3295: Ledger, Crypto and the Battle for Digital Sovereignty

Sure. My name is Ian Rogers. I'm currently what we call the chief experience officer at a Paris-based company called Ledger. At Ledger, we have the number one security solution for things like cryptocurrency, but also your login. We live in a world where digital security is important and that's more important every day, and we make the best solution for that. Previously I was the chief digital officer at LVMH, and prior to that I spent 20 years in digital music. The last two things I worked on there were Beats Music and Apple Music, and you know, some people might be familiar with an MP3 player called Winamp that we worked on in the '90s.

Yeah, with pleasure. I mean, you know, I ended up here because I'm somebody who was passionate about the early internet, but also I feel like the internet we got was not quite the internet that we dreamed of, right? I think we all feel that in many ways, and that's really what drew me to crypto as well. I think we've already lived through this once in humanity digitization of all information. And now we are living through a once in humanity digitization of all value. And I see these as kind of separate but related trajectories. We're increasingly living digital lives whether we like it or not. I think we have to admit that that's true. And of course we'll have digital value in our digital lives. We use Apple Pay and Google Pay and we tap our credit cards, and lots of places where we buy things don't take cash, and this is the world that we live in. But really this is not just digital money. It's actually kind of digitization of again all value. And one of those things of value is your identity. You're in possession of a passport or a driver's license, and it's those things that give you the ability to move across borders. I had more mobility than most of my friends during COVID because I was in possession of a US passport and a French visa. And therefore, I could move borders more easily than a lot of my friends. We forget that ownership also equals identity. And increasingly these kinds of things are digital, whether it's a title or a deed or a mortgage or an option. There are lots of things that will be digitized in this digitization of all value, but if that's the case, you must have security. There's not an option to have a digital thing that you could lose and have that thing be easy to lose, right? Security needs to be the default. And unfortunately that hasn't been the case. We've kind of lived in this world where we went from a username and password that gave us access to a bunch of websites to login with Google, login with iCloud, login with Facebook, etc. And now all of our kind of ownership is in the hands of these third parties. Well, I don't think that's the internet that we asked for as users of the internet. So giving people the ability to securely own their own digital private property is fundamentally what we're all about and the leading solution in doing so. Now, what we do practically speaking is we make really beautiful pieces of hardware. We're one of our partners in the business is Tony Fadell, who invented the iPod, co-invented the iPhone, created the company Nest, and he is uncompromising when it comes to usability, beautiful industrial design, and ease of use for the consumer. And we're a 10-year-old company that has the best security experts and cryptographers in the world that are uncompromising on security. So, what you get with Ledger is the best of both of those worlds, which is a beautiful, easy to use device featuring the same technology that's in your passport or your credit card in terms of protecting digital value, but with a really easy to use package. So, you can literally walk into a Best Buy store in the US or a Fnac in France and buy the device and go home and buy your first Bitcoin if that's what you'd like to do. So that's what the company has been doing for the past 10 years and really we're doing it better than ever now that we have these beautiful new devices, Ledger Flex and Ledger Stax, and more services than ever so people can do whatever it is they would like to do with their digital value.

Well, I mean, so Ledger is, again, as I said, security is paramount if you have digital value. Going back to the Winamp metaphor, that was 1998, 99 for me. And if you look at the growth of the world of digital value now compared to the growth of the internet, we're kind of in that 2001, 2002 time period when there's kind of half a billion users and the path to a billion users is pretty clear. But also if you remember back in those days, the user experience of the internet was not great. A lot of it was dial-up modems. Broadband was not evenly distributed to say the least. And there was just a lot of work to do. And I think we're really kind of in that same moment when it comes to digital ownership. There's definitely a lot of awareness around digital assets, whether it's BlackRock or other talking heads on CNBC. And now we have these very simple user interfaces called ETFs to buy things like Bitcoin and Ethereum. But the reality is that's not what this was created for. Bitcoin and blockchains were created to make permissionless money. Money that you can actually hold on to without counterparty risk. And have ownership of your own personal digital private property. So to do that you really need both self-custody and security, and Ledger is the only company that really provides both of those things in a good package. So I think that's why at this moment in time when there's about half a billion users in the world of crypto and the path to a billion is clear, yet if you really sort of look into and get your head around what is it we're talking about, you end up with this refrain which is: if not self-custody, meaning you hold your private property in your own private safe, then why crypto? What's the difference between holding this digital money versus having a PayPal account or using a Visa card? And that's where what Ledger gives you is something that is fundamentally different than what you could have with a bank account, with a PayPal account, with a credit card. You are actually getting a secure digital safe for your personal private property. And that is actually quite profound. And it goes all the way to owning your own preferences and owning your own identity. We have on Ledger an application called Security Key which will allow you to secure your Google account or your X account or any of your login that use it as a hardware 2FA, but instead of storing that with iCloud or 1Password, which is just another way of offloading that to another centralized honeypot, you're actually keeping that in your possession. Another way to look at this is, from a technology perspective, there's a technology in Ledger devices. It's called smart card technology. It's a secure element that is hardened and meant to be secure. Well, it's the same technology that's in your credit card and your passport. The difference is that the smart card in your credit card protects the secrets of the bank, and the one that's in your passport protects the secrets of the government, and the one that's in your Ledger protects your secrets, which I think in the world that we're living in is important. One more thing about just this moment in time, we're all using AI more and more and more. Many of us, myself included, are using AI throughout the day in many parts of our lives, but you can't live in this kind of agentic AI future that we're all imagining without having blockchains and digital ownership and secure digital private property. Blockchains deliver digital scarcity and they also deliver proof. Using cryptography I could prove to you that this is indeed me talking and this is my voice coming out of this microphone, and if somebody edits that, that edit could be recorded as proof. And many of us that are looking at AI every day are seeing clearly that notion of provenance. Was this created by a human? Was this created by AI? Can I know that this really was the source? I'm working with an author right now who's writing something they feel is important and they want to inscribe that thing onto the blockchain because they're imagining that people will refer to it, you know, 10 years from now, 25 years from now, 50 years from now, and even longer. And they want to have proof that these were indeed the words that they wrote on this day. And if you're thinking more about an AI future, you realize that yes, provenance will be important, proof and ownership will be important. So I think that it's the other side of the coin from artificial intelligence. If you're interested in artificial intelligence then you are also interested in provenance, proof, and these sorts of things.

Yeah, I'll try it. Let me at least attempt to take the opportunity to help your listeners understand how these devices work a bit too, because I think it's a bit mysterious, but I think for at least some of your listeners I can get them over the hump of understanding how it works. You have these things called wallets, and there are software wallets and there are hardware wallets like Ledger. We have a piece of software called Ledger Live, which is our wallet. But your value doesn't actually live inside the wallet. Now, that's the mental model that we have from the world that we've grown up in. But what actually lives inside the wallet is the proof that you are the owner of that value. And the value actually lives out there on the blockchain. So, the way to think about it, and let's assume that you have a little bit of Bitcoin. You've got 0.01 Bitcoin or something. What you really have is you have a private key that proves you are the owner of that value out there on the blockchain. So, you have that value because somebody has given it to you. You probably paid for it and they transferred that value to your wallet. When they did, they inserted a record on the blockchain that said, this 0.01 Bitcoin has been transferred from someone else's wallet to your wallet. And then what you have is the proof that you are the owner of that value. Now I've told you enough for you to appreciate that that proof is everything because if someone else has that proof then they have your value. So there are some situations like when you're on an exchange where you don't have that proof at all. What you have is you have a login to the exchange and they have put in their kind of spreadsheet that you have this much value, but you're taking their word for it that they are going to give you that value back when you ask for it. And there are definitely some exchanges out there which I trust, although not very many, and we've seen these exchanges go the wrong way before, whether that's FTX or even banks like seeing SVB go illiquid was not something that I thought would happen in my lifetime. So there's always counterparty risk when you're in that sort of a situation. Or maybe you have your value in a software wallet. And a software-only wallet is only as secure as your computer or your phone. And we know these aren't very secure at all. If somebody wants to own the value that's on your computer or your phone, they can quite easily. Unfortunately, because of the line of business that I'm in, I hear these stories every day. But the reality is that your phone or your computer were not built for that. I always use the example, if I gave you the task of protecting a billion dollars in gold bars and you started working on the building and then I came to you and I said, "Oh, and by the way, I'm going to put a nightclub and a grocery store and a kindergarten in that same building." You'd probably say, "Hey, man, get a second building." Right? But that's the reality. Your computer and your phone are very good at many things, but protecting value is not what they were designed for and not what they're good at. They're built for performance. They're built for utility. They're not built for security. So, a Ledger device is built for security. Like I said, it has this secure element chip in it. And it uses that in a very special way that I'll describe in a second. But basically in that chip lives your private key so that no one else can get it. And that's what they do. And then the challenge then is doing that in a usable form factor because you're really using it as a signing device the same way you would use a second factor of login. And when you want to do something with your crypto, whether that's buy some, sell, send some, stake some, swap some, buy an NFT, interact with the blockchain in some way. You're going to set up that transaction on your phone or your computer, but then you're going to approve that transaction on your device. And by doing that, you're going to look at it on a screen that's secure. And that's how you know it's secure. So, one last thing in this explanation. In order to be secure, you need three things. You need to generate that private key in and store that private key in a secure element. Now, why generate it there? Because you've got some special features and functionalities such as onboard entropy to make sure that you're really generating a sufficiently random thing. I'm getting into cryptography, but it's important that the cryptography works well. Cryptography is incredible, but only if it is done well. So that's why it's important. You need that to be in that secure element, difficult to get to, offline, not available to attackers on the internet, etc. You need to be sure that it stays there when you do the transaction. In other words, that private key can't come out of the wallet and into your phone or out of the wallet and into a general-purpose MCU. Some pieces of hardware have a chip that's like the same chip that would be in the remote control of your television, and they do the transactions in the clear. That's also not secure. And the third thing is you need to be able to verify that transaction on the secure screen with your eyeballs. Meaning that the screen you are looking at doesn't have some other chip or some other piece of software that's attackable between what you're seeing and what you're signing, that it's actually that secure chip that's powering the screen. So I apologize that's a bit technical but that's actually what makes Ledger distinct. Ledger is the only piece of hardware that checks all of those boxes in terms of security. And we've been really uncompromising when it comes to that. And that's why we're the leader here. And there have been many cycles in crypto. And every single time, very smart people come up with very rational reasons that they need to compromise on either security, self-custody, or both. And those reasons are always wrong. In the end it hurts people. You end up with the kinds of things that we had with FTX or the kind of hack that just happened to Bybit. It's worth noting that we also have an enterprise product and for example, if Bybit had been using Ledger's enterprise product when they were just hacked for $1.4 billion by the North Korean government, that particular attack that they suffered would not have been possible. And so this is really the types of problems that we're focused on and that we provide for both consumers and enterprise.

Well, I think the first thing is we do have, as you said, that sort of 5 million plus users that represent 20% of the market cap. So the way that people find themselves to Ledger is through education. They usually start on an exchange as you just said, and then they get a little more value, they get a little more educated, they become more interested in self-custody and security and they get a Ledger. So that's why we have that cohort of people who are very well educated and kind of understand what they're doing deeply, because really the magic here is digital ownership. But if digital ownership, then you need security. And that doesn't matter if that's on the enterprise side or on the consumer side. Like if you have ownership of something of value that you could lose, it's a lot easier to steal $1.4 billion in digital money than it is gold bars. So digital security is a must. So that's the first principle, is just really not compromising on security or self-custody is step one. But the much more difficult thing to do, and this is where it is akin to the growth of the internet, is bringing great user experience around that is very difficult. It's not often that you get more security and better usability, right? And so we've managed to add lots of services to Ledger Live so that people can buy, they can swap, they can stake and earn yield. We have a credit card so that they can spend and we have tons of services built in, whether that's tax services, NFT services, etc. We have lots built in so people can very easily do more with their digital assets than ever. So that's been a big part of it, but also I think that enterprise side of it has been a big push for us too. We just launched a product called Ledger Enterprise Trade Link and what that does is it allows asset managers or wealth managers to trade off exchange. So they have a relationship with an exchange, they have proof of funds, and so they're really getting the services they want without giving up custody of their value. So really just adding in all of these features is what's been the most crucial. I think also for us though is that this is a new world and there are pioneers in this world and being close to those pioneers and understanding what they want and need and trying to stay with them. But I think that this company is really akin to, we're less like Yahoo or Google in the early days of the internet and more like a Cisco, where we're quite agnostic. Regardless of what kind of digital assets you hold, you probably need a Ledger. And what we're building is quite horizontal. So we want to build lots of vertical services on top of that platform. But we really want to be the platform and the secure operating system for this emerging digital asset market.