Today Max Skibinksy joins us to discuss how Vault12 can backup, secure and protect all your digital assets.
Max is the CEO and Co-Founder of Vault12. He is a serial entrepreneur, angel investor and startup mentor. Most recently, Max was an investment partner with Andreessen Horowitz, where he focused on enterprise security and bitcoin and deals with Tanium, TradeBlock and Digital Ocean. In addition to co-founding Vault12, Max leads the R&D team.
Before that, Max was the founder and CEO of Hive7, a social entertainment company that
became part of The Walt Disney Company. In 2003, Max joined newly formed Voltage Security,
an encryption startup incubated at Stanford University, where he architected and designed an
Identity-Based Encryption messaging system that was showcased at DEMO ’04. Voltage was
acquired by Hewlett Packard in 2015. Max has also advised and invested in many startups
graduating from Y Combinator including Eligible, Transcriptic and ZenPayroll.
Max graduated with a masters degree in theoretical and mathematical physics from Moscow
*Disclaimer. None of this information is financial advice.
The following transcript was created using artificial intelligence. There will be some grammatical errors below.
00:00:03:16 – 00:00:14:02
Richard Carthon: Hello, everyone, welcome to another episode of Crypto Current, your host here, Richard Carthon, and today I got a very special guest all the way out in Russia. We got Max with Vault12, how are you doing today?
00:00:15:00 – 00:00:24:22
Max Skibinksy: Hey, doing, doing great. Thank you very much, Richard, but actually, we’ll correct you right off the bat. I am in Silicon Valley, but Russia is the place where I was born.
00:00:29:26 – 00:00:30:11
Richard Carthon: Gotcha.
00:00:30:13 – 00:00:30:28
Max Skibinksy: But a bit off by about 20 years.
00:00:31:00 – 00:00:40:24
Richard Carthon: Just by 20 years. Alright well, thanks for that correction, man. You’re out in Silicon Valley working on Vault12 and I’m sure we’re going to dive into all that, but before we do, tell us a little bit about yourself.
00:00:42:15 – 00:01:25:14
Max Skibinksy: As we just established, born in Russia. Actually, I educated a theoretical physicist right after getting my degree in Russia, I actually moved to Silicon Valley and have been building startups here for exactly about 20 years. Most recently before starting Vault12, I was one of the investment partners in big venture capital funds, Schallert, Andreessen Horowitz. We actually did one of the very first deals in the Cryptocurrency space, we funded Coinbase. That’s pretty much where I kind of got my chops into Crypto industry.
00:01:25:27 – 00:02:02:15
Richard Carthon: Coinbase, I mean, not a small fish. The fact that you were there to help that happen and that just speaks to the just absolute time that you spent in this space and being able to learn through the years. I mean, to invest in Coinbase early and then to just see how things progressed throughout the years, dive into that. How did you first decide, when you were at that investment company, when did you decide, like, Okay, I need to pay attention to Crypto, Coinbase? Tell me more about this whole Crypto thing, like what piqued your interest? And then, like, when did you decide, like, Okay, this is where I need to pay attention?
00:02:03:07 – 00:02:34:19
Max Skibinksy: So basically I would say one of the magical parts of Silicon Valley, it’s like a giant gen technology discussion club. Before I joined Andreessen. I recently sold from my previous company, so I was enjoying some downtime and I was just chatting with lots of people, kind of getting all the scuttlebutt going on around Silicon Valley. And keep in mind with that, this is like 2011, 2012, this was a very long time ago.
00:02:35:01 – 00:02:35:16
Richard Carthon: Yeah.
00:02:35:25 – 00:03:36:22
Max Skibinksy: One of the things that kept coming back to me was everybody was saying, like, “Hey, look at this Bitcoin scene, look what’s happening there.” It was relatively like people with technical background, I think it was relatively apparent very quickly that once you look into details as it was like, Oh, my God, this is bigger, the biggest advance in computer science kind of over the past, probably 40, maybe 50 years. So this is huge and you’re saying. So basically I wrote a very kind of short, small, kind of investment thesis, that was kind of, sort of my proposal to Andreessen is like, Hey, I think we should look at that space. Yeah, it was fine as they played the cards very close to the chest, so I was like, could have listened to my investment thesis, listened to everything I prepared and say, Well, we’ve already actually invested in this company and this company, so it is right on time. The only difference is we’ve already done all that, but welcome aboard.
00:03:36:26 – 00:04:04:05
Richard Carthon: You learn about this, you have an ear to the ground and you also probably start learning that it’s kind of difficult initially to get Cryptocurrency, especially Bitcoin and there was a lot of ways that you could start to lose it or if you don’t have it securely put into a place, someone could probably steal it from you. So was that kind of the thinking and what kind of led you to Vault12? Or kind of tell us about what made you decide to want to start Vault12.
00:04:04:26 – 00:05:37:18
Max Skibinksy: One of the benefits of working in the investment fund is you obviously see all deal flow ends in the place, you see everything that everybody is working on. A feeling that it’s that area like we’re already kind of moving forward in time, that was like kind of 2013, 2014 was that Bitcoin was starting to get adoption, but it was pretty much almost no startups that were working in the space. So obviously Coinbase already existed, but if you look across the board, it was basically barren wasteland. And we started asking questions like, Okay, people go to Coinbase, and buy their first Bitcoin. Ethereum did not exist yet. What happens next? And all sorts of additional questions, well started popping up, like, how people restore the Crypto currencies in case of catastrophic loss, how you pass your kind of digital assets if something happens to your relatives, to your family. How would you avoid undue centralization? How you avoid kind of just becoming another bank that has Crypto assets, how we kind of leverage this decentralized nature of Bitcoin. First a bit old, actually for about six months, I wasn’t even trying to start Vault12 myself, I was trying to find a CEO in our pool of serial entrepreneurs.
00:05:37:26 – 00:05:38:11
Richard Carthon: Yes.
00:05:38:13 – 00:06:16:27
Max Skibinksy: And speaking with a few people and was like, “Hey, we should start this company.” This is really awesome, this is like big, big problems that need to be solved. And of course, everybody like, was looking at this wasn’t Crypto CEOs, they had no idea what Bitcoin was or they were like, “Oh, I want to start like, enterprise software sales company.” They were looking at me like a martian and after six months, I just realized the only way to make it happen is just to build it myself. I followed this very well through the path of some venture capitalist leaving your job to kind of go in the middle of a startup.
00:06:17:24 – 00:06:43:25
Richard Carthon: So tell me about that, so what year was it when you were like, Okay, I guess I’m going to dive into this. And of course, you’re going, like you said, from a more relaxed kind of work environment to more like hands to the ground startup, let’s go get it attitude. What year was that? Tell us kind of the trajectory of like, where the original thought was for it and then, like what you’ve kind of built it to today. Give us the roadmap of like, how you’ve gotten to the point where you are today.
00:06:45:03 – 00:07:45:23
Max Skibinksy: I started putting everything together, I didn’t work full time on that yet, but roughly around middle of 2014 and kind of like kept getting more and more momentum kind of as the year comes to the end. In our initial idea, which is still a main product of Vault12, this is our main offering, we’re doing a big release in the next few days, but the main offering is roughly very simple. Your Crypto assets, your digital assets are incredibly valuable, but because of that value, you cannot store them at centralized locations. You can, but you expose them to undue risk that we see over and over in the press with yet another exchange getting yet another sort of story, how people kind of who delegate storage, obviously Crypto assets are taken advantage of.
00:07:45:25 – 00:08:01:17
Max Skibinksy: There is a well known kind of proverb in Crypto space, not your key, not your Crypto. If you want to keep your Cryptocurrencies to yourself, it exposes you to different sort of risk, primarily catastrophic loss.
00:08:01:25 – 00:08:02:10
Richard Carthon: Right.
00:08:02:12 – 00:08:21:25
Max Skibinksy: What happens if you dropped your hardware wallet in the toilet? What happens if your house caught on fire or like speaking here from twenty years in California, waters of Coal Valley is a big pile of rubble kind of next Thursday. They will probably call it small ones, big one is much, much worse than California.
00:08:22:03 – 00:08:22:20
Richard Carthon: Yeah.
00:08:22:22 – 00:09:18:04
Max Skibinksy: So it requires completely new solution for storing up this type super sensitive assets and that’s what Vault12 is because kind of, in simplest version, the only thing you need to do, you need to pick your most trusted friend and family members, invite them to our app and that creates an incredibly secure cryptographic vault, could keep pretty much anything. You can keep your kind of, if you want private keys to your currency, you can keep the phrases of your wallets, you can keep in yours or super sensitive documents. So it’s exactly that kind of virtual place that doesn’t exist on any centralized servers. Vault12 doesn’t run any servers, we do not store your data. You don’t have an account with us, it all happens on peer-to-peer fashion between you and your family.
00:09:18:14 – 00:10:09:13
Max Skibinksy: In this way, you basically become completely self-server. You only depend on people you trust to store, backup and restore in case of calamity kind of your most necessary assets. And I think that’s kind of the bigger implications here. We’re not only solving this problem for Cryptocurrency users, which is kind of a big problem in itself, but we’re solving it for all citizens of a fully digital world, where we kind of don’t really want to trust big companies with all our data, with our possessions. I think we’re already seeing negative effects this is causing. So if you kind of want to just centralize the world in a meaningful way, you need at least storage capability, similar to Vault12, peer to peer, your friend and family storage.
00:10:09:26 – 00:10:55:18
Richard Carthon: Okay, so there’s a lot of things I kind of want to unpack there and some really cool points that you brought up. One being and I think I’d spoken on this in a previous podcast, but like, how do you secure yourself, right? In times of calamity. So right now you kind of have cold storage and you have to write down all this stuff. Hopefully you’re writing it down in multiple places and you’re not putting it into the digital plethora, but what it sounds like with Vault12, like you said, you do it in such a way that you make sure it can’t be hacked, but it’s also shared with friends and family. So I guess my first question is, if I share it with my family or whoever I really trust to have this, do they have access to it at any given point? Is it only somehow I am dead? Like, tell me about, like, how that process works.
00:10:56:15 – 00:11:46:26
Max Skibinksy: So there is a very interesting piece of cryptography, relatively well known in the crypto world, that we use as a core engine of our product and that’s called Shamir’s Secret Sharing. A core idea of Shamir’s Secret Sharing is that if a person has one piece of data, there is theoretical security that he cannot retrieve any information about the data. When I say theoretical security, it’s a technical term, which in practical sense, it means even if one member of your family has access to an infinite number of quantum computers, he still cannot extract even a single byte of what we call shared, he’s keeping kind of on your phone.
00:11:47:10 – 00:13:08:19
Max Skibinksy: In only the schemas are called threshold schemas. So only when the threshold number of guardians cooperate, Zen’s the data you backed up with them becomes available again and that’s sort of your protection mechanism. So you need to select your guardians very carefully, but of course, we’re all human, we might make a mistake. Even if one of those guardians is not so good, it’s actually not a big deal because you have all other guardians serving as that backup. Yet at the same time, one guardian and depending on what schema you selected, even two bad guardians, it’s not only nothing to worry about, you have a big body of cryptographic proofs that it’s theoretically secure, you have nothing to worry about. They like, absolutely cannot extract anything about your data. That type of security, because I will challenge you slightly, when you said earlier, I have a cold storage and I wrote down to my backup phrase, like in multiple places, this is what lots of people do, but it’s not a great strategy because the more direct backups of your data you create, the more vectors used for hackers or attackers to steal it you create just by doing so.
00:13:08:24 – 00:14:06:21
Max Skibinksy: So a simple example, like some people I know they like, Oh, I will write my recovery phrase, I put it on those cards and I hide it all over my apartment or my house. Well, guess what? You hide it in some strange place and probably the person who will find it there would be your house cleaner, so she takes your backup card. And let’s say this house cleaner got kind of a sudden lottery win. Having multiple copies of your backup phrase, it’s not such a great idea for Cryptocurrency storage. What we sold in Vault12 is Shamir’s Secret Sharing because it lets you have that extra robustness of multiple shards, of multiple backups. Yet at the same time, it makes every backup useless and every backup in isolation gives the person no additional information. That’s kind of the technical background of our system.
00:14:07:17 – 00:14:30:02
Richard Carthon: It’s really unique and it sounds like it’s doing it in such a way, just like you said, that even if somehow you share it with a guardian that loses their phone or however, they would have access to it, there’s still protocols put in place that could still protect you. One of the points that you brought up was that this can be used outside of Cryptocurrency, what are some other use cases if someone wanted to use Vault12?
00:14:31:07 – 00:15:11:28
Max Skibinksy: We’re doing a big release over the next few days and one of the things we’re bringing forward is what we call digital inheritance. And that’s kind of a next step in this whole kind of what we call Digital Citizens Program. ID here is Okay, you have your Cryptocurrency, it’s very well backed up, but, now I hate to say this, but even millennials are aging, like millennials having kids, millennials becomes older kind of in all their usual life stuff like diseases, car accidents happens and of course, discovered we all see how unexpectedly mortal we all are.
00:15:12:11 – 00:15:12:29
Richard Carthon: Right.
00:15:13:01 – 00:15:36:12
Max Skibinksy: So as we all know, Cryptocurrency is so secure that if the original owner dies, there is again no computational way to ever get his Crypto assets back, they’re gone forever. And actually, it’s bad for the whole ecosystem because those coins will never re-enter circulation back. You’ve kind of permanently destroyed part of a Blockchain funded address space.
00:15:36:28 – 00:17:10:00
Max Skibinksy: So what we provided with digital inheritance is now you can put any sort of file into your vault. So it doesn’t have to be just Cryptocurrency, it could be anything. It could be your financial documents, it could be your password database, whatever you want to keep secure and you can designate an inheritor, a person who will have the right to restore those assets in the same kind of distributed way in case you pass away or even incapacitated. So while there was a less dramatic example I can think of is Crypto owners get into a car accident, he’s hospital, he’s paralyzed and he needs exactly his Crypto assets to pay for his hospital fees. With digital inheritance, he for example, can assign his wife to be the benefactor and she will have the right now to restore that vault with all his assets and do whatever is necessary for him. That makes our solution universal, so now it’s not just like a pure narrow vertical of Cryptocurrency case, it’s all digital assets that any family might possess. And kind of as we move forward to the future, pretty much everything we own will become digital, kind of which will be digital keys to our house, digital keys to our cars, if we’re still driving. Digital keys to everything and we allow people to have as secure backup of all these digital properties as security currently offered to Cryptocurrency owners.
00:17:10:02 – 00:18:11:21
Richard Carthon: That’s powerful and something that I’ve thought of a lot and still kind of like peaks my interest is just to make sure that in the event something ever happened to me, especially being in this space, like what I do? Currently my current system, unfortunately, is like if something were to happen, I have everything written down in a place where I know my family would find it, but just like you said, that’s probably not the best way to go about it. So something like Vault would definitely be very beneficial for me is actually something that I’m probably going to be looking at to myself. So I really appreciate you spending some time diving into that and explaining all of that. To kind of shift gears just just a little bit, 2020 has been an eye opening year for the space and a lot has happened and there’s more and more attention being brought to Cryptocurrency. It’s top of mind and it’s starting to get a ton more media attention. What are some things in the current horizon that have your attention that you think others should be looking out for?
00:18:13:15 – 00:19:16:20
Max Skibinksy: People ask that question in some forums and my answer is there is kind of not that much good news in short term and it’s massively positive news for Cryptocurrencies over the long term, because I think what fundamentally COVID crisis did, it kind of put the final nail in the coffin of the idea, like Hey, our governments are competent and they know what’s best for you and they’re prepared. So it kind of drove home in a way that you can never explain like by a logical argument, it explained to the people in a very like physical way. You can only rely on yourself and your family. You have to be prepared yourself. You have to be self-reliant, digital citizen and that’s exactly where Cryptocurrency shines because by design, Cryptocurrencies are not dependent on any specific governments, not dependent upon it’s working, it’s all kind of native peer to peer currencies.
00:19:16:28 – 00:19:52:00
Max Skibinksy: So I think over the long term, after we get out of any immediate crisis, after we kind of solve that, right now, the job is to save lives, not to run some sort of digital sovereignty experiments. But after we kind of get through the immediate crisis, get the vaccine going and normalise the society a little bit, I think after that, people will start thinking about long term consequences. And I think it will be simply a golden age for Crypto. We invented this technology, we will manage as a hammer and nail finally arrives as the size of the planet.
00:19:52:02 – 00:20:59:13
Richard Carthon: The attention that’s being brought to it is being seen as Cryptocurrency as a potential hedge against everything that’s happening in the world that’s making the global markets get affected, especially the U.S. dollar being challenged. And by printing more money with the Federal Reserve that’s basically set up, that then means that you’re also inflating the rest of the countries that depend on that USD. So now they’re looking at other places like, Look, we potentially can’t sustain this, what are other options? So now you’re starting to get countries who are looking at digitizing their currencies, potentially trying to overhaul and even looking at, Well do we just make Bitcoin potentially our next like base of like this is where value is and that is causing institutional money to start putting a decent amount of their money into Crypto. And it’s really interesting to see that dynamic because I feel like that’s really like the first wave of legitimacy and making more and more people start to pay attention, because as the money starts to move up top, it’s then the rest of the world begins to follow suit.
00:21:01:04 – 00:21:53:06
Max Skibinksy: One of my friends had an excellent tweet a few years back is that Bitcoin is insurance policy against politicians because fundamentally what you described, and I mean, make no mistake about it, we are currently on war footing. We are on war footing versus virus and every government enters war like, Well, we spend our way out of this war, we do what’s necessary to save lives and then future generations will pay for it. The difference here, I think, is that like war, it’s brought by external enemies, so there is not much you can do about this. This was a fairly preventable crisis, it was fairly easy to kind of invest ahead of time in steps to make it because like how hard it is to print 300,000,000 masks that probably cost like one cent in mass production.
00:21:53:14 – 00:22:18:17
Max Skibinksy: So it was basically failure of preparation or political class in that current printing is effectively like, Oh, well, we weren’t smart enough. I mean, politicians kind of running the things, we weren’t smart enough to prepare, so please everybody else pay for our mistakes. Please give us a loan to fix the stuff that would have been incredibly cheap to fix a few years ago.
00:22:18:27 – 00:23:25:20
Max Skibinksy: So, again, I think the lesson people got is like, well, the intellectual level of our politicians not going to improve anytime soon. They will make another mistake and then another mistake and every single time they will ask basically citizens, Oh, please pay for that. And I think citizens are kind of more or less well they were fed up with that even before it happened, but now they have an instrument. They have a Crypto instrument and it’s like, Hey, I want to buy insurance against all your future mistakes. It’s up to them individually how much of that insurance they buy, is like one percent of this, it’s 10 percent of their assets, but they have an instrument now. And obviously, even if we see it like one to 10 percent of the world population going ahead and buying kind of these insurance baskets of protections about future political missteps. That’s exactly what I say, we’re looking at the golden age of Cryptocurrency, so all companies are providing tools, providing Cryptocurrency, providing a new solution built on top of Cryptocurrency, this will be the next huge technological wave.
00:23:26:16 – 00:23:56:22
Richard Carthon: The attention’s being brought and it’s starting to hold up against everything that’s going on in the markets and I think we’re just at the beginning of it. And another question I just want to ask real quick is, over the next decade, we’re in 2020 right now and in the next decade, I’m sure we’re going to see a lot of things happen. What are you looking for and what has your attention that you’re going to be looking specifically out for? And then also, how do you think Vault12 fits into that?
00:23:59:00 – 00:24:24:16
Max Skibinksy: Well, the biggest wave is going to be what I call Tier One Adoption, because realistically, and I mean, I’ve been doing Crypto industry starting from Bitcoin close to 10 years now. And of course, I would say one of the sad facts for Crypto oldtimers like me is that we still have not hit mass adoption.
00:24:24:19 – 00:24:26:02
Richard Carthon: Right, we’re close.
00:24:26:26 – 00:25:20:06
Max Skibinksy: That’s what we all wanted, that’s what we dreamed about, but it simply did not happen. And, you know, sometimes technological adoptions happen with some delay. I think now that the moment will arrive that it will increasingly start to be like Crypto mass adoption will start happening all over the world. So to a degree, we don’t even need radical new ideas, because lots of those tools have been already built. We have onboarding ramps, we have exchanges, we have very powerful infrastructure of software wallets, hardware wallets and all that. The main thing that was missing was the user driver and I think that will arrive post crisis.
00:25:20:13 – 00:26:18:22
Max Skibinksy: So at Vault12, we basically have the same position with our vision. Our vision is exactly the same as it was five years ago, that you guys are going to want a lot of digital assets. You will have all sorts of wallets, you will have all sorts of private keys. You need such a backup that is safe from your housecleaner finding your little secret safe phrase card and it has to be much more secure than that. So simply build your distributed family roles that only you control, that you don’t have to trust Facebook or Google or Apple with your security. Just solid trust for the people in your kind of personal circle and you will have a cryptographically unbreakable vault to pick up and keep all sorts of digital assets. And I think as hundreds of millions of people enter Crypto over the next decade, we will be there to provide this vault for them.
00:26:19:14 – 00:26:50:03
Richard Carthon: Awesome. Well, everyone listening, definitely go check it out. It’s definitely worth looking into, a really cool website with videos on there. Just for everyone that’s listening right now, do remember we have a YouTube channel and we’re starting to record these. If you want to watch this video, a quick thing to let you know that there’s something really cool on Max’s shirt, especially if you’re a Fallout fan of the video game. I’m not going to spoil it, but definitely want to check out the shirt. But, Max, really appreciate your time today, but what is a final thought that you want to leave with all of our listeners?
00:26:51:11 – 00:27:41:21
Max Skibinksy: Stay strong. We’re still not out of the woods of this COVID crisis, so wear a mask, be safe. When things get back to normalcy, start thinking ahead, start thinking about you and your family strategy enthuses. Exactly as you said, worldwide currency will be devaluing where the worst of cash instruments will be very different than what it was before. And make smart choices based on your own research. The era of centralized top down expertise is over, it’s all up to you, it’s all your it’s all your decision power.
00:27:42:19 – 00:27:50:15
Richard Carthon: Excellent. Well, I definitely appreciate that final thought, but what are ways that people can connect with you and learn more about what you have going on and learn more about Vault12?
00:27:51:14 – 00:28:11:20
Max Skibinksy: We are heavy on Twitter. They can follow my Twitter handle, which is _LordMax on Twitter and we have the same, can do for Vault12. It’s Vault12 on Twitter, we’re very easy to find and would love to engage with anybody who has questions, thoughts or suggestions.
00:28:12:15 – 00:28:17:09
Richard Carthon: Excellent. Well, again, really appreciate your time today. And for everyone listening, stay Crypto Current.
Crypto Current will be guiding all of you who are new to the cryptocurrency world to becoming a cryptocurrency and blockchain expert. Crypto Current was founded to give access to information to everyone on current events occurring in cryptocurrency and blockchain in a digestible way. Since its creation, we have created content that impacted thousands of people through its podcast, blog, and social media.