Money had always been at the heart of Ethereum – it was Vitalik's original idea to create a programmable version of it, of course. Now several months into the project the Ethereum cofounders strained under the lack of hard currency coming in to fund development.
The crowdsale of ether had been planned for just two days after the Miami conference, but it had to be put on hold so that the legal issues around selling a security in the United States could be resolved. Then the crowdsale was put on hold again and again, and it seemed to many people working for the foundation that the payday would never come. The other obstacle they had to overcome was the security of the sale itself. Would they just open up a Bitcoin wallet and have people send them money? No, that wouldn't work. Hackers would love to get ahold of the Ethereum crowdsale Bitcoin. They needed a strong system – from the web site they'd use to the wallets where the Bitcoin they raised would be kept. All of that takes time.
“The team was really frustrated and running on fumes at that point,” Joe Lubin said. While Joe and Anthony Di Iorio had footed the vast majority of costs up to that point, “there were other people who contributed quite significantly in terms of paying rent and groceries and keeping shit going,” Joe said. “It was going on lots of people's credit cards and they weren't getting paid.”
One of the larger expenses was the house in Zug, which Gav called “The Mansion.” The monthly rent was 5,500 Swiss francs, which at the time equaled about $6,300. But the landlord of the newly built house wanted a year's worth of rent, plus a deposit, up front. That came to 82,500 Swiss francs, or just over $94,000.
“All the money was being fed to Switzerland and getting things set up there,” Anthony said. “You had people there who never had money before, and they didn't do a very good job.” Why did the project need a huge house with an elevator? The spending was getting out of hand, he thought.
“Back in Toronto we were trying to control things a little bit more,” Anthony said. And the project's ranks were swelling on an almost daily basis, it seemed. “They're bringing in all these new people. Listen, it was a free-for-all for new people to join, which led to a lot of chaos and lack of communication.” Nothing seemed to stay the same from one day to the next.
“There were a number of times where I wasn't going to keep funding the project,” Anthony said. “The company was in dire need of money and it was a pretty rough time when the markets went down.”
Bitcoin's value had continued in the doldrums in mid-2014 after the Mt. Gox hack was revealed in February. It traded for $400–500 for many months, off from its high of $1,000 in January, according to data on CoinMarketCap.com. It seemed that for every positive Bitcoin story there was a negative one – Yelp announced it would create a separate category for merchants that accepted Bitcoin, and then Amazon said it wouldn't be accepting the digital currency any time soon.
The repercussions of going the for-profit route were starting to become clear to the cofounders. The original idea had been to split the equity evenly among the eight, so each got 12.5 percent. Yet this didn't sit well with everyone.
“Gavin says, ‘hang on a second here, I'm doing more work that this other founder,’ and then this person is fighting with this person and why does Vitalik get the same as everyone else when he came up with the idea?” Charles Hoskinson said, “The even split didn't make a huge amount of sense.” The egalitarian nature of this arrangement – no matter your contribution, you get an even share – had failure written all over it.
“Amir Chetrit didn't even want to be on the web site and was working on other projects, and yet his equity would have been identical to Vitalik's,” Charles said. The Toronto conference had marked the point at which Amir had begun to distance himself from the others. He'd showed up to the conference wearing the T-shirt of another project he was working on instead of Ethereum's. It sounds childish, but this set people off. The T-shirt was part of the uniform, part of the team. If you don't want to be on our team, what are you doing here? Nor did he stay with the others at Decentral, many of whom slept on the floor with one towel allotted per person. Amir opted for a nearby hotel. Living up to his nickname Amir the Capitalist, he said explicitly on a conference call with the other founders that he was solely involved in Ethereum for the money.
“In reality he barely did much work,” Vitalik said of Amir. “Half the time he was shilling his own colored coins thing that he was still working on. That character confuses me.”
The problem the group faced if they moved away from an even equity split was that they'd have to value some founders more than others. “That creates a really toxic situation,” Charles said.
By April, Ethereum had spawned 50 different meetup groups on five different continents. These are events to bring in new people and to help the already enthralled to become more so. They can be in the form of a chat at the corner pub or a meeting at the corporate headquarters of Microsoft. The Ethereum community grew at an amazing rate, and a lot of the people who were now involved felt they were helping further the project. If it's a for-profit entity, do these community members get in on some of the equity? Are they shareholders? Is there a way to reward them? Here was another issue to split the founders and add to discord.
“Anthony was very draconian about this,” Charles said. “He said, ‘look we need to keep it small and we need to start pushing some people out of the inner circle and basically consolidate and centralize the project or else it's going to be a management nightmare.’”
Vitalik and Mihai, who came from open-source projects, rejected this approach. They said that the very thing that set Ethereum apart was its burgeoning community; they wanted as many people to be involved as possible.
“Vitalik's kind of a Communist,” Charles said. “He's not a capitalist.”
It seemed as though promises were starting to be broken. Anthony had a clear vision of what he'd signed up for when he agreed to fund the early work. The project would be for profit, headquartered in Switzerland but with two offices, one there and one in Toronto, where Anthony had spent years building a blockchain community. “Nobody really wanted to be in Switzerland, but it had to be set up that way,” he said.
One European convert who would soon come to play a larger role in the Ethereum story was Stephan Tual, a general software developer and marketing executive. In 2012, he was responsible for the information technology strategy of a firm called Beyond Analysis, a data analytics company that had a strategic partnership with Visa. Because of the link with the giant credit card company, a lot of Stephan's work involved the financial world of payments. But outside of his day job he'd become interested in how distributed computer power could change human behavior after participating in an online challenge to solve something called the Infinity Puzzle. The prize was $1 million, and he worked with others to digitize the puzzle and distribute the work to come up with a solution. In the end, he said, even though the puzzle was solved, no $1 million prize materialized.
Yet the idea took root in his mind, and it wasn't long until he realized that Bitcoin used the same idea of distributed work – the proof-of-work mining algorithm – to operate. He soon found himself at a Bitcoin conference, where a skinny young man named Vitalik Buterin was distributing copies of Bitcoin Magazine.
“He's a very shy, young paperboy, that's how he presented himself,” Tual said of his first impression of Vitalik. Tual had dedicated his entire career to computer science, yet felt the power that the enormous technology firms had amassed was choking off the industry he loved.
“Like many people, I had a sense that there was something wrong with the world,” he said. “I felt very disturbed by the whole system and disturbed to see centralization becoming more a part of my profession.”
Soon after he met Vitalik at the Bitcoin conference, a copy of the Ethereum white paper landed in his email in-box. “When I discovered this, I told my wife, ‘that's it, I'm going to quit everything, my job, quit everything, and work on this Ethereum.’” He felt Vitalik's idea could change the world, yet his wife wasn't so sure. She thought it was nonsense and that Stephan was falling for a scam, but he reassured her that Vitalik was the real deal.
“I feel like it saved my life, to be honest,” Stephan said. Ethereum represented an escape from his corporate job, from the malaise that can come in the middle of a career where success can feel like complacency. He reached out to the cofounders and received an invitation to come to Zug, where he met Mathias Grønnebæk, Taylor Gerring, Mihai, Roxana, Gavin Wood, and Jeff Wilcke, among others on the project. Stephan was immediately impressed with Gav.
“Personally, I think Gavin was the driving force,” he said. “Vitalik is not a developer, he's a thinker.” Like a lot of people I spoke to for this book, Stephan referred to Vitalik as being otherworldly. “When you're Vitalik and you live on planet Jupiter, or Alpha Centauri in this case, I suppose, once you've thought of something you get bored of it. It's solved it's done it's finished it's no longer something that fascinates you.” As for his role, Stephan knew early on that he could sell Ethereum to the masses.
“Gavin saw this and thought, ‘I can do the code bit,'” Stephan said. “I saw this and thought, ‘Ah, I can do the product strategy bit, I can do the marketing bit. I can do the selling to people bit.’” Stephan proved good on this, and the others on the project soon realized he had the gift of gab. Charles Hoskinson hired him on, and while he was making less than when he'd worked for Beyond Analysis, Stephan was happy. He began writing blog posts and helping to spread the word about what Ethereum was up to.
As for Anthony's contention that no one wanted to be in Switzerland: that might come as a surprise to Mihai, Roxana, Taylor Gerring, Mathias Grønnebæk, and the others at the Zug house. Progress continued there apace, with Vitalik, Joe Lubin, and Jeff Wilcke staying over between their travels to meetups and conferences around the world.
One of the most pressing issues was getting the Ethereum web site ready to handle the crowdsale of ether. Not only did the web site have to stop crashing all the time, it needed to have foolproof security to prevent an attack during the time that they would be exchanging Bitcoin for ether. Taylor Gerring worked on these issues both in Toronto and back in Zug.
One specific attack they worried about is known as a distributed denial-of-service attack, or DDoS. That's when a whole bunch of computers gang up on a web site to overload it with information in the hope of making it crash. In 2012, for example, the US government accused Iran of a series of DDoS attacks aimed at Bank of America, JPMorgan, and other banks in retaliation for sanctions, according to the Washington Post. Bitcoin services like exchanges were a target as well. In 2013, a DDoS attack tried to take down BTCChina, then the third largest Bitcoin exchange in the world, but the security firm Incapsula prevented the attack, according to a story in the IT publication the Register titled “How Mystery DDoSers Tried to Take Down Bitcoin Exchange with 100Gbps Crapflood.” Crapflood, in this sense, is a technical term meaning that the attackers had an enormous amount of resources behind them, according to the Register. There were bad people out there, maybe even state actors, looking to take down Bitcoin-related services.
Taylor helped negotiate a deal with Incapsula to protect the crowdsale. Rather than try to pull it off using their own servers, the foundation would migrate their web services to Incapsula to prevent attacks. They'd have to pay as much as $10,000 a month for the level of security they were looking for.
“It was a very, very expensive service but we felt like we can't really do what we want to do without this,” Taylor said. The foundation already knew they had a target on their back in the larger sense, so were cognizant of always trying to do things the right way. “We tried to do everything with really good optics,” he said. “There were already enough people who were nay-saying the project, so we wanted to do everything in a way that seemed as clear as possible.”
The work Gerring did on web-site security changed how he saw himself in relation to some cofounders. Here he was negotiating a high-level security issue on a matter of great importance to the project. Then he'd pass on the work he'd done to the higher-ups, which didn't seem quite right to him. “So what exactly is my role here, then, if I'm working on this level of stuff, making decisions, and handing that over to other people at the top?” he said. “Amir was just sitting there doing nothing.”
Anthony might've liked to know that money was on everyone else's mind too. Pressure was building to get the crowdsale done. The developers wanted to go fast, they wanted to put something out to show the world their software and what this crazy Ethereum thing could do. Here again, though, the majority of the group remained cautious about walking a safe regulatory line. They were in almost daily communication with lawyers at Pryor Cashman, who were drafting a letter that stated that in their opinion ether wasn't a security and wouldn't run afoul of the SEC. The older members of the team – certainly Anthony and Joe – knew not to mess with the government, even if some of the younger members might have wanted nothing more than that.
I asked Anthony about the balance between wanting to do the crowdfund to raise millions and staying on the right side of the law and regulation. “We're not going to be doing well if we're concerned, uh, what we're doing might not be, uh, you know, might not be the, might not be a good idea,” Anthony said. He almost said illegal there, didn't he?
Like many who found themselves able to work on Ethereum, Taylor Gerring could do so because he was living off the gains he'd made from buying Bitcoin. He was paying his mortgage in Chicago and his bills with it, allowing him to feed his passion for the project. Other people, though, had families and no savings, and the stress of no payday, and no payday really in sight, was mounting.
The social atmosphere at the Spaceship House might be described as a nerdy dinner party attended by everyone you work with that never ends. Roxana loved the smart conversation and energy. The work went late into the night with only the glow of laptops illuminating the big central room off of the kitchen. They'd jury-rigged fluorescent lights to hang from the ceiling; opposite the table they'd attached a kaleidoscope of long colored tubes to the wall that looked like light sabers. Whiteboards were filled with scribbled math equations and random thoughts. And yet while trying to remake the world they still had to do the dishes and go to the grocery store (until Roxana found out that one of the local shops in Zug delivered groceries). Late at night they might put on a Carl Sagan video and project it onto one of the whiteboards; on other nights they might watch a movie like Fight Club.
“I was the only girl around,” Roxana said. “It was really interesting for me, like an experience, surrounded by these guys and all these ideas.” But as with any group, especially a group of eight people living together, there were times when they got on each other's nerves. “The mood was not necessarily pink all the time,” Roxana said.
One of the first things about Bitcoin that had appealed to her was how it could be used to send money anywhere in the world, even if you didn't have a bank. And there were lots of people in the world who didn't have bank accounts. At that time she needed to write a paper to finish her undergraduate work at the Lucian Blaga University of Sibiu in Romania. She chose to write about Bitcoin and banks and a history of money that clocked in at 40 pages. Most of her information came from Bitcoin Magazine articles, which she translated into Romanian. She got a perfect score on the paper, as well as a warm reception from her professors. When she presented the paper, “they didn't ask me the technical questions, but they were really intrigued by this peer-to-peer technology,” she said. “I was the first student in Romania to write the bachelor's degree paper about Bitcoin in 2013 – maybe even Europe.”
As work continued in Zug, Gavin Wood was immersed in writing the technical specifications for Ethereum. He took Vitalik's ideas from the white paper and formalized them in what came to be known as the yellow paper. This color coding would continue for later implementations of Ethereum as improvements were made; for example, in 2016 the mauve paper was written. Being explicit about the way Ethereum worked was important to many of the cofounders, as it would set it apart from Bitcoin. Satoshi Nakamoto's white paper had laid out his vision just as Vitalik's had, yet because from the outset Bitcoin was just a loose affiliation of people working on it in their spare time, no one took responsibility for documenting the technical specifications for the code. That's what a spec is: a guidebook for anyone who wants to come along and re-create or add to the open-source software on their own. And this is what Bitcoin lacked; Joe Lubin described the Bitcoin code as “a bowl of spaghetti.” In an email from November 2008, Satoshi said that he wrote the Bitcoin code first and then created the white paper as a way of describing the code. Ethereum would be different.
Gavin set out to define a whole set of terms to be used in the code, such as logsBloom and init and gasLimit. There is enough math to made anyone's head spin. The yellow paper is not meant to be read casually; it is a detailed and complex instruction manual for only the savviest coder. Whereas Vitalik's white paper set out the vision, Gav's yellow paper gave us a bag of nuts and bolts and said, here, you can go build your own Ethereum node. He also set out to update Vitalik's vision of a generalized world computer that wore its philosophy on its sleeve.
“Dealings in this proposed system would have several attributes not often found in the real world,” Gavin wrote. “The incorruptibility of judgment, often difficult to find, comes naturally from a disinterested algorithmic interpreter. Transparency, or being able to see exactly how a state or judgment came about through the transaction log and rules or instructional codes, never happens perfectly in human-based systems since natural language is necessarily vague, information is often lacking, and plain old prejudices are difficult to shake.”
But if a global network of computers became judge and jury, the way humans interact with each other would radically change. That sounds crazy, doesn't it? That we'd let a global network of computers decide human conflict? For starters, it assumes the inputs will be there to come to a decision. I can imagine something like this for a very simple conflict, maybe a dispute about an insurance policy in the time of a natural disaster. The inputs are there, the details, and they could be boiled down to yes/no questions like, Did the hurricane occur? Was it covered in the policy? But I have a very hard time seeing this global network dirty its circuits with, say, a divorce. Imagine “a disinterested algorithmic interpreter” trying to navigate charges of infidelity or abuse. And yet, while this sounds ludicrous to us now, how must it have sounded in 1970 to hear about a global network of computers that sends information anywhere in the world instantly and for free? So, I don't know, maybe Gavin Wood's vision is the far reaches of what I'm trying to get across to you about Ethereum. Maybe this is the 100-year plan.
Gavin, as is his way, had no doubt about his conviction or ability to make it a reality.
“Overall, I wish to provide a system such that users can be guaranteed that no matter with which other individuals, systems, or organizations they interact, they can do so with absolute confidence in the possible outcomes and how those outcomes might come about,” he wrote in the yellow paper.
The ethos was plain, but how exactly do you take those ideals and make them, you know, work? That was a main purpose of the yellow paper. A million decisions had to be made, there would be tradeoffs – for example, maybe a bit less transaction speed for better security. But here the hard work of taking Vitalik's idea and turning it into working code that could be shown to the world was being done.
One of Gavin's earliest contributions was nudging Vitalik's original idea of Ethereum as a generalized form of programmable money. While Vitalik had been explicit in the conclusion to his white paper that Ethereum would allow users to “do anything that any cryptocurrency will ever be able to do,” Gavin had the broader idea of making Ethereum a generalized computing platform. They certainly fed off each other, and in many writings before Gavin became involved with Ethereum, Vitalik wrote about how he wanted the platform to be as general as possible so that users could come up with whatever application they wanted. In other words, not just money, but a system of applications all linked together to form the basis of a distributed Internet. This is where Gavin took a lead role in pushing for an even broader idea. Ethereum would handle the smart contracts. A program called Swarm would be used to store data files. Whisper was the name of the messaging system they'd create. All of them would be linked and managed by a browser, a sort of decentralized Internet Explorer. In Gavin's mind, he was laying the foundation for not just a peer-to-peer system based on Ethereum, but a peer-to-peer Internet. The vision was bold and audacious and would take years to implement, if it even worked. For now, it was all mostly ideas on paper.
●●●
Vitalik and Gav took the overnight train from Vienna, passing through Innsbruck and Lichtenstein, with the Alps all around them hidden in the dark. They arrived at eight in the morning at the Zug station, which is really not much more than a platform. A grocery store is across the way, past where all the buses roll in and out. Mihai had come to meet them alone; no one else knew he was there. He had to speak to Vitalik.
The tension would have been noticeable from the moment they stepped off the train. Vitalik felt it in his gut; he knew everything would come to a head today and that he'd have to be the one to make the decisions that had to be made. Too many other factions had formed to trust decisions to a vote. He'd put this random group of people together, and he'd have to suffer for it.
Only a year before Vitalik had thought of Ethereum as a side project, something he'd work on for a few months before returning to his studies at the University of Waterloo. But then it gained traction. Serious traction. It was the idea so many Bitcoin adherents had been waiting for, the next. The reaction he garnered from the blockchain community had sent the message that he couldn't build his project on top of another existing blockchain like Primecoin; he had to make his own. And here he was six months in, in the throes of that building, and it seemed as though it could all fall apart. While the idea had spread externally all around the world as Ethereum captured the imagination of a good number of very smart computer scientists, the kitchen council Vitalik had assembled was on the verge of dissolution. The discord could cost him the whole project if he wasn't careful. He'd now devoted years of his life to Ethereum, and he was all in. He had to save it.
The cofounders had been together at most six months, true, but that amount of time had been sufficient to let everyone see each other's personalities. They'd started as strangers, a motley crew, and now something had to change. For Mihai, the only one he didn't feel conflicted about was Vitalik, whom he counted as a friend. They'd shared ups and downs at Bitcoin Magazine and gotten to know each other well through the struggles as well as the fun times. But there were others who had to go.
Now on the platform at the Zug train station, Mihai asked Vitalik for some time to express his concerns, and they left the train station behind.
“We had this clandestine walk in and around Zug, and talked about things,” Vitalik said. Mihai was far from the only person to pull Vitalik aside that day. The jockeying for position had started. “People started kind of taking me off and dragging me out on walks. Charles once. And Anthony once. And Taylor once. They were all coming to me with their complaints.” The thing was, everyone knew something was going to happen today – had to happen – but no one knew exactly what.
People had begun arriving the day before; in all there would be 18 people at the Spaceship. It was June 3, 2014, a beautiful summer morning at Lake Zug. Like Vitalik and Gav, Charles Hoskinson and Jeff Wilcke came in the day of the meeting. Charles had pneumonia and arrived in rough shape, unable to control his sweating. Amir Chetrit made his first visit to the Zug house. Joe Lubin had come in the day before.
The ostensible reason for the meeting had to do with finalizing the for-profit structure by signing paperwork and establishing the ownership of Ethereum.
“By law we had to sign the agreements in Switzerland, so every one of the founders was meeting there to sign the document,” Anthony Di Iorio said. Anthony had come to Switzerland on his own; his assistants all stayed back in Toronto. This was a day to celebrate: he was about to cement his position as one of the main backers of a for-profit juggernaut he believed would change the world and make him very rich in the bargain. The struggles over leadership roles and styles with Charles, the anxiety he'd felt at needing to be involved in every decision no matter how small, could take a backseat to this moment, when his investment and stress and hard work would all begin to pay off.
Charles would have liked to share Anthony's mood, but his eyes were open to what was happening. He knew that feelings about him – of cofounders and others involved in the project – had always been intense. Hell, he fomented a lot of the drama personally, on purpose. If he could manipulate someone to his will, he'd do it, and do it with a smile. But his angles had always been off; he misread the group, and the way he projected his need to be seen as having street cred – all the CIA talk and Afghanistan stories and the Satoshi nonsense – had always been too strong. No one fell for it for very long. And maybe his biggest gamble, his Steve Jobs moment, had been in pushing to be named CEO of a for-profit venture invented by a man Charles himself described as a communist.
There were also deeper concerns about Charles, as expressed by almost everyone involved in the project at this stage.
“I'm not convinced Charles doesn't have sociopathic tendencies,” Taylor Gerring said. “Why would you give people the impression that you're Satoshi Nakamoto, that he has access to his email archive? That you've jumped out of a Blackhawk helicopter? Why?”
Anthony D'Onofrio said he had a bad feeling about Charles the moment he met him at the Miami house. “I immediately knew Charles was a sociopath, that something was wrong with him,” he said. He did things to make you trust him, D'Onofrio said, that were like little tests. He'd show D'Onofrio texts from a woman Charles said he'd met in Afghanistan who he'd been having sex with ever since. But it was all bullshit, D'Onofrio believed.
Joe Lubin, in his balanced way, was more diplomatic. “Charles had said too many things not related to the truth,” Lubin said. That led to the others losing trust in him. The level of emotional maturity displayed by Charles had also gotten to Lubin. “He was really about 15 years old when he was sitting at that table with us, emotionally.”
In the case of Amir Chetrit, it seemed like doing nothing for forever wasn't the best plan. No one in the group knew exactly what he'd done, if anything, for Ethereum, at any time. Many of the cofounders and the other people building Ethereum early on were in it for the ideas behind Ethereum: there was passion for trying to create a better world. Among these peers, Amir's crass money grab stood out as particularly insulting.
Maybe the one thing he'd done is keep his ear to the ground. Before the meeting, Amir warned Charles that people were moving against him.
He was right. A week before, Stephan Tual and Mathias Grønnebæk had called the Spaceship from where they were staying in London. On the other end of the call, Mihai and Taylor Gerring and Richard Stott, a creative director on the project, listened as Stephan said that Gavin Wood was plotting to split the group along technical lines. Stephan and Mathias said they were joining him. Taylor remembered feeling alarm at the Game of Thrones–type maneuvering among this otherwise tame group of computer programmers and creative people.
“Control over the money was becoming a more and more serious issue,” Taylor said. Once there was money in the bank, “people might get a little ferocious.” It was May 28, and the all-hands-on-deck meeting in Zug had been called for the next week. “This was the moment, in my mind, where Stephan effectively said, ‘hey, something's about to break.’”
As the cofounders gathered to start the meeting, they found the big central table in the living room cleared of the usual clutter – all the laptops and beer bottles and cables and notebooks that were normally spread all around were gone. A somber note hung in the air, and while there were several more people involved in this meeting besides the eight cofounders, anyone not directly involved – like significant others or guests – was asked to leave.
There wasn't room enough for everyone involved to sit at the table, so many people stood around it. Vitalik sat next to Mihai, with Gavin Wood and Jeff Wilcke next to them. Across from them sat Roxana; to her left was Jeremy Wood, Charles's personal assistant, and Charles. Next to Charles sat Anthony Di Iorio.
“Everyone had a chance to speak their mind,” Roxana said. “It was not what you were working on,” she said, “everyone knew that something had to be changed.” The motion before the table was to say what you wanted, and to name names.
“Not that I think I can't trust someone,” she said, “you had to say exactly who do you not trust and why, with details.” Gavin and Jeff spoke passionately about their frustration with the first half year of the Ethereum project. Vitalik had come to understand the weight that Gavin now pulled within the Ethereum ecosystem. The technical prowess he'd exhibited in his work on the yellow paper coupled with his intuitive thinking on how Ethereum code should work were hugely valuable. Vitalik couldn't afford to lose Gavin, but Gav had privately given Vitalik an ultimatum. It was either him or Charles – one of them had to go.
“Gav had a long-term dislike for all the nontechnical people because he felt that they were just doing nothing and wasting their time. Kind of masquerading as biz dev and getting as much money out of Ethereum as he was,” Vitalik said. In Gav's mind, people who couldn't understand the technical issues they were working through everyday had no place in leadership roles. Gav had approached Vitalik before about this; in fact, many times he'd tried to convince Vitalik that he, Gav, and Jeff should split off and do their own thing. Now he wasn't being as extreme, but Gav's position put Vitalik in a tough spot.
“I was very scared and could not imagine that Ethereum could possibly succeed without those other people,” Vitalik said. Business development has a place in any venture; Vitalik knew this. And blowing up the leadership right now would jeopardize, or at least delay, the money they hoped to raise from the crowdfund that now was truly and finally only a few weeks away. That would mean going to traditional sources of money that would take more time and provide them with less capital to work with. Vitalik didn't want that either.
Now everyone had a chance to say their piece. When it came to Gav, he said he could no longer trust Charles as CEO and that one of them had to go. Jeff backed him up with the same choice. “That was the showdown,” Mihai said.
Charles shot back that Ethereum didn't have to be for-profit, if that would help his standing. But he didn't realize the depths of his problems with the other cofounders. The conversation got heated. Alex Leverington, a developer who was helping build the C++ client, tried to explain his view – that there was enough Ethereum to go around for everyone. This thing is going to be huge, he told the group, everyone – developers, marketers, salespeople – they'll all be needed and can all bring valued contributions to the project. This wasn't what Gav and Jeff wanted to hear in the moment, and they told Leverington to shut it and wondered why he was even talking during such a crucial discussion.
Then Vitalik spoke. The problem with the group of people around this table was that there were actually two tables, he said: one with developers at it, and one with Charles, Amir, and Anthony. But they should all be at the same table, one team, striving for the same goal. He just wanted everyone to be at the same table.
Someone – Joe Lubin thinks it might have been him – suggested Vitalik disband the cofounders and remake the group as he wished. At that moment the skinny 20-year-old with the too-big head possessed something that no one else in that room possessed. It didn't matter if you had joined Ethereum from day one or had just arrived to help, everyone in that house knew one thing – Vitalik was the only one to trust. He'd earned it, every day, with his attention to people and interest in their ideas and ability to listen and learn from what people told him, whether negative or positive. Yeah, he was 20, but he was a leader. You can't fake that for long, not without an army behind you.
He repaired to the balcony, alone, to think it over.
The qualms raised by Gavin's ultimatum still troubled Vitalik; he knew a diverse set of people was needed to make Ethereum succeed. They needed showmen and coders and writers and thinkers and saleswomen. As he paced the balcony, he struggled with the idea of whether his project could survive a leadership restructuring. Could he consider anyone in the group indispensable?
Once Vitalik returned to the meeting – the amount of time he spent pacing on the balcony was reported to be between five minutes and an hour and a half, depending on who you asked – he addressed the group.
“I made this speech that consisted of half a minute of filler,” Vitalik said, “followed by the real decision, which was that Charles and Amir would be fired. They were disappointed but absolutely not surprised.”
Vitalik made two additions to the leadership group, adding Stephan Tual and Taylor Gerring. The group still stood at eight.
Anthony Di Iorio couldn't believe what he was seeing. He felt blindsided. His confusion started when he arrived to a full house after only expecting to sign some papers and make his way back home. Who were all these people, when he'd left his entire support staff in Toronto? And then he'd been singled out by Vitalik as part of the group of people who were going to be fired. What the hell was going on?
“Charles was targeted because he was the CEO,” Anthony said. “There was just nasty stuff made up about him.” He struggled to come up with specifics when I asked him for examples but said others in the group actively searched for dirt on Charles. According to Anthony, the treachery didn't end with Charles and Amir. There was also a push to get rid of him and Joe Lubin, but Vitalik wouldn't go along.
“It wasn't just to sign the documents, it was a coup d'etat,” Anthony said.
Vitalik didn't see it that way. “It was definitely an internal power struggle,” he said. “Coup is when leadership is overturned. Purge is better.”
●●●
Herbert Sterchi arrived at the Spaceship 10 minutes after the meeting had ended. He found everyone, minus Charles and Amir, out on the balcony.
“If you'd have taken a match to the air, it would have exploded,” he said. “It was so tense. People were quiet.” He'd gotten a call asking him to come over: the cofounders needed some advice after the leadership change. Sterchi, their fixer, had been with the Switzerland crew from the moment they'd stepped foot in the country. He'd given them tax and regulatory advice and let the advance group crash at his apartment in Lucerne for about two and a half weeks while they looked for a permanent house to rent. He was much older than anyone in the group and tried to calm the frayed nerves he found out on the balcony.
It was a change from what he'd become used to in dealing with the Switzerland-based Ethereum folks. He'd always been impressed with how close-knit they were, and how well they worked together. Maybe that came from living and working in the same place, but it set Ethereum apart from the other cryptocurrency projects Herbert had advised. Still, Sterchi knew there had always been internal conflict between the technical and the nontechnical people.
“It was Gavin's group against the others,” he said. Herbert made it a point to tell Gavin that not just the coders mattered to Ethereum: the diverse skills of the entire group were needed too.
By the time Herbert arrived, tempers may have been short not only because of the unpleasant confrontation that had just gone down, but also because of the severance packages that were handed out. Charles was given 300,000 ether for his time with Ethereum. Amir received less, but it was still in the neighborhood of 150,000 ether. At the time, of course, ether had no value, but everyone around that table believed it would one day be worth something. At a $10 valuation, the payouts amounted to $3 million and $1.5 million, respectively. At its highest price to date, ether had traded at about $1,200. That would amount to $360 million for Charles and $180 million for Amir – assuming they kept it all and sold at the very top, obviously. In any case, there was a lot of gold in those parachutes.
By the time Herbert arrived Charles was down in the basement and he didn't get a chance to see him. He'd always liked Charles, but he knew that it would be better to give him space. To Charles, being fired in such an overt manner was deeply personal.
“It became a Lord of the Flies–style situation, where power camps were formed and whoever was most persuasive to Vitalik was the one who won,” Charles said. “That's why there's some bad blood, that's why I wasn't the nicest guy on the exit. My Reddit postings weren't so happy.”
I met Charles at ETHDenver in 2019 but didn't have a chance to join him at his ranch nearby as he suggested. We spoke on the phone several times over the next year until he politely, but firmly, told me he was done talking. My questions about the way people described him – sociopath, liar – had grown more pointed, and he said he was done with that part of his life and had moved on.
But in our first conversation, as Charles relayed his story to me, he described the arc of the early Ethereum days in terms of Miami being the spring and Toronto the fall. In Zug, winter arrived.
He'd begun to notice a change in the cofounders after Toronto. “It was a whisper campaign,” he said. Stephan Tual and Taylor Gerring, who were both resentful that they weren't getting equity or being thought of as cofounders although they'd been around almost since the beginning, felt they were being treated unfairly. For his part, Charles said he'd been doing all of the legal work in private – you don't go emailing a huge group of people about the status of negotiations over whether ether is a security or not – so no one would have known what he was up to. (Mihai was working on this part of the project too, actually.) As far as Charles was concerned his silence fed conspiracy theories about what he was really up to.
When he told me this part of the story, he shifted into speaking about himself in the third person
“You've got this guy who's got a huge personality, kind of larger than life,” Charles said. Everyone knew he was in favor of raising VC funding, his theory went, and when you don't hear from him it could be assumed that he's working behind people's backs.
“I tend to be a very charismatic, verbose guy who draws a crowd, and I tend to wear my passions on my sleeve, which is why I have so much trouble on Twitter,” he said. “For me to get really private and quiet and then there's not a lot of communication occurring, it allows people to invent a narrative.”
Then people who were usually mean to him began acting nice. He had a cordial, “but sometimes rough relationship” with three of the people who worked for him – Stephan, Taylor, and Mathias. “Suddenly they were all just being overly nice and at that point I figured, ‘okay, there's something going on here,’” Charles said.
“I figured going into Switzerland there was going to be a big fight,” he said. “I didn't anticipate how much ill will had materialized.”
After the reporting for this book was done, I approached Charles to ask him for any comments he might want to make about the end of his time with Ethereum. I mentioned the stuff about the CIA, about the Blackhawk helicopters and telling people he was Satoshi. He didn't want to engage.
“I don't care what people have said about me,” he said. “I've completely moved on from this.”
●●●
There was still the matter of signing the paperwork. Mihai had incorporated Ethereum as a for-profit entity in Switzerland in February 2014. A main feature of this structure was that it limited the personal liability of the contributors to the Ethereum project. Yet in so doing, all the shares – 100 percent – were in Mihai's name, and he was not happy about that. What the cofounders needed to do now was agree on how to distribute the shares if Ethereum was to remain a for-profit enterprise. The cofounders continued to discuss their options as the day in Zug turned to evening. Yet Vitalik still had his doubts about going this route.
“I said, by the way, why is it that making a foundation in Switzerland is so hard that we have to give up on the foundation and do the for-profit?” he said. The lawyers were again consulted, and they came back and said, it's actually not that hard to set up a Swiss-based foundation.
“When I got this news, I was like, ‘hey guys, joy, we don't have to make a profit anymore!’” Vitalik said.
This added insult to injury for Anthony, who had invested in Ethereum and spent countless hours working on it for the business opportunity it presented. He wanted to profit from it, as any businessman given that opportunity would. Yet here he was, up against a group of idealists who thought that making decisions by committee was how companies are run. He refers to the Zug meeting as “The Red Wedding,” the Game of Thrones episode where most of the Stark family is murdered. It must have been very difficult for him to see his leadership role so diminished in the course of an afternoon. He'd thought he was coming to Zug to celebrate a great business decision. Then he could only watch as his understanding of his role within the group of cofounders completely changed. He'd fancied himself a leader, and yet none of his opinions carried weight.
If there was one cofounder who never lost faith, who was a true believer among a group of true believers, that would be Joe Lubin. Of course, Joe was also often cool and calculating, maybe reserved his enthusiasm in service to his long-term agenda. More seasoned than most of the cofounders combined, Joe knew the amazing business opportunity before him. And he wasn't the type of person to engage in personal drama. He knew what he'd come across with Ethereum was potentially world changing and he committed to the ride.
I asked him, though, if he found it interesting, or surprising, that Ethereum seemed to grow and prosper despite the fact that its leadership from the get-go was usually in some state of shambles.
“It's not surprising,” he said. “Because the ideas were so powerful, the need was so big and so great.” If they'd been a traditional startup from the beginning, they would've had a much different approach to putting a leadership team together. But that's not Ethereum's story.
“What this was, was a white paper that was hitting the planet at just the right time,” Lubin said. “I knew it was a ragtag group of people. I also knew that we would be able to hold things together regardless of what the interpersonal challenges might be because the set of ideals were so strong and because we all did share the overarching goal of delivering the project. Even if it got heated, nobody was really inclined to say, ‘fuck this stupid idea, I'm going to go build a gambling platform.’”
Everyone knew Ethereum would be transformative. “It was not just another startup,” Lubin said. “It was one of the greatest ideas, opportunities, and enabling projects in human history.”
●●●
By the time the Zug meeting ended the sun had set. It had been a long day. Roxana and Vitalik went for a run. The others fanned out across the house. Charles was in his room in the basement, making travel arrangements to return to London in the morning. He wouldn't see the group again.
Then it was time for bed, and everyone headed to their rooms in the crowded house. There were three to four people per bedroom. Upstairs, Vitalik and Gavin shared a room with Mihai and Roxana. Just before turning the light out, Gav got up. He locked the bedroom door.