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[music plays]


Niki: I’m Niki Christoff and welcome to Tech’ed Up. I know I said we wouldn’t do crypto episodes for a while. But it’s Hotel California, people. It’s 2022 and you can check out of the blockchain any time you like, but you can never leave. 


My guest today is Kathleen Breitman, co-founder of Tezos, an old-school, open-source, decentralized blockchain. “Old school” is obviously relative. She’s dialing in from London, and we talk about the aspiration of crypto versus reality, and why there is daylight between the two. 



Niki: Today's guest is Kathleen Breitman. She's most well known for being a co-founder of one of the earliest blockchains, an OG blockchain called Tezos, which sits alongside Bitcoin and Ethereum. We'll talk more about that in a minute. She's currently running a gaming company. 

Kathleen, you've also been called “crypto royalty.” Thank you so much for coming on the podcast. 

Kathleen: Oh, it's my pleasure. Thank you for having me. 

Niki: So I wanna talk a little bit about your bio. How did you end up…you have a background in traditional finance, and I've heard tell that during your commute, you started learning about Bitcoin and blockchain. So I'd love to hear how you sort of ended up in this world.

Kathleen: Yeah, absolutely. I mean the short answer is that I kind of married into it. So, I met my husband, Arthur, during my sophomore year of college. We got married right after I graduated from school and Arthur has a very fateful draft in his email from 2008 when the Bitcoin white paper was published on the cryptography mailing list that says, “This Bitcoin thing looks cool, you should check it out.” Uh, and of course, Bitcoin launched in 2009. He didn't check it out immediately, but by 2010, he was, like very much, attuned to all the different, I guess, theories and different disciplines that went into organizing and creating a cryptocurrency.

I found myself, uh, I guess, thoroughly immersed in this world because my husband would, would basically never shut up about it.  And so I had a, “if you can't beat him, join him” moment by like 2013 or so,  where, yes, I was commuting to Connecticut from lower Manhattan every day, for a job at Bridgewater, and probably the best part of that job was that I had three hours on a bus. And so, I would read a ton, and, uh, that was really fabulous and it couldn't have happened at a better point in my life.  

So, I got pretty into Bitcoin mostly because I wasn't that into my day job. And Bitcoin was kind of having a very weird moment by 2013, bear in mind that it launched in 2009. So, four years in, it was kind of like this precocious toddler. And it had started to, I guess, invite some controversy and people had a lot of theories about it. So, me and Arthur wound up talking a lot about Bitcoin all the time and that was a good way to think about it and get good way to get involved.

Niki: So, if you'll indulge me and I hope this doesn't make you feel uncomfortable, but I read this… this description of you and Arthur. It's written by Jeff John Roberts, who I know from, like, back in the day- he used to cover antitrust. He's a reporter and he's now the crypto editor at Fortune magazine. I'm gonna read his description of you guys as a couple. Is that okay? 

Kathleen: Yeah. Yeah. Please. 

Niki: Okay. He says the Breit…I just love it. I read it. And I was like, I wanna be friends with these people. 

[reading] “The Breitmans are in their thirties but come across as long-tenured academics. Arthur is French with a world-weary affect. And can describe any aspect of blockchain, no matter how technical with quick precision. Kathleen, who grew up in New York City, is equally versed in crypto but likes to spice up her accounts with gossip and droll anecdotes, the pair met at Cornell, where their mutual passion for polymath study led them to marriage into the blockchain project that made them minor celebrities.” 

[Both chuckle]

Kathleen: I can't emphasize how minor that celebrity is. [chuckles]

Niki:  So, let's talk a little bit about Tezos. So when you guys founded it, the idea is…it was, it was a little bit different than some of the other-it was different than Bitcoin in some really specific ways and also different from Ethereum, which was the other big blockchain and, and one of your competitors. So, let's just go back to the founding principle. Why did you found it?  And what was a little bit different? Keeping in mind that most people who listen to this podcast are not crypto experts.

Kathleen:  Oh yeah. Well, I think there's kind of like the high level, high level, differences, right? So Bitcoin is basically, it's, it's billed as a way to have electronic cash or digital cash. So it was proposed in a white paper from 2008. It was launched in 2009. Basically with Bitcoin, what you do is you, like, exchange information that only you know, and a network of people you may not know, and don't necessarily have to trust, can basically validate that transaction as being, y’ know, verified by you or assigned by you or not.

Ethereum, which was proposed around the same time as Tezos, um, in 2014, basically, y’know, wants to take a blockchain, which is the technology underpinning the Bitcoin network, the Bitcoin ledger, one step further by adding what's called smart contracts.

So, basically smart contracts are a way to program “if-then” logic or add, sort of like, an Excel spreadsheet level of programming on top of a ledger. So, you can make statements about, y’know, if an amount is not enough, this transaction won’t go through or something like that. You can add conditions to what would be a normal transaction.

This is all well and good. Ethereum marketed itself in 2014 as the world's computer to give you an idea of what it was aspiring towards. So, very different goals, different functionalities, but basically the same principles is intact. Which is, you wanna have a way to exchange value with someone who you may not trust without using an intermediary, whether that's a bank or a credit card company to process an exchange value online. Ethereum is a bit more, I don't wanna say sophisticated, but like it, it takes Bitcoin a step further by adding this programmable aspect to the money. 

Tezos is a bit of a departure from the two of them. So, basically, Tezos is this y’know, project that proposes wouldn't it be cool if instead of spinning up a new cryptocurrency every time you wanted to have new functionality, you were able to basically propose and ratify upgrades to the protocol using, for example, as a, a proxy for like what would be a good thing that everyone would value, votes or a super majority of people saying “Yes” to this, to this ratification or this new rule or this new technology. 

So, Tezos basically has smart contracts like Ethereum. Has, y’know, a blockchain like Bitcoin, but it also has a forum for proposing and ratifying upgrades that get pushed out to the network in a decentralized fashion, meaning not one person is control of, of, the upgrade process.

In 2013 and 2014, this was considered, like a really radical proposition, but now pretty much every project talks about governance because it's really incoherent to have a decentralized project with a centralized governing authority.

With Tezos, literally, y’know, thousands, if not millions, of people across the globe looking at every single proposal and ratifying it by voting with a supermajority of, of people who, y’know, actually, um, say “Yes, this is going to be valuable for Tezos” rather than just have, y’know, a charismatic nerd, tell them what's going to happen.

This is all supposed to like, [chuckles] shift the balance over from like a central bank to y’know, something more pure like an algorithm. But at the end of the day, y’know, the question pops up is, like, who actually has the power to ratify these things and to push the direction of a project?


Niki:  So, when you started, Tezos, a couple things that- and I'm just repeating what you said, but in a different way- you, it was similar to Ethereum in that it included smart contracts.

But one of the things you just said that I think is so important. So, I've spent the last two years really getting closer to the crypto industry. I have clients in crypto. And one of my observations is there's an aspirational quality to the way people talk about this technology, but in practice, that's not really what happens. 

So, Ethereum right now is going through a transition and just like most, again, most people listening to this podcast don't care about this, but it's going through something called a merge, which is, or “The Merge” where they're gonna switch from being proof of work, which is energy intensive to proof of stake, which you guys always were- lower energy use, but they're gonna make this transition. And my understanding is that that decision-making is happening by a small group of dudes, like in a room who decide how they're gonna do it. They're not shutting down the blockchain. They're gonna wait till they're all ready. And in my mind, okay maybe they're not in bespoke suits, sitting at the Fed. Maybe they're wearing cargo shorts and have mustaches, but it's still like a small group of dudes deciding what's gonna happen to the platform that wealth sits on. Am I wrong? 

Kathleen: You work in communications. There's always, like, a very generous way to frame something and there's a least generous way to, to, to frame something. 

Niki:  Oh no! I'm not wrong. I'm just an asshole. [both chuckle]

Kathleen: No, no, no!  You're not, it's not, it's it is not that you're not wrong. It's, like, you could argue, right? That, like, they have some sort of rational self-interest in at least having appeasement, right, for the group. But I think this stuff is more powerful when it's not just like a bunch of people acting in the best, their best, rational self-interest, but actually, a group of people validating this and putting, like, a big seal of approval on it. 

That's my problem with Ethereum in the way that it's governed. It's not so much that, like, I think the decisions are bad or that the, y’know, the people are, are necessarily y’know, uh, acting in good faith, it's that a lot of this is, like, over promising and under delivering, and at some point, like, your, your, your, I guess, checks have to clear.

Niki:  I don't wanna overly pick on Ethereum. I think that this is endemic among the crypto industry where there's the aspiration of crypto- and I would put even NFTs in this. When I bought an NFT, I've never interacted with more intermediaries in my life. [chuckle] Like, I've never paid more tolls to more different entities in my life to buy something. And so I, I think it's, I just worry that it's a little bit of aspirational talk that doesn't match to the actual user experience right now. And I think that's a weakness in the industry. As opposed to just saying, “we are getting to this place where it can be more decentralized where we can eliminate these intermediaries.” It just, to me feels, like, a little bit intellectually dishonest as I'm looking at the ecosystem. 

But I appreciate what you're saying, which is, you have to like actually make the system work. I just, I just sometimes think, I know that we have issues with traditional finance, including that it's centralized control, but I also see some of that in projects [pause]  all over this industry. 

Kathleen: Oh, I, I think you're entirely correct! And I'm, I'm probably the most self-loathing entrepreneur in this entire space because, y’know, I, I, I'm a bit idealistic. I'm a bit Pollyanna. [Niki:chuckles] Sometimes I'm like, man, I have, like, do I have to defend these people? Like, not necessarily. So. But nuance doesn't play well on the internet. I truly do believe in a lot of the principles under, under pitting this, but in practice, y’know, a lot of what makes, what would've made someone successful in these last two years as an entrepreneur in the cryptocurrency space, is in effect like doing something highly centralized, having some sort of, like, decentralized theater around it, or at least insisting that you would.


For example, you know, there's this project Cardano, which kind of, like, over promised and under-delivered for years and years and the whole reason that they, they, kind of, had this mass appreciation was figurehead that they've assumed Charles Hoskinson, who was purged from every project that he was with before [as an aside] but nevermind that, y-know, is talking about how you make the best technology dot, dot, dot eventually. 

Like it's really just kind of wacky, the amount of fronting and, sort of…It's really, really schemey, marketing that's gone into this. And so, y’ know, there's the people who actually believe in decentralization. And the good part about that, Niki, is that if you actually do take the time and build a decentralized ecosystem, what you get is resilience over time, but you have to play the long game.

If you're going to, like, make the hard concession. For example, me and Arthur even though we founded Tezos, so, we worked very hard to, to, do this. No one ever asks us our opinions on the different proposals and ratifications, almost to a fault. But we never opine on it and we think that it, like, betrays a sensibility that we don't believe in, which is that if the stuff actually is going to succeed on the timeline that we think it should, which is in the order of 10, 20, 30 years, it needs to be resilient to things like, gregarious, gregarious, figureheads, and people like pounding the drum of their own, their own ego and vanity. 

And if you wanna be in this for a few years, you can't go lying about your credentials and what you're gonna eventually do cuz, life is a repeated game and, and people have receipts. The internet is forever.

Niki: The internet is forever! So, the, I really like this about you guys, you and your husband. The idea that you are driven by ideology, that the ideology of decentralization will create resiliency. Bitcoin is to the extreme decentralized. In some ways that creates flaws for it, but it also creates significant resilience for that blockchain. I mean, obviously, I think that's right. 

And I think for you guys, it's the same thing. You've already done the decentralized thing. So, if you can continue churning along while some of these other projects might fail because of the human fallibility I think we'll see, will create a longer, a longer path for, for what you've created. Now, your blockchain, we have to address this, has been to hell and back.

Kathleen: [chuckles] Well, I've been to hell and back. I don't know about the software.


[both laugh] 


It's not sentient. You've been to, it's not [Kathleen: laughs] 


[Kathleen: laughs]

Niki: It’s not sentient! You, you've been to hell and back.

Kathleen: [laughing] Some serious PTSD. Yeah. Sorry, go ahead. 

[both chuckling]

Niki: So, we don't have to dwell on it, but you did, so you, you guys started, again, this blockchain that was lower energy use because it was already proof of stake versus proof of work. It incorporated smart contracts like Ethereum. It was more flexible and able to be updated than Bitcoin. And you raised $232 million, and then basically it sounds like a Swiss bureaucrat, like, held you hostage and created, like, you had tons of lawsuits. It was a total nightmare. 

Kathleen: [interrupts] Yeah! Oh yeah, of course, it was the longest six months of my life.

So, in any case, yeah, so, a few things. So, basically, I didn't raise $232 million, a Swiss nonprofit did. And the idea was that people would contribute phones to the, the, Swiss nonprofit in order for a blockchain to be bootstrapped. Meaning, like, when there's this proof of stake network, one of the main drawbacks is that you already have to have tokens in order for people to validate the software. This is a technical point, but all it's to say, you need to have some sort of bootstrapping mechanism and some sort of, like, coordination point for people to participate in the network from the jump. This is very different from Bitcoin where people could participate in the validation software by just plugging into the network.

So, we needed, basically, the Tezos network needed, some sort of event to coordinate all these people who wanted to participate in the network so that when tokens, y’know, were released or if they were released they would have people readymade to run the software. So, this is  a big, like, coordination issue. It's a big pain in the ass, frankly. Y’know, one of the reasons Ethereum started off with proof of work, which it hasn't transitioned to proof of stake yet is just because of how difficult this coordination is. 

So all that's to say, the Swiss nonprofit model was actually pioneered by Ethereum, which as you've mentioned before, is one of our main competitors. So, the same law firm [exasperated sound] was hired to set up the exact same structure, exact same model, except with some different parts, meaning my husband and I had built this IP through a company in Delaware and so all the IP was parked in Delaware in a C Corp. And we were like, well, shit, like, how do we actually transition this to the non-profit and open-source it in a way that kind of makes everyone happy? So the easiest way to do this was actually to have an agreement where we would eventually sell the company and open source the software to the Swiss nonprofit, which would manage all the activities. So, not unlike the Linux foundation but with a little bit of messiness because of this existing IP.

In order to prevent what would be a conflict of interest my husband and I actually didn't sit on the board of the Swiss nonprofit, the idea being that if we ever had a contract with the Swiss nonprofit, and we were on the board, that would be bad! 

And so, our attorneys recommended this guy, Johan Gevers, who my husband actually knew from all sorts of wacky, like, libertarian circles. And so, Johan basically had this board and it was probably a good setup if the foundation had raised like $5 million, but it was a terrible set up for the, the, foundation raising $200 million, which is when it did in July 2017. And so Johan went, squirrely almost immediately, like, he basically saw $200 million and like we got screwed, right? Like, royally screwed cuz this guy basically saw the money come into his coffers and was like, “Perfect!” 

So, we had six lawsuits filed against us in like, I don't know, like a week or something like that. All the complaints are like these freaking cockamamie, like, conspiracy theories being spouted by someone who thinks the walls are listening on him, which is this Yohan guy and he just becomes increasingly crazy and walled off. So, what wounds up happening is like, I don't know some of the best advice I'd been ever given is if, if you can't go through them, go around them. So, a second foundation was started in, in Switzerland to basically launch the Tezos network, cuz, by the way, the software was definitely gonna launch. It was, like, basically feature complete by the time of the fundraiser. 

So, I had to kind of like, you know, muddle through that while basically hemorrhaging money paying for like all these different legal bills and also paying for the engineering fees and so on and so forth. Yeah, I mean, like, the guy was sitting on at some point, this Johan character, was sitting on, like, about a billion dollars in Bitcoin, in his personal safety deposit box at some point. And he still wound up having to resign from this foundation that he had sole control over because, like, a second nonprofit was launched. 

So, it's a crazy story! I'm probably gonna have to, like, y’know, write a memoir, to, to unpack it in more than five minutes. But, uh, but it was, it was completely bizarre. [laughs]

Niki: I think you should turn this into a Netflix limited series. There's a, there was a Wired cover story about it that said “The Blockchain: A love story. The Blockchain: A horror story.” [chuckles]

It's like you and your husband on the, on the cover and I don't mean to laugh, but you're through it. [Kathleen: Oh, I]  This amazing quote, I really do think you should turn this into a limited series, but you had this amazing quote where you were like, “I felt confident that, that we would, that we would prevail in this, and I was emboldened by the low quality of my adversaries.” [Kathleen: It’s true!] And I wanted to get that on a t-shirt. 

Kathleen: The problem is the guy’s, like, clearly, very mentally ill. What I really blame is, like, there are a whole cadre of, like, attorneys around him who are enabling this. Right? And those are the people I, like, would, like, to wish a pox at their house, if I'm getting riled up now even though it's been a few years and obviously- I like the Joe Namath quote, “When you win, nothing hurts.” So it's, you know, it's completely fine, cuz, like, it was, ultimately, it's, like, six months of my life. That was kind of bad, but almost like, funnily bad. And I guess it built character.

Niki:  So, switching gears slightly, the, the last thing I wanna talk about is, so, we're in the middle of a so-called crypto winter. You're seeing projects fail. I have a theory. And again, I don't know why I'm being so negative today, but I think of crypto, a lot of people are, like, crypto's a scam. 

I don't think it's a scam. I don't think most projects, some do, but most, the vast majority of projects are not trying to defraud anybody or deceive anybody. I do think it's a little bit of a hustle, where it's like bringing people in who are less skilled or less knowledgeable. So, then the people who really understand what's happening are gonna have an advantage over it. That might be again, a kind of a harsh way of saying it. But we're in the middle of a, of a so-called crypto winter where projects are failing, prices are dropping. But I think, that my hunch is that, the really solid technologies are going to actually thrive and flourish because it's gonna be less noisy with the lower quality projects. But I wanna know what you think. Like, what's your assessment of the current state of affairs in the industry? 


Kathleen: I kind of agree with your statement. I don't think anyone, I, I think there are remarkably few con artists in the cryptocurrency space but I do think there's a lot of people who are, like, likely unaware of, like, basic economics and basic finance. I do think there's a bit of suspension of disbelief and people will, like, pretend that they don't know economics almost. Because, like, oh, it's just a new paradigm. Like, Axie Infinity, this, like, played earned thing is clearly, like, a Ponzi scheme. Like that's, that's what it is. And we've been saying that for a while, Herbalife on the blockchain, right? [Niki: chuckles]


And the thing is, people will go on podcasts and they'll be like, [in best bro voice] “No, you don't understand, Kathleen. It's like a new paradigm.”  I'm like, come on, man. I'm sure someone said that about multi-level marketing when it first came out!

But like, [chuckling] we, we know that it doesn't work [short laugh] so, like, let's not pretend that just because you slap the word blockchain on it, it makes, like, other traditional, like, bad schemes, okay all of a sudden. And I think that's what people have been trying to do in this, like, effort to be congenial, and to be exploratory and, like, let's just take y’know, as an assumption that, like, that's what we should be doing. 

We should be experimenting- if you're not failing, you're not experimenting enough like that, y’know, that tends to be the case, but where I think this gets kind of icky and where I think this downturn is a little bit different than previous ones is there's a ton of institutional money that got basically cheap tokens that they wanted to flip on retail. And that has made a lot of people, very rich, and it's also made them extremely convincing evangelists for things that don't make any sense fundamentally and aren't solving any problems. 

So, it makes my life a thousand times harder. As I mentioned, it's a very difficult sphere to be an entrepreneur in because you see a lot of things that are, like, classically don't work in economics being repackaged because, “Oh, because blockchain!” And then you see things that are, like, actually pretty innovative. Right? So, this idea of, of, uh, rolling perps and things like this, that, like, FTX is, is pioneering on, like, that is genuinely cool shit. Right?! Um, and that's actually very engineering and pioneering rather.

But there's not, a lot of, like, the use cases and this idea of having, of slapping a token on everything and calling that “Web3” is just, it's just a way to, kind of, make mostly institutional actors very wealthy because they invest in these companies. They get these tokens at a discount. They flip 'em on retail through very aggressive marketing campaigns and they declare victory. And it's just like the devil's in the details. And a lot of the nuance here is, is lost because you have all these boosters and people have a lot to gain by promoting these things because they get token tokens on the cheap from entrepreneurs and their job is in effect to flip everything.

Niki: [interrupts] And I guess that's what I mean by it's a hustle. You see a lot of people who, again, it's not that there's not something of value there, it's that people are, there's a lot of hype around it, which is creating the value versus the value being fundamental to the tech or the project. 

Kathleen: I can give my, my positive account of why I, y’know, work in this space. [Niki: Yes! Yes!] The way I think about it is this:  y’know, cryptocurrencies allow for something very unique to happen that we've been trying to solve for hundreds of years. So, when people started traveling far and wide, y’ know, they had very limited ways to interact and transact with people who were, were far away. This whole idea of exchanging precious metals kind of came from the age of Exploration but then also this idea of top-down credit systems and lines of credit being issued between different banks is really just something that's a byproduct of, like, double-entry accounting, and, y’know, having some sort of systemic banking system. Right?!

And so, if we think about, like, kind of, the grand scheme of history, we're allowed to do better things because of better financial accounting. And I think cryptocurrencies offer a kind of unique proposition because they allow for assurances that traditional accounting can't make for.  Now, I was, I, I met Mark Carney a few weeks ago, a former Head of the Bank of England, and I didn't expect to convert him, but I also didn't expect to agree with him as much as I did.


So, this is very disappointing for me but basically, I do think that there's, like, just a small corner case on the internet where this is, like, extremely applicable and for the other part of it, you know, for the most part, the banking system, isn't the most hostile thing to, to humanity that's ever existed. It just doesn't work for a very large swath of use cases on the internet and for those swaths of use cases on the internet I think cryptocurrencies are an interesting proposition.  And we haven't really experimented with them very much because again, we've been trying to repackage multi-level marketing schemes as innovation.

But if we think about the idea of programmable money and we think about the idea of the velocity of capital increasing, I think that cryptocurrencies offer, like, some really interesting design spaces for basically automated payments and transacting with people who you may not otherwise be able to because of the transaction cost of intermediaries. And for that, I think cryptocurrencies are super useful. And I hope that at some point you get to experiment with those use cases and can stop talking about “play to earn” games. [chuckles]

Niki: I absolutely agree with you and, and what I think the biggest advantage or potential for crypto is- I know there's a lot of skepticism and side-eye from, kind of, mainstream media and financial reporters around inclusion, and can this really be inclusive, but the truth is traditional finance completely and totally fails billions of, of people around the world. Like, they just don't have access to credit. They don't have access to banking. They don't have the ability. You know, if the, if the U.S. banking system is working for you, you don't necessarily think about how it's failing or inaccessible to so many people. 

Kathleen: And reputation is gained over time, right? Like, this is kind of like a precocious teenager. Right? I said it was a precocious toddler, but now it's a precocious teenager. And I think like there's still, like, norms are established by effectively, like, experimenting but also by gaining your reputation over time. And, like, there's some cryptos that are, like, more, I guess, credible than others because of their track record, and that's built and there's an ethos that's cultivated around them. But we're still seeing a ton of experimentation because we haven't quite locked in on those norms.

I think just because something's working for you doesn't mean it's not broken in some ways for other people, to your point. And a lot of people who need finance the most or need the sort of assurances that the traditional financial system ought to be giving them are basically systemically excluded from it because of all sorts of mandates that banks have to be compliant with for better or for worse. 

Finance is a tool for human betterment, not different from education or property rights and there's whole squads of, of, of people mainly on the, y’know, bottom rungs of the socioeconomic ladder, who could really use it and unfortunately, those are the people who crypto schemes also tend to, to heavily market to, unfortunately.  But, y’know, I think the, the, the wheat will be separated from the chaff over time. 

Niki: I love that! Let's end on that the wheat will be separated from the chaff. I actually think this is a moment by shaking it out a little bit it provides more clarity to people who are curious and not totally all in. And I just wanna end on something you just said, which is finance should be like education and property rights. It should be accessible to people and, and lift people up. And I do think that this has potential, but we've gotta sort of, sift through all the noise of the last few years. And I think that's where we are. 

Kathleen: Very good!

Niki: Thank you so much for coming on and taking the time. And you're calling in from Europe and I'm really grateful.

Kathleen: Thank you very much. I really appreciate it. 



[music plays]


Niki: Thanks so much for listening. 


In our next episode, Tech’ed Up will be back and talking supply chain. Are we doomed to live forever in the seventh circle of hell, waiting a medieval amount of time for purchases to arrive on our doorstep? Our next guest will talk about some solutions the companies he’s funding have in the works. 


Be sure to subscribe so you don’t miss an episode.  Reminder Tech’ed Up is on a bi-weekly schedule for now. 

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