Crypto wallet maker Ledger gears up for battle with Dorsey’s Block

CEO Pascal Gauthier wishes Block’s CEO were still distracted with Twitter, but he’s still gunning for the big opportunity in securely stashing customers’ coins.

​Ledger CEO Pascal Gauthier

Ledger CEO Pascal Gauthier talked about Ledger’s strategy in an interview with Protocol.

Photo: Ledger

Ledger CEO Pascal Gauthier reacted with an odd mix of excitement and fear to news that Jack Dorsey was leaving Twitter to focus full-time on Square.

“Oh, shit,” was his immediate thought, he told Protocol. “I would have preferred him to stay with more companies and not focus on anything.”

His reaction makes sense given how Square, which was just renamed Block, could prove to be a bigger headache for Gauthier with Dorsey at the helm full-time.

Paris-based Ledger is a leading maker of crypto hardware wallets, the small USB drive-like devices used by retail crypto holders who want to make sure their assets don't get hacked. (Just don’t end up like the Welshman who threw half a billion dollars away in the dump.)

The market is small at present, with sales of $202 million in 2020. But as with other parts of the crypto market, it’s growing fast, and Ledger, which has sold over 3 million devices, was valued at $1.5 billion in a June fundraising round.

That month, Dorsey announced that Square was considering entering the market, and in July, it confirmed those plans. Both companies now have Apple veterans heading up their efforts, a sign of how design and ease of use will matter in the coming battle to reach mainstream consumers.

Block has since unveiled a major crypto offensive, in which the wallet hardware initiative is just one part.

Gauthier said the new challenge makes his job more exciting.

“Who am I? I’m nobody,” he said. “If I win, I win big. And if I lose, it’s because he's the great Jack Dorsey, and therefore it's OK if I lose. But we strongly intend to win.”

He also described an encounter with the Square team as “patronizing.” Asked about this comment, a Block spokesperson told Protocol: “We have a long and collaborative history of working with Ledger, respect their work and believe both of our efforts are additive in improving crypto technology and security for all. We believe that a rising tide lifts all boats.”

Ledger’s not sitting still. This week, Gauthier said, Ledger plans to unveil a product that would make it easier for customers to actually spend the cryptocurrencies they hold in hardware wallets.

The move is part of Ledger’s ambitions to go beyond hardware and offer services and features that make it easier for consumers to join the crypto economy.

“The ambition that we have is to do what Apple did with your phone — we're going to do it with your wallets,” he said.

Gauthier talked about Ledger’s strategy in an interview with Protocol, how the company is preparing for new rivals and why he believes non-crypto-native companies will have a tough time competing in the world of Web3.

This interview was edited for clarity and brevity.

You’ve said that what Apple did to the phone, Ledger will do for crypto wallets. How are you pursuing the vision?

Look in your pocket and everyone still has a wallet, which is funny in a digital world. You have cash, sometimes your health card. There are many things in your wallet. What's happening is everything that has value can be tokenized and can become something on the blockchain. The same way that our communication got digitized — suddenly everything went into your phone — we have this vision that everything that holds value will go into your Ledger and for simple, fundamental reasons.

Phones right now are not designed for security. Phones have to do many things. They're actually beautiful machines. They play video games. They take very high-quality pictures, and so on and so forth. In the hardware, if you ask a device to do too many things, you just augment the surface of attack and so there are just many ways of attacking and stealing from you.

Phones are not secure by nature and to make them very secure, it’s a lot of R&D, so it's not something that's going to happen overnight.

Our focus is really security. Our vision is you will need a Ledger [that is] great in terms of security in the future because cyber attacks are on the rise. There were more attacks in 2021 than in 2020. You can be sure that there will be more in 2022 and so on and so forth. It’s exponential.

All this value being built on blockchain right now has to be secured by the highest level of security. What you have in your wallet right now won't be on your phone. It will be on Ledger.

What has been a critical stumbling block in terms of security?

Security is a cat-and-mouse game. It's a never-ending story. If you were to freeze Ledger R&D today, you can be sure that security will be broken because attackers are very creative and can always spend more money.

The market right now for cryptocurrencies and crypto in general is like $3 trillion. A lot of what has value will go onto a blockchain at some point — cash, bonds, equity — all of these will become tokenized. Suddenly, if you have tens of trillions to steal, as an attacker, you can spend much more to attack.

We have an internal attack lab. We're still trying to attack [our product] every day to figure out whether we can find new ways of entering into it. So it's something that we do on a continuous basis. We know that attackers are trying to find a way in.

We think about the problem very differently because we secure what has real value. If it's gone, it's gone forever. With identity theft, if they stole your identity, you still have your identity. If they steal your bitcoins, your bitcoins are gone forever. You will never recover them.

We think that in the next few years, adding one security device is an absolute must. And that's going to be a Ledger.

Do you envision the Ledger device evolving into a phone, like the iPhone, that can do a lot of things?

Potentially. And it's a future that Ledger is ready for in the sense that we are developing technology that can be embedded into a phone. But you have to redesign the phone completely. You will have to compromise on some of the phone’s functionality. This is why it's such a challenging problem.

In today's world, security cannot be on Web2. It has to be on a Web3 hardware device, and Ledger is the leading force into this. We'll see what the future holds.

You started with one product, and are clearly moving into other areas. That’s consistent with the view that one-trick ponies can’t thrive in fintech and crypto.

What's driving our roadmap is: What do our customers want?

If you look at your phone today and compare it to the phone that you had 10 years ago, the hardware has evolved a lot to capture the new usage. The same is happening in Web3. Our hardware vertical position has to evolve to match the usage and capture whatever is happening in the software. All of this has to perfectly match together to extract the best experience for the user and the real ease of use.

Five years ago, it was bitcoin-only. That's all you need to do. Send and receive: boom, done. Now you have multiple coins. They are getting more complex and the features on the protocols themselves and the applications that are being built on top of protocols are becoming more complex. You have NFTs. So all this software innovation is sort of pushing hardware. What we’re trying to do is to capture the market by enhancing both hardware and software at the same time.

Is Apple a one-trick pony because they have the iPhone? I always say no, because your iPhone is actually a gateway to everything we do. And so every trend that you have in Web2 has a positive impact on iPhone sales because they're going to sell more phones and/or because they're going to monetize more into the Apple software.

For us, it's exactly the same. It was bitcoin only. Now it's every other cryptocurrency and NFT. Watch out because you know tokenized securities are coming. All of this makes the hardware or software evolve. This is how we capture a bigger share of the market and why we are not a one-trick pony.

Who do you consider your toughest competitors?

It's a great question. Our competition in the future is very clear. It's very exciting and a little frightening, but it's Square, I mean, they rebranded as Block. They want to build their hardware wallet. They've been very precise about what they want to build.

We understand exactly what they want to build. We don't agree with everything. And we also feel that we are ahead of the game that they're describing. But still, it's a $100 billion company. They're going to go aggressively after our market. They have a lot of marketing dollars in terms of advertising they can spend. It's a force to reckon with. It's certainly exciting because we know that they're coming and so we're ready for a fight and a [it's] little frightening. It's like Mike Tyson entering the ring.

Another juggernaut entering our space is Coinbase. If you look at what Brian Armstrong has said recently, they entered the market with centralized finance and being a bank. It's got them to where they are. But there are limitations in terms of regulation, in terms of conquering the market. It's primarily a U.S.-only value proposition. So if they want to grow and if they want to go international, they have to go [to a] noncustodial wallet, which is what they're doing right now. They are also in our path.

You said there are things you don’t agree with in Block’s crypto game plan. What did you mean?

Right now, Square’s position seems to be very maximalist for bitcoin only. That has never been our stance. We feel that crypto communities have taken many forms over the past. If you go to market with bitcoin-only wallets, I think you're gonna serve your community, but you're not serving the world.

Where we win in the end is because we want to be agnostic. We want to give a platform on top of which everyone can build and everything can grow. We are very pragmatic and open to all communities. If our bet had been on bitcoin in 2015, Ledger would be a very different company today.

How do you view Robinhood?

I think it's very interesting, Web2 companies trying to become Web3 companies. I think they're right to do it. Because otherwise they'll be dead before they know it. All these guys are super smart. The problem is, can you become a Web3 company if you're a Web2 company?

How soon can you make the switch? The way these guys are approaching the game, they have their game plan. It's very centralized. They decide: "This is what I want for my community. I'm going to do bitcoin.”

Web3 is very decentralized. Decentralization is at the heart of everything that we do. We don't want Ledger to become a single point of failure. If Ledger goes bankrupt tomorrow, our products will still work. You don't need Ledger. That's very important to know.

We built Ledger around the principle that even if we die, the products don't die. You can still use the technology. You can still recover your funds and you can still switch to other providers.

We don't want to be the centralized company that controls people. We absolutely want to be decentralized. It's a very different mentality. For Web2 companies to switch to that mentality, I think it's going to be a challenge.

What was your reaction when heard that Jack Dorsey was quitting as Twitter CEO to focus exclusively on Square? What was the first thing you thought?

"Oh, shit."


Yeah. You can't really run Square and Twitter. That's impossible. No one is that good. If you run two companies, you can eventually light-touch the companies and other people do the work. If a guy like Dorsey said, “OK, now I'm going to focus solely on this,” that’s a problem. I would have preferred him to stay with more companies and not focus on anything.

Bringing more focus makes the threat and the fight more real. I mean, it's exciting to me. Who am I? I'm nobody. But, you know, compete with Jack Dorsey and win, this is what I would do.

What’s your biggest worry?

I am where I am because I don't worry too much and also because I want to win. I take this as a positive challenge. I'm actually quite happy that he is focusing 100% of the time [on Block], because I'm saying two things. If I win, I win big. And if I lose, it’s because he's the great Jack Dorsey, and therefore it's OK if I lose.

For me, it's only a win I can see in the future. We strongly intend to win.

I spoke with Jack Dorsey's team, and they told us things that were patronizing. They were like, “Oh, you know, we're gonna take this business to like 100 million people buying hardware” — as if it was not what we were trying to do, that we will be happy staying as a small company. They were like, “You guys are selling like a few hardware wallets, but we want to sell like 100 times more. I'm gonna show you how to do it.” And I’m like, “Sure.”

But don't get me wrong. I'm taking them seriously. I'm like, “Shit, maybe they will. They have more marketing power. If they want to throw an obscene amount of cash against this, they can.”

I get where they're saying. They’re thinking big, which is great. It helps me also push the boundaries of Ledger. We are gearing up for these kinds of fights. So, overall, it's great. I prefer to be underestimated. In the end, it doesn't change the ambition that we have and the ambition is what Apple did with your phone, we're gonna do it with your wallets.


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