Proton CEO Andy Yen on Tech Giants Dominating the Internet, the Future of the Web, and Bitcoin

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(Boston, MA, 05/30/14) Andy Yen, co-founder of ProtonMail. (see Jordan Graham story) (Staff photo… [+] by Stuart Cahill) (Photo by Stuart Cahill/MediaNews Group/Boston Herald via Getty Images)

MediaNews Group via Getty Images

Andy Yen is the co-founder and CEO of Proton Corporation: a privacy-focused collective that aims to provide an alternative vision for the internet. Instead of an Internet where user privacy is the product, Proton aims to prove that people will pay for and maintain models that will help them better ensure that their web traffic is not used for advertising or for violate their privacy. I sat down to talk with him at the Collision Conference about the future of the internet, what Proton is building, and what Andy thinks is happening with the bitcoin ecosystem as Andy was preparing for a trip to Washington DC to address US lawmakers on these same issues. .

Note that the annotation here is based on an edited and transcribed recording of the interview, and that this interview was conducted during the summer of 2022.

What do you think of the current big tech, anti-trust landscape, and what do you hope to get out of your trip to Washington DC?

Well, this is probably the first trip Proton has taken to DC since we started. So it’s different in that respect. And I think it’s also very timely because for the first time, in a century in fact, anti-trust legislation was being considered, at least in the United States. And that’s particularly focused on technology companies, where today is where we have some of the strongest monopolies or duopolies in the world.

And the impact of the legislation slated to pass in the next two weeks is nothing short of groundbreaking, it will completely revolutionize and open up the tech industry in ways that were never imagined a while ago. a few more years. And I think that’s why it’s a very important time for us to be in DC to have these conversations. And to make sure we can give policymakers and regulators all the support they need to get these bills across the finish line.

Give a brief overview of this legislation for those who are unfamiliar.

So there are two pieces of legislation moving forward in Congress today (Author’s note: the two bills referenced are the Open App Markets Act which deals with app store pricing, and the American Innovation and Choice Online Act, which deals with tech giants advertising their own products), and what they’re really trying to tackle is the abusive behavior of big tech companies, to make sure they can protect their market dominance.

And for the uninitiated, you might not see any of these things happening. But the reason big tech is so dominant isn’t because other companies aren’t innovative or there aren’t other successful startups. It is really that they have rigged the game and they are breaking the game in a major way which makes it impossible for any other innovative company to grow and gain market share as well.

I can give two examples. An example is the 30% fee they charge for all mobile payments, whether Android or iOS, which effectively dominates the entire market.

So, today, Protonmail competes with Gmail. It is our biggest competitor. Yet in order for us to have access to Android, which is the biggest mobile platform today, especially in the mobile world, we are forced to give away 30% of our revenue, that’s revenue, not margins or of profits, 30% of revenue as a fee to GoogleGOOG, which is our biggest competitor. You can hardly imagine an industry where you pay 30% markups, let alone an industry where you pay your competitor 30% of your revenue, and still be able to compete effectively. So that’s an example of how the game is rigged.

Another example of this is simply how tech giants can self-prefer their own services when it comes to defects. So you know today that when you get an Android or an iPhone, the defaults are set by the companies. They are almost impossible to change. And the defaults they set are their own services. And we know from studies that 95% of people don’t change these defaults. So if you have an environment where tech companies can self-prefer their own services and make it impossible to undo faults, it’s next to impossible for anyone to break in.

So the maximum you can capture is maybe 5% of the market if you are lucky. And that’s really bad for consumers in the long run, because first of all, it hurts innovation because competition is the foundation of innovation. And when there is less choice for consumers and less competition, there are also higher prices.

Some people say the 30% fee on the App Store is paid by developers, but of course developers will pass those costs on to customers, so it’s basically a tax on the entire internet. It’s all of us. So you and I were all paying this tax. And those are the things that these bills will make illegal and that, I think, will dramatically change the economics of the Internet.

We talked about the political side, what about the product side?

If you look at the internet today, the notion of individual products and services is something that is rapidly disappearing.

What dominates the industry today are the ecosystems. And those ecosystems today are either Google’s ecosystems or Apple’s AAPL ecosystems. Facebook has an ecosystem. MicrosoftMSFT also has an ecosystem.

These tech giants have built ecosystems, and the way they lock customers into those ecosystems is actually to have multiple products all together that work together seamlessly. And the problem I have with existing ecosystems is that they are really designed to maximize profits at the expense of people.

[…]

This is often not in the best interest of users, nor in the best interest of society. So what Proton does is link Protonmail to Proton, which is also an ecosystem. But what we want to do is the world’s first privacy ecosystem.

So unlike Google’s ecosystem, for example, the Protons ecosystem is designed to be private by default, right? Google Services […] are designed to maximize the monetization potential of each user. And that’s a very different goal. And I think the world needs an alternative ecosystem that puts users and privacy first, gives good control over user data, and is your alternative because otherwise you’re left with just a few options, none of which is really good for you and really provides what you want.

I also believe that for privacy to be successful in the long term, it takes an ecosystem approach. Because yes, there are people who only use email. But the majority actually use Google Calendar, Google File Storage, and other services and apps. So for us, it really takes privacy to be accessible to a wider audience to make it accessible to you, not just you and me, but ordinary people on the street. It really has to be an ecosystem. This may be the big bet Proton is taking.

Speaking of a product that is part of the Protons ecosystem, do you see any spikes in VPN usage in authoritative countries/environments?

We saw it when Myanmar staged the protests we saw there. We also saw it in Hong Kong. We saw this in Belarus a few years ago. So this is literally every place where democracy is under attack. We see it. It is very disturbing that we are seeing it more and more frequently in the world as well. You see it a lot in Africa. We see a lot of situations also in South America. And I wish I could tell you that the frequency of this incidence is decreasing, but it has actually increased quite dramatically over the past two years.

You’ve been officially bitcoin supporters, what do you think about what happened with bitcoin and any plans to accept lightning payments?

Okay, so you know, it’s kind of an interesting topic given the collapse of the financial markets. Proton has always kept part of our reserves in BitcoinBTC. And this is actually something that is already known to the world. There is an internal debate: I don’t have the answer to this question, but I don’t know if we continue to hold Bitcoin or not.

Again, I’m not, let’s say, a bitcoin industry insider, but I’m happy to share some of my insights.

I think there’s just too much fraud and abuse and other objectionable things, disbelief things. Especially when you look at things like NFTs and some of the other things that happened at the end of, say, the recent bubble, right? There’s just too much cheat and too much gross stuff in space.

And you know a lot of that stuff is bound to crash. And when you have a space that’s, you know, maybe too dominated by the abusive or the fraudulent and the downright absurd, then those corrections happen, and that also ends up removing the good projects, because that sort of messes up sort the entire space every three, four years. And that’s really bad for the industry.

[…] you know, we were also holding bitcoin in 2017. Right? And in 2017 what you saw was this crazy ICO craze, it sure looks like there were tens of billions of ICO floods and we knew a lot of them were scams, and he had to crack for crash at some point. And that’s compounded by the fact that you know, crypto and web3 is a highly unregulated space, but you know, there are things going on in the space that in traditional financial markets would be absolutely illegal, but because it’s crypto, you can get away with it.

So it may not be a popular opinion. But I believe the crypto community is well served by taking a tougher stance on regulation. And I don’t mean asking legislators to step in and make rules and laws about what you can and can’t do, because they don’t understand the space.

But I think a lot of players in the space where we should have some moderation and maybe, you know, self-regulation, if that’s even possible, right? But I think it’s important to do it. Or we have a continuous cycle of spikes and crashes and spikes and crashes. And that’s not good in the long run.

People won’t have faith, trust and confidence in an asset class if it experiences frequent 80% crash cycles. We need crash cycles to get less and less severe over time and that just doesn’t happen. This crash cycle is just as bad as the previous one. And that shows me that we haven’t really learned our lesson here. So maybe a controversial view, but that’s my personal view on this.

[…]

Why does Proton not accept Lightning? It’s just a matter of resources. We will eventually – it’s only a matter of time. (Author’s note: As of December 27, 2022, on Protons’ own instructions for how to pay in bitcoin, it still appears to have an on-chain wallet address versus a Lightning bill.)

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