Gnosis Co-Founder Friederike Ernst: Why the Exit Beats Decentralization
Gnosis co-founder Dr. Friederike Ernst argues that the real test for crypto finance is not how decentralized a system is, but whether users can leave it with their assets at no cost. In this Startuprad.io interview she explains how Gnosis built Safe, CoW Protocol and Gnosis Pay around that idea, and why euro stablecoins and on-ramps, not regulation or merchant acceptance, are the hardest constraint on crypto payments in Europe. The conversation lands in a difficult season for Gnosis Pay, which is closing its own consumer card on December 20, 2026 and moving to partner-run card programmes.
What Is This About?
Gnosis began building on Ethereum in 2015, weeks after the network launched, and is one of the oldest projects still active on it. Its co-founders, according to Gnosis' own ten-year retrospective, are Friederike Ernst, Martin Köppelmann and Stefan George. Ernst, a physicist with a PhD from Freie Universität Berlin and postdoctoral work at Columbia and Stanford, sat down with Startuprad.io founder Jörn "Joe" Menninger to explain what the company has actually built and why.
For founders, investors and corporate buyers in Germany, Austria, and Switzerland, the episode matters because the technology argument around crypto payments is largely over. Banks and neobrokers have moved in. The open question is which business models they bring with them, and whether European rules such as MiCA and SEPA Instant give the region a real edge.
Gnosis sits in the group of founder-led companies that quietly shape the infrastructure others build on, the theme of our Power Structures pillar on hidden champions and ecosystem gatekeepers. Below: the short answers first, then Safe, CoW Protocol, Gnosis Pay and Gnosis Chain one by one, then what is and is not on record.
The video goes live on Friday, November 13th, 2026
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Executive Summary
Ernst's core claim is that decentralization is a means, not a value: what matters is agency, neutrality and the ability to exit, including exit from centralized providers on top of neutral rails. Gnosis applies that logic to three moments in the life of money, holding (Safe), trading (CoW Protocol) and spending (Gnosis Pay), and she names local-currency stablecoins and on-ramps as the binding constraint in Europe. Her three predictions for 2029 are testable: self-custodial spending goes mainstream in Europe, non-dollar stablecoins stop being a rounding error, and fintech-owned chains fail the exit test. What the interview does not address is Gnosis Pay's own 2026: a June exploit that Gnosis reimbursed, a November data breach on its legacy consumer system, and the wind-down of the direct consumer card. That context is ours, not hers.
Key Takeaways
Exit beats decentralization. Ernst's revised belief is that the real value of decentralization is being able to switch providers, even centralized ones, without lock-in.
Extraction dressed as growth is the target. She describes the standard fintech playbook as cheap acquisition, lock-in and later monetisation through spreads, fees, data and switching costs.
Guardrails belong in the user's own account. Limits, delays, allow-lists and co-signing can live in a smart account rather than with a custodian, but account abstraction does not stop social-engineering scams.
Europe's constraint is money, not acceptance. Merchant acceptance comes with Visa; what is missing is deep euro and other local-currency stablecoin liquidity, since most stablecoin liquidity is in US dollars.
Europe has real advantages. MiCA as one rulebook, SEPA Instant and euro IBANs linked to wallets make on- and off-ramps easier here than almost anywhere else.
FAQ: The Short Answers
What is Gnosis?
Gnosis is an Ethereum infrastructure organisation that began in 2015 building prediction markets and then built the tooling those markets needed. It runs Gnosis Chain and Gnosis Pay, and it incubated Safe and CoW Protocol, which were later spun out. Ernst describes the common thread as a set of values: agency, no lock-in and non-extractive design.
What is the difference between Safe, CoW Protocol and Gnosis Pay?
Ernst calls them a triptych covering the full loop of money: Safe secures assets, CoW Protocol lets users exchange them "without being front-run or milked", and Gnosis Pay lets them spend in the real world. In each case a function that used to need a trusted intermediary is rebuilt so that protection comes from the system rather than a custodian.
Why aren't crypto payments taking off in Europe?
Because SEPA already works. Ernst says crypto payments compete where the pain is acute, citing Latin America, where she puts 2025 remittances at $174 billion and the stablecoin share of crypto purchases at 40%, over 70% in Argentina. In Europe the bar is free, instant SEPA, so on-ramps, gas fees and anything that "feels like crypto rather than money" must disappear first.
What is the Ethereum Economic Zone?
The Ethereum Economic Zone (EEZ) is a rollup framework co-led by Gnosis and Zisk and co-funded by the Ethereum Foundation, announced in March 2026. Rollups on it settle to Ethereum and can call mainnet contracts in the same transaction. Gnosis Chain is expected to become the first instance, Gnosis EEZ, with 2-second blocks; the Gnosis documentation says core contracts are still unaudited and gives no launch date.
Do Gnosis Pay's 2026 problems undermine the self-custody case?
Critics will say yes: on June 1, 2026 an attacker exploited a flaw in the Zodiac Delay and Roles modules used in Gnosis Pay card safes, with total impact of about $1.8 million across 5,281 wallets, according to the Gnosis Pay post-mortem, and a November breach exposed customer data on the legacy consumer system, according to the company's disclosure. The response on record is that Gnosis absorbed the losses and says all funds were restored, that the breach did not affect funds or the enterprise platform, and that the consumer card was already being retired. Both incidents hit the layer around self-custody, the modules and the card system, which is exactly the "rails with guardrails" problem Ernst names in the interview.
The Triptych: Hold, Trade, Spend, Settle
Safe: the wallet that started as an internal need
Hard facts. Safe began inside Gnosis as a multi-signature wallet and was spun out; in July 2022 it rebranded from Gnosis Safe to Safe and raised $100 million in a round led by 1kx. Ernst calls it the largest smart wallet on Ethereum.
What it does. Safe is a smart account: the rules for moving money live in code the user controls. That is where the bank-style protections Ernst wants can sit, spending limits, delays, allow-lists and co-signing, without handing the money to a custodian.
What she said. Safe and CoW "all began as internal needs and turned out to be actual businesses." Gnosis spins things out "when something outgrows us", and she adds that "non-extraction very much applies internally too."
Why it matters. Safe is the clearest proof of Gnosis' build rule: if what you need does not exist, build it. In 2015 there were no wallets, no exchanges and no tooling, so a prediction-market company ended up producing core Ethereum infrastructure.
CoW Protocol: trading without being milked
Hard facts. CoW Protocol launched as Gnosis Protocol in April 2020 and was rebranded and spun out to its own DAO in early 2022, according to Gnosis. Ernst describes CoW as the largest DEX aggregator on Ethereum.
What it does. CoW batches and matches trades so users can swap assets without being front-run, the practice of a third party jumping ahead of a visible order to profit from it.
What she said. Infrastructure has to be "genuinely useful", audited exhaustively, tested by years "under real adversarial pressure", and built with a minimal attack surface. "Infrastructure should be boring and small. And hard to get wrong."
Why it matters. Her four-part threshold, usefulness, audits, time and small attack surface, is a practical test any buyer can apply to crypto infrastructure vendors. It also explains her view of bridges as "the perennial hacking target": maximum complexity, maximum honeypot.
Gnosis Pay: self-custody behind a Visa card
Hard facts. Gnosis Pay launched in 2023 as a Visa debit card linked to a Safe account on Gnosis Chain, with euro settlement through Monerium, an Icelandic-licensed e-money institution that issues the EURe token. On September 3, 2026 Gnosis Pay announced in "Gnosis Pay: The Next Era" that the direct consumer card would be wound up in favour of partner cards; its help centre says the card and web app stop on December 20, 2026, with no deadline on withdrawals.
What it does. A user taps a card at a normal terminal while the money sits in their own smart account. Through Monerium every wallet can get a euro IBAN, so a SEPA Instant transfer from a normal bank account shows up in the wallet seconds later.
What she said. "You tap a card, a Visa card, and the self-custody underneath is nobody's homework. It just works." Gnosis Pay "exists in its current form only because European plumbing allows it."
Why it matters. Ernst's adoption metric is the share of users who could not tell you they are using a blockchain. The September shift moves Gnosis Pay further in that direction: it now runs "under-the-hood" for partners such as Rebind, MiniPay and PicNic, which design their own card programmes. Gnosis Pay becomes infrastructure rather than a consumer brand.
Gnosis Chain and the Ethereum Economic Zone: speed where the user feels it
Hard facts. Gnosis Chain came out of the 2021 merger of xDai and the Gnosis Beacon Chain. Under the EEZ plan it is expected to be hard-forked into Gnosis EEZ, with contracts, balances and addresses carried over, according to the Gnosis Chain documentation.
What it does. The EEZ aims to let rollups call Ethereum mainnet contracts in a single transaction, without a bridge, while producing fast blocks.
What she said. "Decentralization isn't a value in itself." Fast blocks are needed for payments because nobody waits 12 or 24 seconds at "the point of sale terminal at Aldi", while Ethereum provides the settlement guarantees. "You choose speed when the user feels it."
Why it matters. This is the trade-off at the centre of the interview made concrete: centralize what the user experiences (block production by a Gnosis-operated composer), keep decentralization where the security model needs it (settlement on Ethereum).
What Connects Safe, CoW, Gnosis Pay and the EEZ?
Gnosis' stated rationale is that people should have agency and choice over their money, that no one should be locked into a system, and that rails should not rent-seek from the people using them. Ernst frames the triptych as the same pattern applied three times. Our interpretation, clearly separate from that:
Gnosis keeps moving down the stack. Each product starts close to the user and ends as infrastructure for others: Safe and CoW as independent DAOs, Gnosis Pay as a white-label engine for partner cards.
The exit test is a sales argument, not only a value. For a bank or fintech building on these rails, "users can leave at no cost" is a constraint on the business model. That is why Ernst expects fintech-owned chains to fail it.
The risk sits in the glue. The 2026 incidents happened in the modules and systems around self-custody, not in the idea of self-custody itself. Guardrails are the product, and they are hard.
"Decentralize the rails, not necessarily every service on top." — Dr. Friederike Ernst, co-founder of Gnosis
What Has and Hasn't Been Announced?
Announced: Gnosis Pay's direct consumer card and web app stop on December 20, 2026; partner card programmes run on the Gnosis Pay enterprise platform; the EEZ is co-led by Gnosis and Zisk and co-funded by the Ethereum Foundation.
Not announced: a launch date for Gnosis EEZ, or a list of which partner apps every existing Gnosis Pay user can move to.
Statements from the interview, not verified by us. The GnosisDAO treasury being "well in excess of $100 million", Revolut being Europe's largest crypto trading venue, and the Latin America remittance and stablecoin figures are Ernst's statements. We found no primary source that confirms or contradicts them within this piece.
Robinhood Chain is live. Robinhood launched Robinhood Chain on mainnet in July 2026, according to The Block. Ernst's prediction is not that such chains fail to grow, but that they fail the exit test.
Polymarket and Gnosis. Ernst says Polymarket is built on Gnosis' Conditional Token Framework; Polymarket's own documentation describes its outcome tokens as built on the CTF. Kalshi, the regulated US competitor she mentions, is centralized.
What to Watch Next
December 20, 2026. Whether existing Gnosis Pay users move to partner apps or withdraw, and how much of the card volume partner programmes retain.
Euro stablecoin share. Ernst says about 99% of on-chain stablecoin volume is US dollars; her 2029 test is whether euro and other local-currency stablecoins stop being a rounding error.
Self-custodial spending. Her metric for 2029: how many millions of Europeans pay daily from smart accounts without knowing what a blockchain is.
Gnosis EEZ timeline. Audits of the core contracts and the first calls from Gnosis EEZ into Ethereum.
Corporate chains and the exit test. Whether users of fintech-owned chains such as Robinhood Chain can leave with their assets at no cost. For context on how European neobrokers are building their own rails, see our Unicorn Atlas profile of Trade Republic, and for the regulatory frame, what the MiCA licence means for crypto startups in Europe and our Fintech Review 2025.
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About the Author
Jörn "Joe" Menninger is the founder and host of Startuprad.io, based in Frankfurt am Main. Since 2014 he has covered startups and venture capital across Europe, with a focus on Germany, Austria and Switzerland, with 1,700+ podcast episodes across the franchise. Before Startuprad.io he spent more than 15 years in management consulting. LinkedIn
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Automated Transcript
This transcript was generated automatically from the episode audio and lightly corrected. It may contain errors; the audio and video are the authoritative record. The host's questions were re-recorded after a technical issue, so a few questions and answers do not line up exactly.
Joe Menninger [00:00:00]: Can Gnosis turn Ethereum from a crypto-native settlement layer into real financial infrastructure for Europe without rebuilding the same gatekeepers decentralized finance was meant to replace? What do Gnosis, Gnosis Pay, Safe, and CoW Protocol reveal about the next phase of fintech startups in Europe, B2B payments in Europe, embedded finance and infrastructure software? How should founders, venture capitalists, and operators in Germany, Austria, and Switzerland understand Dr. Friederike Ernst as co-founder of Gnosis, as a builder of Ethereum infrastructure, or as one of the European operators testing whether decentralized finance can become usable financial infrastructure. Hello and welcome everybody. Can decentralized finance become part of everyday payments, custody, and trading without losing the decentralization that made it worth building? Friederike, welcome to Startuprad.io.
Friederike Ernst [00:01:13]: Thank you so much for having me.
Joe Menninger [00:01:15]: When someone searches for Gnosis today, what should they understand first? Ethereum infrastructure, decentralized finance, self-custody, crypto payments, or something else?
Friederike Ernst [00:01:26]: All of the above, honestly. So we've built Ethereum infrastructure with Gnosis Chain. We've built DeFi with CoW and Safe, self-custody and crypto payments with Gnosis Pay. So no single label really captures it. What to understand first is kind of what really underpins it. It's really a set of values. So we do very strongly believe that people should be empowered with agency and choice over their money and their digital lives. So no one should be locked into systems.
Friederike Ernst [00:01:59]: You should be able to leave. You should be able to take your assets and go elsewhere if you so choose. So we design systems that should be fair and non-extractive. And the rails themselves shouldn't rent-seek from the people using them. So if you look at the things that we've built, everything we've built is an expression of those values. And that's kind of what kind of corrals it all back together.
Joe Menninger [00:02:23]: What is the operating problem Gnosis is solving that most fintech founders and venture capitalists outside crypto still describe incorrectly?
Friederike Ernst [00:02:33]: That's a fantastic question. So what I would point to is that kind of standard fintech and VC operators have a playbook that is extraction dressed as growth. So you acquire users cheaply, you lock them in, and then you milk them—with spreads and fees and data and switching costs and kind of retention really often means captivity. So the problem that we are solving is building finance that people choose, not finance that traps them in. So kind of products with no lock-in, you can leave anytime with your assets at no cost. Products you can own a piece of if you choose to as a stakeholder and not as inventory and products that people keep coming back to anyway because they're better and not because leaving is painful. And I think this is the part that outsiders often get wrong.
Friederike Ernst [00:03:32]: They see crypto's volatility and assume that it's all about short-termism when the actual bet is exactly the opposite. So voluntary retention should beat forced retention and the value created for users compounds longer than the value extracted from them.
Joe Menninger [00:03:51]: Where did the early Ethereum ecosystem underestimate what it takes to build financial infrastructure for normal users, companies, and institutions?
Friederike Ernst [00:04:01]: We were so green, which I think is why it's taken us so long. So censorship resistance, which really is at the base of Ethereum, makes user protection much, much harder. So the property that keeps the system credibly neutral also removes that safety net that everyone's already used to. So the irreversibility that you have as a feature for the settlement is very much a bug for humans. So what's way too easy is fat fingering and kind of falling for scams and there's no recourse, right? So kind of one wrong character in an address line, one phishing site, your money's gone and you have no chargeback, you have no fraud desk you can call. And banks solved this a really long time ago with policy engines, right? So kind of if you're sending €20,000 to a Nigerian account, they will damn well call you up and say, Joe, you sure? You sure about this? And you can tell them, oh yeah, absolutely. This is my buddy, he's a prince. And they will process your payment, but kind of like you will get a fair warning, right? So what we actually need to do is build rails with guardrails, which currently are still not there yet.
Friederike Ernst [00:05:13]: So kind of what you build is, those protections kind of to fit into self-custody. So you have limits, delays, allowlists, co-signing kind of, and it can all live in the user's smart account, not with a custodian. But even if you're not here for self-custody, it's totally fine. Self-custody is not for everyone. It's about the optionality. So some people will want a custodian and that's totally fine too. What matters to me is that the choice exists. And custody is opted into, and not the only choice.
Friederike Ernst [00:05:48]: So the failure to me of TradFi was never really the custody itself. It's that there wasn't a choice and there was no alternative.
Joe Menninger [00:05:58]: What belief about decentralization did you hold in the early Gnosis years that reality forced you to revise?
Friederike Ernst [00:06:08]: I think that decentralization is always king. It really isn't. So kind of there are absolutely scenarios where no recourse is exactly what you don't want. And I mean, talk about the scams and fat fingering issues that kind of we just talked about, right? So what matters to me now is the exit, not the absence of intermediaries. So kind of my revised belief would be decentralization's real value is being able to switch between service providers, even centralized ones, without lock-in. So decentralize the rails, not necessarily every service on top. And kind of if you have a neutral base layer with competing providers above it, you get both, right? Kind of you get convenience when you want it and you get freedom when you need it.
Joe Menninger [00:06:56]: Looking at Kalshi and other prediction markets, Gnosis started out as early as a prediction market and then moved into broader Ethereum infrastructure. What decision rule guided that shift?
Friederike Ernst [00:07:09]: Yeah, I'm still a little bit salty. So I think kind of like we were super early and Polymarket does very much use our framework. So kind of like it's built on the Gnosis Conditional Token framework as its backbone. Kalshi is centralized. So kind of for Kalshi, kind of it's, I don't have this sentiment so much, but yeah, I'm a little bit salty. I'm also happy that kind of Our, um, that our thesis that prediction markets would make it big was validated. Still sad it wasn't validated by us, um, but, uh, sometimes, uh, that's the way the cookie crumbles, right?
Joe Menninger [00:07:46]: How do you decide whether Gnosis should build something directly, support an ecosystem project, spin it out, or let the market solve it without you?
Friederike Ernst [00:08:01]: I think I should point out first that we were absurdly early, right? Kind of we started, we actually launched our first smart contracts on Ethereum 2 or 3 weeks after Ethereum itself launched in the very first instance. I think we may be the oldest project still around and active on Ethereum. So you, You have to think about what Ethereum was back, what Ethereum was like back then, right? It was really bare bones. So our rule was really simple. If what you needed doesn't exist, you build it. And there was nothing there. So kind of there were no wallets, no exchanges, no tooling. And prediction markets needed infrastructure the ecosystem didn't have.
Friederike Ernst [00:08:47]: And then kind of that's how we started building Safe, the largest smart wallet on Ethereum. That's how we built it. That's how we started building CoW, now the largest DEX aggregator on Ethereum. And they all began as internal needs and turned out to be actual businesses. And the ecosystem at the time needed them more than it needed prediction markets.
Joe Menninger [00:09:10]: What threshold tells you that a product is infrastructure software Europe can rely on rather than
Friederike Ernst [00:09:19]: Good question. I think every company to some extent is pervaded by its founder's DNA, right? And Gnosis was very much founded by 3 German engineers and that's kind of what we're here for. So kind of we like building things when there are at least 2 things present, a conviction that exactly this thing is needed and the intellectual curiosity to build it. So we've always been outside-the-box thinkers. The interesting problems no one else is touching, those are typically our projects. When do we spin it out? Typically when something outgrows us. So Safe and CoW were very much started as internal needs, but once they were ecosystem infrastructure with their own gravity and kind of they needed an independence, that— made them stronger. So non-extraction very much applies internally too.
Friederike Ernst [00:10:15]: So we'd rather build when we think there's a unique solution that only we can build or that we can uniquely build. If it's something else, we can also support when others are closer to the problem. So capital and infrastructure. through Gnosis DAO, kind of, that's not a problem. And kind of you just post a Gnosis improvement proposal to the DAO forum and often they do actually get funded. And when do we just stay out of it? Often when it's commodity work, to be honest. So if it will get built anyway and it needs neither our conviction nor our curiosity, it—
Joe Menninger [00:11:03]: Safe, CoW Protocol, and Gnosis Pay look like separate products from the outside. What strategic system connects self-custody, decentralized trading, and crypto payments?
Friederike Ernst [00:11:14]: Yeah, um, so in my eyes, it needs to be genuinely useful. So it should solve a real problem, um, people return to. It shouldn't be just a token with a user interface, right? Then it needs to be audited exhaustively. We already talked about the scams, so every audit it can go through and then some. And then you let time test it. So years in production under real adversarial pressure, that's typically what gets you to a state where something becomes infrastructure that you can build on. And the fourth thing that people often neglect is minimal attack surface by design. So if you have a large surface area that hackers can hack into, it's disqualifying.
Friederike Ernst [00:12:13]: It's why bridges are the perennial hacking target, right? Kind of you have maximum complexity, you have the maximum honeypot. So infrastructure should be boring and small. And hard to get wrong.
Joe Menninger [00:12:25]: Where is the crypto market still confusing self-custody with actual usability?
Friederike Ernst [00:12:31]: Yeah, they're all expressions of the same core beliefs, right? So kind of the agency, no lock-in, non-extractive design, and they're just applied to different moments in the life of your money. So together they kind of cover the full loop. You hold money, you trade money, you spend money. Safe secures your assets. CoW lets you exchange them without being front-run or milked, and Gnosis Pay lets you spend them in the real world. So all without ever handing your money to someone else. So it's the same pattern in each. You take a function that required a trusted intermediary and you rebuild it so that the protection comes from the system and not from the custodian.
Friederike Ernst [00:13:14]: So that's kind of what in my mind binds them together despite the fact that kind of they cover different parts of the cycle. To me, they're very much a triptych. They're not a random assortment of projects.
Joe Menninger [00:13:28]: What metric would prove to you that Gnosis Pay, Safe, or CoW Protocol has crossed from crypto-native adoption into real financial service infrastructure?
Friederike Ernst [00:13:40]: Oh yeah, absolutely. When people use it without understanding how or why it works. So nobody knows how TCP/IP works and everyone happily browses the internet. And to me that's very much the bar. So the measurable version of this is the share of users who couldn't tell you they're using a blockchain. They tapped a card, they got paid, they swapped currencies. And when that share dominates, we've crossed over.
Joe Menninger [00:14:08]: Guys, we will be back after a short ad break. Answer the question, can Gnosis make decentralized finance usable enough for mainstream adoption without centralizing the trust layer that Ethereum was designed to remove? Hey guys, welcome back to the ad break. Let's get right back into the interview of Friederike, co-founder of Gnosis, where Do banks, fintech startups in Europe, and regulators most underestimate crypto payments?
Friederike Ernst [00:14:45]: I don't think they misunderstand it anymore. That's exactly why they're getting into it, right? So Revolut is now the largest crypto trading venue in Europe. Robinhood launched its own chain. The technology argument to me is over. So kind of the problem to me is what they bring with them and that's the extractive business models. They port over the lock-in, the spreads, the walled gardens and blockchain becomes just a new backend for Wall Street. So if that's adoption of the rails without adoption of the point, to me crypto very much has failed, right? You don't want cheaper plumbing for incumbents, you want more power for the users.
Joe Menninger [00:15:29]: What has to become invisible before Gnosis Pay or any other crypto payment system can compete with the existing payment rails?
Friederike Ernst [00:15:39]: It already competes, just not in Europe yet. The reason is that you need the pain to be acute and that then kind of invisibility has already happened. People aren't using crypto, and I'm using inverted commas here, they're sending money home cheaper, right? So look for instance at LATAM. You have $174 billion in remittances to LATAM in 2025. And stablecoins here are the main growth driver. Stablecoins were 40% of all crypto purchases in LATAM in 2025 and over 70% in Argentina. So kind of, if you look at these stats, Not that crypto can't compete, it's that we are already on a technically very high level in Europe. So in Europe, bar is super high because SEPA is good, right? Kind of like it's free and it's instant.
Friederike Ernst [00:16:46]: So what still has to disappear here? Probably the on/off-ramps, gas and anything else that feels like crypto rather than money. And that's exactly what Gnosis Pay does. So kind of you tap a card, a Visa card, and the self-custody underneath is nobody's homework. It just works.
Joe Menninger [00:17:08]: Where does account abstraction change user experience of self-custody and where is the market still overselling it?
Friederike Ernst [00:17:17]: It's a building block, right? So where it genuinely changes self-custody is it kills the seed phrase. So with passkeys and social recovery and hardware you already own, losing your phone stops meaning losing your money. It also makes gas disappear. So sponsored transactions pay fees in whatever you hold. One less alien concept, i.e., that you actually have to pay to move money. And it enables the policy engine. So kind of you can have spending limits, delays, allowlists, co-signing, the bank-style protections that we talked about finally living in your own account. This is a huge one and Safe has been proving it for years.
Friederike Ernst [00:17:57]: Where we're overselling it, it doesn't, it very much doesn't stop scams, right? If you're socially engineered into approving a transaction, account abstraction executes it for you beautifully. The recourse problem is a policy and user experience problem, not a signature scheme. It's plumbing, right? It's not a product. So we have account abstraction doesn't mean good user experience and And any more than kind of any other technical feature means good user experience. Kind of you can have the most beautiful database in the world, doesn't necessarily translate into a fantastic product, right?
Joe Menninger [00:18:36]: What is the hardest constraint in making Gnosis Pay useful? Regulation, UX, liquidity, merchant acceptance, or trust?
Friederike Ernst [00:18:45]: None of these actually. It's local stablecoins and on-ramps. So kind of if you look at the things you just listed, They're largely solved, right? So merchant acceptance comes free with Visa. User experience is a tap, kind of exactly the same format that then with all your other cards. Regulation is handled at the zone level. Trust is earned by shipping. But you can't spend money you can't get in, denominated in a currency you don't live in, right? Most of the world's stablecoin liquidity is very much in US dollars. People earn and budget in euros and reais and pesos.
Friederike Ernst [00:19:25]: Without deep local currency stables, every purchase hides an FX leg. And that is a huge downside. I am 100% convinced that over the next year or 2, we will see a huge resurgence in local stablecoins and see the dollar predominance shrink also in the cryptosphere. But we're not there yet. Gnosis Chain is deliberately onboarding non-US dollar stablecoins. The payment vision just works if the money on the rails is the money that people actually want to use.
Joe Menninger [00:20:06]: When you compare Europe with the US, where does Europe have a real advantage in decentralized financial instruments?
Friederike Ernst [00:20:14]: First, I would say regulatory clarity, at least to a degree. MiCA isn't perfect, but it's one rulebook that passports across 27 countries. And the US just spent years regulating by enforcement. So you can build compliant crypto payments products in Europe and know the rules won't flip with the next election. That's a huge benefit. We also have the best fiat rails in the world to plug into. SEPA Instant and open banking make the on/off-ramp problem, that's our hardest constraint, dramatically easier here. Gnosis Pay exists in its current form only because European plumbing allows it.
Friederike Ernst [00:20:57]: So kind of if you, it has an integration with Monerium. So kind of every wallet automatically gets a SEPA, an IBAN that you can just send a SEPA transfer to. So if you want to top up your Gnosis Pay card, do an instant SEPA transfer and it shows up in your wallet a couple of seconds later. It's beautiful, really.
Joe Menninger [00:21:19]: Where does European regulatory seriousness become a strength and where does it become execution drag?
Friederike Ernst [00:21:27]: It's typically the number that starts in DE whatever, whatever, kind of FR if you're in France and BE if you're in Belgium. So that number, you have one associated with your wallet and kind of if you are on your local bank interface, you send euros to that address, to that bank account number, and they show up in your wallet seconds later. It's beautiful. Okay, then kind of what other chances, what other advantages do we have in Europe? So I think the euro gives us a non-US dollar stablecoin opportunity just because it is a relatively stable currency and much of the world doesn't really want a dollarized account anymore. And then we also have the values alignment. So Europe's instincts as to data protection and distrust of platform monopolies and consumer protection, they often map directly onto self-custody and non-extractive design. It's just that regulators and people in power don't always understand this upfront.
Joe Menninger [00:22:35]: Where does the American hypergrowth model fail when applied to Ethereum infrastructure and decentralized finance?
Friederike Ernst [00:22:42]: Interesting question. So if you look at hypergrowth and how it works, it works by capturing the users first and then it milks them, right? So you subsidize the acquisition, you build switching costs, and then you extract later. And this whole model depends on the exit door being expensive. And open rails very much break that model. So when a user holds their own assets and leaving costs you nothing, then the milking phase never arrives. So you can buy users, but you can't keep them hostages.
Joe Menninger [00:23:15]: Where does the European capital efficiency model become discipline, and where does it become fear disguised as prudence?
Friederike Ernst [00:23:25]: The discipline, I think it's not having that VC culture, right? Kind of you are building for the revenue, you're not building for the next round. So European frugality forces real business models early, which happens to match how infrastructure is actually won slowly by not dying. It becomes fear when prudence means only funding what's already proven, right? Kind of incremental bets, consensus ideas, waiting for the US to validate a category before touching it. That's not risk management, that's outsourcing conviction to some extent, right? What's the tell? Discipline says no to bad economics and fear says no to ambition. So Europe in principle doesn't lack capital, but kind of if you look at where VC investments are still by and large made, It's the US. So we lack the willingness to write an uncomfortable check. And that's the irony. So kind of the biggest infrastructure prizes go to whoever endures longest.
Friederike Ernst [00:24:28]: And endurance is the one thing capital efficiency actually trains you for.
Joe Menninger [00:24:33]: Under what conditions would Gnosis choose speed over decentralization?
Friederike Ernst [00:24:39]: Oh, decentralization isn't a value in itself, right? So kind of it can foster resilience, but kind of if you only look at decentralization, Decentralization, that's very much a vanity metric. It should be a means and there are real trade-offs to being decentralized on every axis. What we actually care about is agency, being able to exit and neutrality. So the Ethereum Economic Zone, which is something that we're building kind of with funding from the Ethereum Foundation, makes this trade-off very concrete. So kind of Gnosis Chain is becoming a zone in the Ethereum Economic Zone. But there's no way to compose synchronously with Ethereum, meaning to access everything that is on Ethereum as if you were on the network itself and build fast blocks at the same time. It's simply physics. It's not ideology.
Friederike Ernst [00:25:27]: So we chose speed and waiting for the next Ethereum block for full economic security. Fast blocks you need for payment experience. You can't wait for 12 or 24 seconds. for kind of executing a payment when you're standing at the point of sale terminal at Aldi, right? So you need the fast blocks for the payment experience. You need the Ethereum ultimately for the settlement guarantees. So you choose speed when the user feels it and you keep decentralization when the security model And
Joe Menninger [00:26:09]: under what conditions would you take external venture capital?
Friederike Ernst [00:26:14]: We're currently not capital constrained. Okay. So we take on external capital kind of when it's strategic. The Gnosis DAO treasury is still well in excess of $100 million. So we're, we're good. We take capital for its strategic value. And then it doesn't matter whether, what kind of party it's from. We would even take it from VCs.
Friederike Ernst [00:26:48]: Often the business incentives are not aligned for VCs. So kind of like if you look at it, the business model for VC is to buy a token and then later to sell it at an upside, right? That's essentially the business model of a VC. It's not long-term value creation. So often partnering with other partners is more conducive. It's just that often you get money with fewer questions asked from VCs.
Joe Menninger [00:27:18]: Getting to our last official question of the interview, I was wondering what prediction about crypto payments, self-custody, Decentralized trading or Ethereum infrastructure should we be able to judge as right or wrong within 3 years?
Friederike Ernst [00:27:34]: 2029, that is. So I would assume that self-custodial spending goes mainstream in Europe. So kind of, and the metric you look at is how many millions of Europeans pay daily from smart accounts, card or phone, without even knowing what a blockchain is. That's your metric right there. Second prediction that is definitely testable is non-US dollar stablecoins stop being a rounding error. So currently 99% of stablecoin volume on-chain is US dollars. And we will see a big surge in euro and other local currency stables. That's my second prediction.
Friederike Ernst [00:28:19]: And my third one, maybe definitely the most controversial I think, is corporate chains will fail the exit test. So kind of if you look at fintech-owned chains, so Robinhood and others, they will grow, but they will not produce lasting user ownership and no open composability. So kind of, if you look at this in a couple of years, in 2029, ask yourself one question: can users leave with their assets at no cost? And if yes, then kind of you can tell me I've been wrong about this.
Joe Menninger [00:28:59]: Normally we end our interview with 2 questions, but you already answered the first one, if you would be open to talk to new investors. Are you currently looking for talented people? Are you hiring?
Friederike Ernst [00:29:12]: Yeah, absolutely. So we always have open positions and it's typically people who are smart, who think outside of the box, who want to move the needle. We're always interested.
Joe Menninger [00:29:26]: Ulrike, thank you very much. It was a pleasure having you as a guest.
Friederike Ernst [00:29:30]: Thank you so much for having me. It was, it was, the pleasure was all mine.
Joe Menninger [00:29:33]: If a founder in Germany, Austria, or Switzerland wants to build financial infrastructure instead of chasing the next crypto cycle? What decision rule should they adopt before they raise capital, hire a team, or choose their first market? This was Joe Menninger for Startuprad.io. Really sorry if not all the audio matched my questions to Friederike. I did have an issue with my video and audio recording, so I had to re-record all the questions. Thanks, guys.
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