Because basically, when the craziness started, we were about I guess 20 or 22. Now we are

140 in the company. and what is incredible is that we added more than 100 persons and in fact we are more or less serving the same amount of customers than we were before. It's just to say that we were so much in stretching that we were able to... It's a miracle that we didn't explode it, you know, because when you have too much traction,

you can just die as a company, because you take the orders and you cannot fulfill and then you lose the confidence of your customers and then you spiral down. And so it was very intense. And I think that one of the reasons that we were able to survive is because we onboarded Pascal Gautier, which is from one of the co-founder of CRETO,

which has already seen how to scale a company from 20 to 1,000 person and IPO a company. And he was an early investor, a business angel, but I remember we went into consensus of 2017. So it was in May, I think, of 2017, like one year ago. And he was here because he was an investor. He was also interested in Bitcoin. And he told him, okay, let's come with us. So, you know, you are going to see.

Because it was already starting, you know, to sell more and more. And I think this is this day that we understood that everything changed. because we had like, I think, 100 nano-s that we put to the conference because we always come with devices and we sell them. But usually, you know, we sell them a few. It's not like crazy. And there was a lot of people at the booth like waiting, do you have nano-s, do you have nano-s?

And I say, okay, we are going to start to sell them at 10 a.m. And then there was a lot of people when we started to sell. And the first guy asked me, okay, how many do you have? say, okay, I think we have 100 units. And the guy said, okay, I take them all. And this is where Pascal saw also that something's changed. And we agreed that he would come as president and help us scale the company. And he has been instrumental into helping us to build all the support function of ledger.

And today at Ledger, for instance, there are 10 lawyers, 10 in-house lawyers, just to check everything about, you know, certificates. import, export, taxes, corporate, risk, security, everything. It's just to say that the level of support function

that you need for a consumer company who is selling in 165 countries is tremendous. So that's also why we decided to do a big series be round because

the level of investment that you need, if you want to scale a company, is is very big. And we have like large, very large ambitions for leisure because the hardware wallet

is just one side of our business. It's just one pillar. And we have others to build. And it's going to take a lot of energy. And now we are really focusing on execution to have this vision

moving forward. So you talked about this crazy growth going from 20 people to 140 people now. How did you do that? Like, how did you hire so many people? Like, what did you look for in people? And, like, what went well about that? And what were some of the struggles with growing so quickly? Well, the struggle is that you, not only you need to execute and do your day-to-day job and

solve all the issues and just cope with everything which is happening, but also you need to hire. So it needs to spend a lot of time in interviews because one thing which is very important is culture because when you need to hire 100 person, you cannot make mistakes because if you do mistakes and if you hire anybody on the spot like that because they just feel, okay, then you can destroy the company from reason. It's not that people are not good or they won't do the job properly, but if they don't share the same culture, if they are not a fit for the company, it can completely destroy you. So it was important to spend some times with the candidate,

with every candidate that we were hiring, just to make sure that they had the good fit. And at Leisure, we are looking for people who are very autonomous, who are okay to take charge of their different tasks. Because we don't micromanage. The trust is given. It's not one. So it's meant that when someone arrives,

okay, we give them all the trust that they need. and let them do their things. So they need to work well into this environment. There is a lot of matrix management in the sense that a lot of the support functions are horizontal in the company, so they need to work well with a lot of different people. And they also need to have this kind of fire and passion about the project, about the vision, because it's quite demanding to work at leisure, especially in an environment where you have so much growth.

And each time that we have some people arrived immediately, it was completely overrun by things. And so you need to have people with a lot of energy, a lot of goodwill. And that was one of the important aspects of the recruitment to find people with internal fire and energy. This episode is brought to. you by ShapeShift, the world's leading trustless digital asset exchange, quickly swap

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putting on your slippers. Whenever you see that good-looking fox, you know that's where Shapeshift is. So to get started, visit Shapeshift.io and start trading. And we'd like to thank Shapeshift for their supportive Epicenter. So we talked a little bit about the funding round. One point that I wanted to bring up is just, so the series B that you closed, I believe it was earlier this year in 2018? Yeah, it was in January 2018, and we closed $75 million. Right. So $75 million U.S. round.

And so you raised this money right when, well, I guess you were doing the fundraiser, when cryptocurrency and Bitcoin and everything was sort of ramping up to this to this pivotal point at the end of 2017. Talk about some of the challenges about raising that much money in this nascent industry and also particularly in France. And given the types of investors that you have that are institutional investors like Kete, what are some of the challenges there? Yeah, we decided to raise to raise money. raise a big round quite in the summer of 2017. We decided that we needed to raise a large round. So why?

So the company is profitable. And when we did a lot of sales, we could think that why not trying to just to grow organically and not have a dilution. But there were two things that we were looking for. the first, of course, was Monet, because it's important to have a war chest. A lot of other players

was also raising large rounds. And when you are in hardware, when you are in security, research, and development, you need a lot of cash because cash is fuel, cash is life, and you don't know when the market is going down.

Because we were sure that at some point, the craziness will cool down. I mean, it's only logical. We couldn't know when or how, but it was important for us to have this world chess to make sure that even if we had some kind of nuclear winter, we wouldn't have to change the strategy of the company. And the second reason about raising money is that we wanted to have partners, partners to help us

for the internationalization of the company, to help us on Asia, to help us on the US because we have customers everywhere. We sell in 165 countries and we wanted partners we can rely on and not just money. And that's why also we didn't do an ICU because everyone was asking us, why are not you doing an ICU? Well, first of all, utility token would not make, I guess, any sense for leisure. But more than that, it was not just about money. It's about finding the right partners. And so we ended raising with Draper Espre, Team Draper, Cate Capital, which has a lot of view on China.

Correlia, which is also about South Korea, first mark in the U.S., which is a Tier 1 fund. You can help us also structure in New York and a few others. And so it was instrumental to help us to get all the right vision and the cash amounts to deploy our vision. Because, as I said, it's not just about consumer electronics and hardware wallet. It's also about enterprise solutions for financial institutions, the vault, which is enterprise key management. And it's also about everything that we can call IoT machine-to-machine transactions and payments where we can see a very big futures. And on that, we need to invest a lot. For instance, we are investing $10 million into a facility in France for the production.

for the shipping, because right now we are doing a lot of production in China, but one of our objective is to relocate the production in France, because we believe it's important for not just about the quality, because you can have good quality in China, but we can have a lot of flexibility by producing locally, and also is part of the mission of ledger to be socially responsible, and it's always better to create work, into France, into our regions, especially that we are in the center of France,

where there are not that many jobs. So it's also in line with the stories and what we are trying to do at Leisure, but also is going to help us have, let's say, more efficient management and production line for the future. So we're also investing a lot into security. We are building a security lab to make sure that everything is working well, and that we have like six to eight security experts attacking all the time our firmware, our devices, to make sure that everything is really shut and tightest shut regarding security.

Well, we need to hire a lot of workforce internationally. We are in San Francisco. We have opened New York. We are opening Hong Kong. So we need to be present on the ground. and we need to build a sales forward task force, our SaaS product for enterprise, we need to hire also for IoT. So it costs a lot of money, it's a lot of investments. And that's why, despite the fact that the company is profitable, we need to move forward quickly because it's about execution.

It's about taking the global market as fast as possible because our ultimate ambition is really to build a very large technological company, which is going to provide with all solutions for security and infrastructure for cryptocurrency and blockchain applications. Quirk, thanks so much. It's really fascinating to hear just how leisure grew in this process. So I'm really glad you're sharing this. So I'd love to speak a bit about sort of the aspect of building products, you know, in the blockchain space and the unique challenges around that.

So you built a bunch of companies. before, what do you think, are there some big fundamental differences in blockchain or what are some unique challenges in building, you know, cryptocurrency products? Well, I would say that one of the specific aspects of all this cryptocurrency space is the fact that there are strong communities. And it's sometimes not always easy to manage these communities and the people because they can have strong opinions. And to just take an example, it's like Bitcoin versus Bitcoin Cash, we are a technology provider.

It's not our point to take sides, you know, it's because we secure endpoint and we are not here to say that this is bad or this is better because that's not the mission of ledger. But sometimes when you try to do things, or if you are not delivering the latest update about this crypto or this version of the crypto, people start to really become crazy and think that we are trying to sabotaging and there are all these ideas that we want this or we want that. And it's sometimes it takes a lot of energy.

The other aspect is that in cryptocurrency, it's everything, you are your own bank, you have a lot of research. responsibilities, so you have to be cautious about what you do, and it's very hard to close the gap between, let's say, people who do not understand what they are doing, because a lot of people recently have invested in cryptocurrency without understanding what it is, but they still want to secure it, and security. So you need to explain to people who do not understand IT, that, But if they do something stupid, they can lose everything that they have. It's like, you know, sometimes when I talk to customers, it's like they take cash, you know, real cash. They put a gasoline on it, they light it.

And they say, why is it burning? Why is it burning? You know? And it's very hard to find the right way to explain to people how they can secure their assets because it's part of our mission to basically bring something easy and simple. to users, but that's the biggest challenge. And because what we try is to remove anxiety from our customers, because when they are not secure, they feel bad at night,

you know, they have nightmares. And the idea is when they buy leisure devices, they have to feel much more calm and they have to feel good. And so we need to provide with the best experience possible. And we know that we have a lot of work to do on that. And one of the next milestones is to provide with the new version of our wallet software, which is going to go live on July 9th. And we hope that it's going to also to help new users and newbies to go into the cryptocurrency space securely

and with a lot of, with much more easiness. Because we know that with Segwit and the Forks, and everything that we have now, sometimes people don't understand anything, and that's quite challenging for everyone. Yeah, well, let's speak about that application exactly. So I'm very excited about this, right? Because Ledger so far has used basically Chrome apps.

So Chrome apps are, well, Sebastian would know better, but you basically can get this through the Chrome app store, and then you had these different applications, right? So there was a Bitcoin application, an Ethereum application, you know, a ripple application. you know, a ripple application, a bunch of different currency. And then there was also a ledger manager. So you had all of these separate applications.

And it's interesting because I feel like in the beginning, you know, the ledger user experience was really good. And then over time, it kind of like got more and more as I think the complexity grew so much. And you guys have to handle all of these different force, these different things. You know, it became harder to accommodate that. I think in the initial kind of setup. and, you know, an example would be that, okay, you can only have a limited amount of applications. And now it asks, okay, can you update the applications?

But there's not enough space. So there's a lot of these, like, challenges have grown up. And now there's this new application that you talked about, which is, you know, desktop and mobile application and the screenshot. It looks fantastic, right? To have, like, one unified application. So how is that new application going to work? Can you share a bit more about that?

Yeah, of course. So you're totally right. The Chrome apps, which were at the beginning quite well received, became more and more complex because we had to hack it and had all these forks and segwit and everything. And it became not easy to use. And then there was after the Ethereum app, the Ripple app and the manager, so people started to get lost into all that. So the new application is going to be a single app for everything.

We are going to release in steps. We are not going to have all the feature on the first version of the app, which is going on the July 9th. But basically, you will have the possibility to have all your accounts in one app. So you can scan all your different Bitcoin, Ethereum, Bitcoin Cash, Repel, et cetera, accounts. It's going to add them into the application, the desktop app, and you will have all your portfolio.

and easy to click, let's say, send, receive with added security features to make sure that you can verify your address. We are also an onboarding procedure which is going to make sure that everything is all right. We ask a lot of security questions. There is the manager, which is integrated, so you can add and remove application quite easily.

And in the next release of the application, we are going to see like easy auto install of apps like you want to manage different different cryptos is going to remove the apps, install the apps

automatically you will not have to think about all that to do that on your device, you will have auto-scan functionality it will be much better and ultimately you will be able to follow all your crypto in only one application

so not only it will be useful as a wallet, but it also can be useful as some kind of portfolio manager. And right now we are going to publish the desktop app, so we work on Windows, on Mac, on Linux. And we are going then to follow up a few months after with the mobile app, which will give you the possibility to see your accounts and spend from your Android or iOS application. So it's going to be, I think, a very well-deserved,

let's say, improvement of user experience for our customers. We know that we took a lot of time to release it because this application is on our roadmap for a while, but all the crazy scalability, the crazy growth that we had to go through last year completely changed all our initial plans and we had to work in priority into scaling on our infrastructure and then only we had the time to work on the new versions of our application. That's really good news. I can't wait to try the new application, the new wallet and see how that experience is being improved by this unified desktop application. I think a lot of people

are going to like it. So let's talk a little bit. bit about the product. So we've talked a lot about the company, but let's talk about your product lineup. So I believe right now, looking at the website, there are sort of three main products, so the Ledger NanoS, the Ledger Blue, and the Vault product, which is something that's quite new to me. Can you talk about these different products broadly what they do and who they're for? So the NanoS is our bestseller, how to do? Worldware wallet. So basically it's a digital safe to manage the security cryptocurrencies. So it caters for any individuals who own crypto and wants to secure them. So it's really a consumer-facing product. It can be used by professionals, but basically it's for individuals, in the sense that you have one person, one device.

The blue is like an OS, but with, let's say, an improved user experience with a touch screen. so it's easier to use for people who liked big screens. But we are going to sell a last batch of the blue, and then we are going to retire it from the consumer market and use it only for our Volt product. And I'm going to explain what it is, because the blue is really a premium product, and it's very hard to scale.

And we couldn't really improve. all the production without raising the price too much and it wouldn't make sense for a consumer product. So it's going to get, we're going to continue to support it, but it will not be possible to buy it anymore after the last batch. And the vault, so the vault is an enterprise product. It makes sense when you have, let's say, a minimum of $15 million of crypto to secure because it's an expensive solution. It's an enterprise key management SaaS product

which basically solve the need for professionals to manage a large amount with governance. Because let's say that you are a hedge fund and you have $100 million dollars to secure in Bitcoin. You could use a NOS, a key,

but then the question is to whom do you give the device? Is it the CEO, the CFO? Where do you store it? What happens is the CFO? becomes crazy and run with the money. What happens if people with guns go into your office and ask you for the device? I mean, you can have cybersecurity protection, but you do not have any protection against this kind of physical risk and threats,

which are quite big when you start to have a large amount. So the idea of the vault is to provide with governance, which is multi-signature, multi-authorization, time locks, delayed opening, rate limiters, et cetera, all the features which are required by professionals. And it's a SaaS solution in the sense that we manage everything for the customer. The customer keeps the ownership of the keys. So it's not a full custodian solution. This is for self-custody.

Lager is never the owner of the private keys. We provide with all the infrastructure so the private keys can be managed securely using multisignatures. and it works for any kind of cryptocurrency, even if they don't have the blockchain-based multisignature, because we do a multi-signature which is enforced by hardware. So on the server side, we use what we call hardware security modules, HSMs, which basically are very secure servers, some kind of very large hardware wallets.

And on the endpoints, each of the operators of the vault, which can have as many accounts as they wish, have a ledger blue, which is used as an authenticator to either request a payment, request a transaction or to approve transactions, and then transactions are ultimately approved by the HSM, by the server, when they have the quorum of the signature at the endpoint, or if enough time has come by because you can have this delayed opening.

And so our customers are hedge funds, family offices, investment banks. We have in Europe, in the U.S., in Asia. The pricing is based on the assets and the management. It's basically 48 base points per year. And it is an enabler for all these enterprise, all these financial institutions to come into the cryptocurrency world because without security, without the proper key management, it's not possible for them to scale

because investors or LPs, limited partners are not going to put more money if the hedge fund cannot provide with good security solutions. So we have launched the solution a month ago. It is quite successful, and now we are trying to onboard as fast as we can all our new enterprise customers. And our objective, our ambition, is really to secure billions and billions of assets

using our technology for these institutions. Earlier we talked about enterprise blind optimism that we had there, right, in terms of adoption. But as a company, it seems now Ledger is building products for hedge funds, asset management firms, limited partnerships, et cetera. Talk about perhaps, like, what are the particular traits of these types of customers as opposed to, so the enterprise. And also, gives a sense of the need there.

So, like, what's the scale of the need, sort of the customer base here that you have potentially for this product? So all our customers are believers in cryptocurrency. So it's really about cryptocurrency. It's not about blockchain or... some kind of private blockchain, DLTs, or it's really about cryptocurrency. So that's why it makes a lot of sense and there is like real use cases because financial institutions really want to move forward into crypto

because it's an asset which has now a lot of legitimacy. I think everyone is convinced that these assets are here to stay and there is no way that this asset manager, hedge fund manager, financial institutions are not going to take a share of the pie because they are here to make profits. And so they want to play the game of crypto. But the only way to do it is if they have the proper infrastructure to manage that, because if you want to buy stocks, bonds or everything, you always have the custodians, you always have third-party banks who are going to keep these assets for you secure. so you don't think about how you are going to secure them. And if you buy gold, physical gold,

you are going to find depository where you can put the gold in vault and everything is insured, et cetera. In crypto, all that doesn't exist. So the biggest problem that all these institutions have is how can they hold and secure the cryptos? And the ledger vault is an answer to that. So we are talking about the scale of 100, of customers.

It's not yet in the thousands, but it's in the hundreds of potential, let's say, hedge funds and family offices who wants to go into crypto. I guess maybe in one, two years, it can move to the thousands because now this is the early adopters that we are seeing moving forward to crypto.

And we have seen more than one hedge fund or investment bank who wants individually to put at least one or two billion dollars into crypto. So all combined, we can see an influx of tens of billions easily in crypto. So I'm pretty convinced that next year, we are going to see this massive investments, especially now that the price is low. It's a better opportunity for these financial institutions to enter

because they are not entering at the highest of the market, which wouldn't be good for them. I thought initially that we will see all this financial institution investment this year. But I saw that everything is taking always more times that you think, especially just the time to deploy the vault solutions and others. But for sure, the first semester of 2019 is going to be interesting because we are going to see a lot of movements from the financial industry into cryptocurrencies.

And what was the choice? So the ledger vault, it's actually the first time I'm here of a product that's like hardware-based kind of non-custodial large key management system, you know, asset management system. Of course there are, you know,

other companies that are also trying to offer kind of custodial solutions for, or they're trying to offer more custodial solutions for, you know, for some of these funds. and where they actually, you know, manage the key. So what do you think are some of the, you know, pros and cons of the ledger approach versus a sort of more purely custodial approach? So you have example, for instance, with a Bitcoin custodian,

where shown its quality into securing assets. You have BitGo, who is also providing with some kind of custodian solution, You also have Coinbase, which is a full custodian, but the solution is not ready yet. And I would say that the drawbacks, if I can call them like that, is that it's very limited in the number of crypto. For instance, BitGo can only manage cryptocurrencies which have built-in multisignature, like Bitcoin, like Litecoin and a few others. but they cannot manage all the other crypto. Exapo is doing only Bitcoin. And Coinbase is also limited to the number of crypto they can add

because they are heavily regulated. And so the vault is really a very flexible and powerful solution for self-custody, which is not exactly the same than full custodian because basically with the vault, the customers still stay the owner of their funds. for full custodian, because some regulated hedge funds required to have a full custodian, a qualified custodian, they cannot self-custody. Then we have announced a partnership with Nomura,

which is one of the biggest bank in Japan, who is going to use our technology and provide a full custodian solution for all crypto. So the idea is to be able to provide to have a go-to-market either for let's say, a smaller hedge fund or hedge fund who do not require this full custodian solution. So they can self-custody and use our solution. It can work also for family offices or foundations or ICOs, you know, have like hundreds of millions and they need the governance.

And for hedge funds who need qualified custodians, the idea will be to work with this consortium called Komenu, on which we are working with Nomura and other banks, hopefully who are going to join, to be able to provide with the best-in-class solution for the market. So we talked a bit about security, but I'd like to focus on this as we come to the close of our episode here. So Ledger is probably, I guess, would be safe to say, being attacked constantly.

I mean, you also sort of promote that through bug bounties and contests and this sort of thing. But you're sitting in a very particular place where people are trying to hack your product all the time and there are billions of dollars worth of assets sitting on ledger devices all around the world. Talk about what that means sort of personally as a CEO and as a public person in the space,

but also as a company, how do you build that culture of security within the company? First of all, we are selling safes, okay? And safes are decentralized by nature. So there is no central point of failure at leisure where someone could hack and run away with billions of assets. Because no such things exist. So it's not like we are an exchange with billions and we can get hacked.

So people are always trying to hack and our devices. It's like akin to trying to open a service. safe, you know, to find a way or clever way to open a safe. But usually if you can maybe try to hack one, it will not open them all. And so that's why there is not a central risk for our customers. What is central is the firmware update because you could think, okay, ledger could get hacked and could release a firmware update. that would, let's say,

exfiltrate the private keys using side channels or something like that. So we do have very strong security mechanisms to provide with the signature of our firmware updates because only a firmware updates which has been signed, let's say, by the certificate of ledger can be accepted by the devices. And so we are using the same level of governance

that is used in the vault, which means that you require multi-signature from different persons. And so even if as a CEO I was kidnapped or held ransom and everything, it would activate some failsafe that will prevent anyway the signature to be done. And regarding security in itself, of course, we take it very seriously. We have a security lab where we have hired eight now security specialists who are working all the time into trying to hack our devices,

firmware, technology, website, etc. We also have a contest with bounties, where we repay all the security researchers who can find some vulnerabilities. Security is always a game of cats and mouse. There is no such things are ultimate bulletproof securities, is just always a question of how you can build the best product possible, and there is always iteration.

We have had some, let's say, firmware vulnerabilities, that was more or less easy to activate, often quite difficult to activate. But that's why there is this possibility to update the firmware, and our objective is always to stay ahead of the game, and that's the work of ledger. That's why that's our main assets and that's why we have, let's say,

the best specialists in the world that you can find into embedded security, secure chips that are working constantly to have the best possible security. And it's always important to stay humble and to make sure that people can and try to open the solution as much as possible so people can really act on it.

And we come from an industry where there is a lot, especially in the security, when there is a lot of, let's say, security by obscurity. And what we are doing at leisure with all our, by publishing all this context and these hardware bounties and everything is quite new into this environment. And we are hoping that it's going to help us

go to the highest level of security ever seen. And the next stage is to create all the certifications, all the standards, because it's important for our customers to know that all the security targets that we have has been audited by third party. It's not just only the good word of ledger. And so to be able to do that,

first you need to write the standards, and this is what we are doing at leisure, to be able to have the same kind of standardization certifications that you can find in the legacy payment industry. And can you talk about, perhaps, in your view, what makes ledger more secure than other hardware solutions out there? Like, why should someone choose a ledger for its security aspects over something else that they can find in the market?

There are two kinds of microprocessors. Because a hardware wallet, this is a computer. You know, it's a secure computer, and the objective of this computer is to make sure that the private keys, the assets which are inside cannot get extracted. And to build this computer, you have two choices. Either you use a regular microprocessor, and the same kind that you will find in remote control, microwave, kettle, you know, toys.

Or you use a secure microprocessor, which you can find in shipping credit cards, SIM cards, passports, all critical, you know, applications. And the advantage of the secure chips is that you cannot open them easily. Because if you take a regular microprocessor, you just take it from the table, you can open it, you can extract very easily the secrets, because it has not been designed with security in mind. Ledger is the only company in the world using secure chips, because our core technology is an operating system designed for the secure chips.

and access to secure ship is quite complex because it requires to show some kind of credentials to be able to access to the underlying structure of the chip which you need to know to build this operating system and so it's a high, very high barrier to entry. So if you compare, for instance,

Pleaslo to Ledger, this is the main difference. Of course, there are other things to take into account because like the Uyx, the form factor and everything, and for the end user, secure chip, not secure chips, they don't understand really the difference. But one thing is for sure is that Treasor, for instance, will never be able to go into enterprise market because it's impossible to give any level of certification for not secure chip. And my prediction also is in a few years or when we are going to see much more mainstream. adoption of crypto that it will work a lot and a lot of people will have hardware wallets.

You will see some tools that will be able to extract very easily the private keys from treasurer, for instance, because you can glitch the chip, you can bug it and then to make it extract the private key, you are going to see a lot of counterfeit treasors. It will be very interesting for makers of fake treasurer just to sell them on Amazon. Amazon because there is no way to protect against forgery. Treasurer right now is using these stickers, you know, holographic stickers, but that's just what we call security theater because you can, it's very easy to duplicate them.

So in the end, if right now I would say people do not understand really why a security ship is better than not a security ship, my prediction is that in a few years building security product. on unsecure technology is going to create a big, big problem. And so on the long term, that's why a ledger president has a solution that can really scale and provide with really securities that can get certified and audited by SELPART. This is a surprise to me. I was under the assumption that other hardware wallet solutions were also using secure chips.

I think most people that buy these solutions also assume so. Yeah, because I guess people do not understand the difference and that's fine, because try to explain what is a secure chip is very hard. But treasorists and Kipki are not using secure chips. There are no solution right now in the market with real securities ships because it's hard. You know, hardware is hard, secure hardware is even harder. And so Treasor is not using security because it's not a choice by design. It's just that they cannot access secure chip anyway.

Because it's like you want to print notes, you know, banknotes. And so you call the central bank and you ask for the printer, the inks. No one is going to give you this information. So it's the same to get access to secureships because it's a very protected industry and ledger is part of this industry. And we are trying also to change this industry which is working a lot on security by obscurity to evolve the models through a more open source approach, which is very new into the secure industry.

and what Ledro is doing there is also, let's say, creating some repals and not always well understood. But we are trying to move also the secure ship industry into open source, and then we will have both of best world. What is it that makes Ledger different in terms of their access to this industry? The access to chip makers, I presume, is what you're saying. Because in order to build the security operating system, you need to have access to the blueprint of the secure ship. And this is highly classified information because basically all the financial industry government identities, everything is built on these chips. So the only way to get access is to convince the chip manufacturers and others that you understand what you are doing, that you are not going to provide with bug code,

which is going to create some reveal, some underlying of the chip infrastructure. And basically, why Leisure managed to do that is thanks to Nicola Baca, our CTO, and his team who was coming from this industry. BT chip, which is the company with whom Leisure has merged, had decades of experience of working with secure ships. So people coming from the big company like Oberture or Gemaltos bringing all this know-ho.

And this is what makes the technology of ledger unique. And that's why it's very hard to duplicate what we have done so far. So I just wanted to understand maybe one last question on this. I wanted to understand so exactly the difference between security chip, not and let's say something that's in Trezor. So does that mean, like, let's say you had physical access to the treasor, you would have some way of potentially extracting key material, and with a secure chip, like with ledger, you have this authentication at every action.

There's a key check, or can you explain? Because I didn't fully understand the difference. Yes, of course. there are different advantages, security advantage of the secure ship. If you have physical access, then secure chips has a few, let's say technology to prevent

the extraction of its secure information. First of all, for instance, all the memory is encrypted all the time. The location of the memory cell is a secret. I mean, even if you use a laser and you try to decape, open the chip, you will not be able to, it will be extremely difficult to, let's say, rebuild the secret inside. There is a lot of counter measures regarding, let's say, differential power attack or side channel. It means, for instance, that, let's say that you want to enter a pin code, okay?

You enter the pin code and then you verify that if it's okay or not. And if it's not okay, you are going to decrement the number of tries. So you can have only three times. If you are using unsecured chip, you can what we call glitch it. You can just cut the power and then it's not going to write down that you did this try. This is a very basic example. With the security chip, if you try to modify the clock, if you try to glitch the chip, it's not going to work.

It's not going to be any help. There will be also some countermeasures to make sure that there is no or the less possible of side channel attack. Because, for instance, when you do a cryptographic operation is going to emit some frequencies or some noise. And if you read that with an oceooscope, you will be able to infer some data about what you do. On a non-secured chip, there is no such counterme research. Also, if you take the chip, you glitch it and you put it in debug mode, you will be able to dump all the memory. There is no debug mug. It's not possible to debug a secure ship.

So, basically, it's like a safe that was built by a five years old, you know, just in cardboard. and a safe which is built with a real reinforced steel. There is a big difference between the two. So you can use an unsecured ship to make it. It's going to work and you can do many things with it, but when it's come to security, if you have physical access, it is very easy just to extract the information.

So as long as you have your chip with you, or if you put a pass phrase, you put a passphrase, which means that you need to enter a passphrase on the chip each time that you are going to use, then you are safe. But the advantage of ledger is you can have highest level of security and you do not have to enter a passphrase each time that you use the, each time that you use the device. So this security features are very essential. And with our attack laboratory, we are going to demonstrate some, let's say, use cases or explain the differences. So our customers or people who are curious about that can better understand.

We will have some video where basically we have attack labs with lasers. You just sent a laser beam on the chip at some point, and it's going to give you all the secrets that it contains. So we are going to show some practical example of the differences between secure and security ship, because it's true that it's not an easy thing to understand, and it's not an easy thing to market as well, because people don't want to have to understand that. That's why ultimately the real difference will be in certification. Because with secureship, you can ensure certification,

and that is something that consumer can really understand. So kind of stamp of approval from third-party audit company, who can show that everything that you say is secure is really secure. Cool. Well, thanks so much, Eric, for elaborating on this. I wasn't really aware of this. And that was very, very interesting to hear about that. And in general, thanks so much for coming on.

I think it was super interesting to hear about ledges growth, about the product and about this security technology as well. So thanks so much. Thank you. Thank you for having me. And of course, thanks so much for a listener for once again tuning in. So we're going to have, of course, in the show notes, we're going to have some links to a ledger website,

to also some of the blog posts about the new desktop wallet that's coming out soon. And of course, you can subscribe to our podcast. You can subscribe to it via any podcast application you use. You can listen to it on SoundCloud, or you can watch the video on YouTube.com slash epicenter Bitcoin. And yeah, so if you want to support the show, you can also leave an iTunes review for us that helps new people find the show,

and we appreciate that very much. So thanks so much, and we'll forward to being back next week.