co-founder Frederieke Ernst on building Gnosis and bringing cypherpunk ideals to real life

In an exclusive interview with crypto.news, Frederieke Ernst, co-founder of Gnosis, discusses the future of money and how the cypherpunk movement continues to impact crypto innovation.

In the bustling crypto landscape, Frederieke Ernst, co-founder and COO of Gnosis Pay And Safe gnosishas carved out a unique space for itself. A semi-retired physicist with a penchant for construction and cryptography, Ernst’s journey from academia to co-founding one of the most widely used decentralized payment platforms is a testament to her innovative spirit.

Ernst’s fascination with cryptography began as a child, sparked by a book given to him by his father: THE Codebook (1999) by Simon Singh. “I was a 12-year-old girl who created her own PGP server,” says Ernst. “No one else was using it, but I had a great time.”

After completing her studies in physics and neuroscience in London and Berlin, Ernst embarked on an academic career, conducting postdoctoral research at Columbia and Stanford before becoming a professor in Hamburg. It was in 2017 that Ernst decided to leave academia and co-founded Gnosis, alongside the on-chain wallet’s original co-founders, Martin Köppelmann and Stefan George.

Initially incubated within ConsenSys as a prediction marketplace, Gnosis Pay, and later Gnosis Safe, became a fundamental pillar of the Ethereum ecosystem. “We started with the goal of creating a prediction market platform,” says Ernst. “Our conditional token framework […] has become the backbone of projects like Polymarket.

Seeing the prediction market landscape as more daunting than that of payment, Gnosis ultimately expanded its portfolio, creating tools and infrastructure essential to Web3. Gnosis Safe, the largest non-custodial smart wallet manages over $100 billion in assets today, while CowSwap, a decentralized exchange aggregator that matches buy and sell orders directly between users, is used by retail investors to reduce fees and slippage in crypto transactions.

This is all technological and driven by the creation of safe guardrails for capital flows.

In recent years, Gnosis has worked to make blockchain technology more accessible to everyday users. Gnosis Pay, launched as a native blockchain payment solution, now aims to integrate on-chain assets with real-world financial systems.

In April this year, Gnosis Chain reached over 200 million transactionsa milestone that also saw Gnosis record over 55% year-over-year growth in transactions.

“One of the reasons we chose payments as our vertical is because of its simplicity compared to other industries,” explained Ernst. “Payments concern balances which evolve according to well-understood rules. »

Gnosis Pay integrates with existing financial rails such as SEPA and VISA, allowing users to spend cryptocurrencies in traditional contexts. “If you walk into Aldi and say you only have USDC, they won’t accept it,” says Ernst. “Our goal is to make on-chain assets compatible with real-world situations.”

Gnosis Pay works by taking a self-custody approach to wallets, enabling the use of EUR on the Gnosis Pay network which functions as a bridge between off-chain visa transactions and on-chain transactions on Gnosis Chain.

However, Ernst also emphasized the importance of user experience, criticizing the traditional cryptocurrency onboarding process as too complex. “The 24-word seed phrase is terrible UX,” she says. “We leverage cryptographic advances like biometric logins and social recovery to make crypto as intuitive as PayPal or Gmail.”

Additionally, Gnosis Safe, launched in 2017, has become an indispensable tool for managing digital assets securely. Unlike traditional wallets, Gnosis Safe offers multi-signature functionality, allowing multiple parties to approve transactions.

“Gnosis Safe is more than just a wallet; it’s a digital safe,” says Ernst. “It is used by DAOs, institutions and individuals who prioritize security and transparency. » Multisig has become an essential tool for ensuring cryptographic security. With integrations into decentralized finance (Challenge) And NFT ecosystems, Gnosis Safe has become the cornerstone of trust in Web3, protecting billions of value.

Building a fairer money supply

Yet one of the developments that Ernst is most excited about is Circles, another Gnosis initiative, which aims to reimagine the distribution of universal basic income, or UBI.

“One of the main disadvantages of the dollar system,” Ernst added, is that most of the world economy takes place in U.S. dollars. But even in the best case, the Fed optimizes the dollar for its 350 million subjects.”

That realization led to Circles, Ernst said, which seeks to empower users to control their own economic destiny. Launched in October 2020, Circles has sparked a wave of local adoption, with thousands of people across Europe building trusted connections through the network.

In Berlin, Café Grundeinkommen accepted CRC for morning coffee, while farmers’ markets adopted Circles for weekly trading. An experiment in Bali, where thousands of people used the system, also worked well, but there were bugs. Circles faced challenges all too common among early technologies: transaction requests, group and community connections needed improvement, and users needed simpler ways to integrate Circles with existing payment systems .

In November, Circles 2.0 was launched at DevCon in Bangkok. Running on Gnosis Chain, Circles 2.0 allows users to issue and trade custom currencies with their social network.

“The idea is to create a people’s financial system,” says Ernst. “Circles emphasize trust and community, making UBI more sustainable and scalable.”

By allowing the creation of personal and group avatars and their currencies via the CRC token. Circles then deploys what it calls a pathfinder to find and locate the optimal path between trusted connections, thus closing the transaction.

Circles uses smart contracts based on the ERC1155 multi-token standard for personal avatars and group avatars, but it is a system that Ernst sees as enabling the next generation of economic actors to take over. economic initiative.

In the Circles ecosystem, a person receives 1 CRC every hour, and 24 CRCs are distributed in a single day. Circles experience daily demurrage at a rate equivalent to 7% per year, and the past days issue accounts for these demurrage, which Ernst says creates a more equitable distribution over time.

“We call this the leaky memory effect,” Ernst said. “For example, the things you did last week should matter a lot, but the things your ancestors did 200 years ago should matter a lot less.” This means that within the Circle economy, “people who come later are always incentivized to join because old money deflates over time.”

This is an innovation that aims to empower local communities to launch complementary currencies, including organizations wanting to build internal economies, as members of a group can now mint a shared currency by locking their CRC personal as collateral in a group safe. Known as Group Circles, fungible and tradable within the group, these can then be exchanged for any CRC in the vault, thus maintaining a stable supply while fostering community-driven economies .

“Circles is a decentralized trust network because you are immediately incentivized to remove all your untrusted connections, otherwise they might stick you with their worthless circles.” Ultimately, it is the vision of a more decentralized, self-reliant and economically equitable society that motivates Ernst’s relentless dedication.

MiCA and the regulatory climate

Regarding the current regulatory climate in Europe, Ernst is candid about the obstacles facing the crypto industry, particularly in Europe under the Regulation of Markets in Crypto Assets (MiCA). “Regulators are inherently risk-averse and seek to prevent crises,” she observes. “But this approach often stifles innovation, leaving Europe at a disadvantage. »

As such, Ernst advocates for a balanced approach to regulation, one that promotes innovation while addressing risks. “Technologies with disruptive potential, like AI and blockchain, require nuanced oversight,” says Ernst. “Banning or over-regulating them only spurs development elsewhere. »

Looking ahead, Ernst envisions a future in which decentralized technologies integrate seamlessly into everyday life. “We need to bring real value and real people into the ecosystem,” she says. “This means bridging the gap between on-chain and off-chain assets.”

True to the core principles of decentralization: shared ownership, individual agency, and permissionless innovation, Ernst still sees plenty of room for innovation and growth.

“I think the cypherpunk movement has always been about giving power back to individuals,” Ernst concluded. “We built the pipes; Now it’s time to put up the drywall.