Lessons - The CEO Protecting Billions in Crypto From Hackers | Pascal Gauthier - CEO of Ledger (6M+ Hardware Wallets Sold)

In this lessons episode, explore how trust in crypto changes after exchange failures and why users move towards self-custody and secure storage. Discover how speculation distorts crypto's purpose while real value lies in payments, applications, and decentralized networks. Understand how simpler onboarding drives adoption and uncover how security and usability must be balanced for mainstream use. Do you find that because you're sort of boots on the ground, so I don't want to make assumptions, but do you find that more people are still keeping their crypto on on the in the spot where they bought it? Or do you see user adoption to harder people understanding security better? No, we've seen people understand money, and they don't want to lose their money. And a lot of people lose money. A lot of people lose money, but after FTX, it's like when you burn yourself and you don't touch the flame anymore. So FTX was the big earthquake, I think. much bigger than, you know, Mongox or, you know, all of these things that happened in the past. And by the way, they keep on happening and they will keep on happening. You know, FTX was not the last. The same way that Lehman Brothers was not too big to fail. Like, you know, it's like, why would you trust a central authority with your money? I mean, exchanges are very useful. Like, you know, you should use them to do the trade, but like you should never leave your coins on an exchange. And so I think people understand that. And we've seen this in our numbers. It was a hard way to learn, but it was a way. And you see it in the coins moving from exchanges to somewhere else. And we see a lot of coins moving to our platform. And then we see a lot more people now engaging with the services that we have in later lives, especially... the buy, the sell, and the swap services, the numbers are, you know, very impressive. You're on your, like, you know, triple-digit growth and very constantly in Q1, continuing in Q2, when the market is not, definitely not doing a triple-digit growth. No, no, no, at all, not at all. So you see, you're not even taking over people that are, like, very, very adamant crypto users. You still are, you're bringing people in who have never used crypto before, even in a... On the transaction thing, what I'm describing is more like our user base now understand that they undo more with Ledger than just store the crypto. And they prefer to do the trades from their Ledger rather than from the exchange. Understood. So they keep it in the ecosystem. Correct. But do you also see people like you still see, of course, the industry is not growing at triple digit growth, but do you also see people that are entering crypto with Ledger versus entering crypto with Coinbase and keeping things on Coinbase? Oh, yeah, for sure. And actually, more and more. First of all, before in 2017, it was not possible. So you had to do Coinbase first and then Ledger second. In 2023, now, first of all, it's not just cryptocurrencies, but it's also NFT. So sometimes you enter through an NFT and not really through crypto. You can go on OpenSea, take your credit to debit card, MoonPay is providing a service, and then you buy your NFT. Yeah. And then you have to put it somewhere. And actually through the payment service, MoonPay will ask you, where do you want to put it? And so it could be on your Metamask, could be on your ledger, et cetera, et cetera. And so, yes, more and more. Actually, what we've seen in 22, when everybody was saying it was a bear market, we saw that Sure, and certain things were not flying as high as they would have had in the past, but other things like the NFT business and those communities being built around those projects kept on growing. And so that brought a lot of people in, that brought a lot of Ledger's. And now, again, you see people that are older crypto users as well as new crypto users using Ledger for all the transactions they want to take care of. What do you think is the key to user adoption? Do you think that there is, unfortunately, the requirement for more FTX type things that, and actually not for user adoption, so that would be migrating people over that are already crypto users, but let's say bringing new people in. So FTX pushes people away that have never touched crypto, makes them scared. They say, oh, thank goodness I never bought any crypto because look at what just happened. But on the flip side of that, what is the key to user adoption? Okay, but first, I think so far, everybody got it wrong to think that speculation over coins was actually crypto. I mean, it is not crypto. To speculate on FTT, on FTX, that's like the worst of financial speculation, I guess. Yeah. And... And if to you, crypto is just like buying an Apple stock, I mean, you know, sure, like you can do that, but I don't think it's the use case for crypto. And by the way, like, you know, the token only has value if you bring security to the blockchain and if the blockchain has a vibrant ecosystem of developers, companies, applications, et cetera, that are built on top of it. So I think that the... Even the market that is just taking care of speculation, like, you know, they're not looking, you know, sort of deep enough into the protocols, etc. And you have like, and it's difficult because he had so many like meme coins that have like sort of no value, but it's just like people pumping and dumping the market that it makes that whole speculation aspect of crypto... a bit ridiculous if you want my honest point of view. I think where crypto is interesting is if it's in self-custody, because this is why and how it has been designed. Like, you know, if it's to leave your crypto at a bank, again, sure. But why? There are other things that you can invest in that are probably good investments. And, yeah, so the interesting thing is like, what can you do with your private keys and how can you engage in, you know, products that are interesting, like DeFi is one good example. If you don't have your private keys, you cannot really engage in DeFi. We always overlook payment as if it's a given, but I still think that store value and payment with Bitcoin or Lightning or payment in general with crypto is the killer app. It's interesting how no one focuses on that as much as they should because that was the original white paper. Yeah. And this is where it's amazing. Like, you know, to pay anything for me in the U.S. with my European credit cards. Oh, my God. It's so difficult. it's very difficult. It depends what you want to pay, etc. I mean, if you leave on $5 a day, I guess you're good. But if you have to go to hotels, you're entertaining your customers because you have a business dinner where suddenly 10 people come, that has a cost, etc. And if you start to use your credit cards, you max them out, the one after the other, etc. And so... And the fees that you pay, like every time that you go to the ATM in the US, it's like $4 to get $100 out. That's ridiculous. And so, yes, payment with crypto is a huge case, you know, and if you think that Bitcoin is too volatile, okay, fine. So do it in stablecoins. And like, I think that's what people actually have to, that's a really good point. So people that are scared of crypto because of FTX, FTT or anything else, you're right. It's because they're focusing on the wrong thing. Because I think too many people tried to gamble on it for a long period of time and they realized that, oh, it actually is volatile. It doesn't just go one way. It can go both ways. It's like going to that casino and be like, fuck, you know, I got wrecked. I'm like, yes. Yeah, that's how casinos work. Yes, that's the casino. That's not a good behavior. You shouldn't, you know, when I got into crypto, the theory was to say you only invest in crypto what you can lose and then you're long. Like you wait. Like, you know, it is not like coming in and out and people that are trying to buy low, sell high. You know, sure, like everybody would love to be able to time the market, but it doesn't work like that. How do you balance when you're building this hardware product? How do you balance security and usability? Because you're attracting, you're attracting, again, the most complex users that want the most complex features, as well as someone's parents that just are starting it for the first time. Okay, so first of all, I don't think we're building technology for parents or grandparents. Sorry to break the news to the parents and grandparents that are using this podcast, but we are building technology for the younger generation. I think if Bitcoin and crypto have to become what they ought to become, it will be for the younger generation. I remember when I was a kid, we switched Franks from the old Franks to the new Franks. And it was a division of a thousand, I think. No, a division of a hundred, something like that. A thousand ancient Franks were suddenly 10 new Franks. And I remember my grandmother never being able to... Actually, it's not true. My grandmother did the switch, but her sister never did the switch. So she would always talk to me in... Old. The old denomination, et cetera, which I always felt that it was going to be super rich, but actually, you know, I had to do the math and, you know, the division in my head. And in the end, I was not that rich. And so... So my point is, other people move with technology, and it doesn't matter if you're a father or grandfather, etc. Like if you pay attention and you move with technology, you will understand. But the technology is developed for younger generations. Okay, so now that I've said that, how do you combine security and ease of use? You do. So Stacks was an interesting story where Tony Fadell, the inventor of the iPod, joined Ledger to design Stacks. Yeah. And there has been that healthy tension between Tony, who's a product guy and wants product features and a product that is easy to use, and the ledger team that is a security team and is like, that's not possible, that's not possible, we can't do that, et cetera. And so in the end, you make it work. And you make it work by saying, number one, there is zero compromise on security ever. Like there's no, it's not even a discussion. We don't even open the discussion. If there is a flaw or if there is a way, even if it's very difficult that someone could get into the device, then it's a no-go. Then we have to change the design. We have to change the product, et cetera. So, but once you pass that hurdle of zero compromise on security, then you try to develop products where basically you make the onboarding easy. and the connectivity easy. These are two pain points that you're really trying to solve for. So I need to set up my bank account. I need to set up my wallet. I need to set up something. How easy it is. And by the way, coming back to your previous question, I'm like, oh, this shit is hard. I don't know. Like, you know, last time I tried to set up like an exchange account, it wasn't easy. You have to have your ID, you need to understand the kind of levels. So level one is like, okay, just one ID. Level two, you need two IDs, a proof of residence, et cetera. It's not so easy. To register at a bank is not so easy either. Some make it easier than others, like Revolut has a very slick service, but this is why they're super successful. Yeah, you're right, actually. Because they brought that into the market. So even in the old financial market, Most of the UX UI are really bad. And so I would actually argue that what we're doing now, and especially with Stacks in terms of onboarding, is going to be flawless. And then in terms of connectivity, it's like, okay, once I have that thing, what can I do with it? That's the second problem that you're trying to solve. And to make it... as connected as possible. Think about the iPhone. The iPhone was a hit because certainly you could connect to the internet. Thanks for tuning in. If you found this valuable, don't forget to hit that subscribe button so you never miss an episode. And if you want to dive deeper into this conversation, check out the links in the description to watch the full episode. See you in the next one.