Charles Hoskinson | CEO of Input Output Global | web3 talks | Apr 4th 2024 | MC: Marlon Ruiz

[Music] welcome everybody my name is Marlon Ruiz and I'm excited to host today's fireside chat Our Guest today will be Charles hoskinson Charles has been in the industry for roughly 12 years helping to guide the industry all the way back to bitcoin we take a look at his bio we can see that he's currently the CEO of input output Global he's done a lot of advocacy for digital asset regulation in the before time he was a Founder for iog in viticus Innovations Bitcoin foundations education committee and also co-founder for ethereum Charles welcome to the conversation thank you for joining us today thank you for having me here Marlin it's great to be here fantastic so we we talked last year early in the year so I'm hoping that your last year had plenty of activity and that all is going well I'd like to start out our conversation with kind of a timely topic we have this idea of the Bitcoin havening coming up right now so I know that there's a lot of interest that you've had in Bitcoin over the years so I'm just kind of curious for your thoughts on basically the havening uh what's happening with the happening as well as how BTC has been able to last last so long and has no VC so that's kind of like the opening Salvo for our conversation what are your thoughts well I mean Bitcoin is the OG of ecosystems and you know what it has going for it is it's very decentralized there's a lot of Integrity with the original intent and it has Stellar liquidity in Market infrastructure so it really is the digital gold standard of uh the industry and every four years um for some reason uh Satoshi decided to have a a having as opposed to a continuous reduction of inflation uh so what ends up happening is that you typically have a flow in stock model where it creates a big surge of speculative value increase inside the Bitcoin so you know the first time I witnessed it having was in 2012 and uh then it led to the 2013 uh Bull Run and then again it happened in 2016 which led to the 2017 Bull Run happened again in 20120 it led to the 2021 Bull Run so the hypothesis is that in 2024 it will create a bull run uh next year if we believe the models uh with probably an all-time high around $150,000 $200,000 Bitcoin so uh the industry kind of plans around it and everybody has an expectation and this is one of those expectations become reality type things so we're already seeing a lot of uh VC investment increase we're already seeing a lot of projects start getting much more aggressive with spending in order to Catch the Wave uh and it might become a self-fulfilling prophecy uh that said you know this Cycle's a little different because we have ETFs uh this Cycle's a little different because we have a radically different composition of actors in the ecosystem and there's a lot of really good and interesting technology that finally found its its way you know into into the mle year um so like light spark for example uh which is uh you know just integrated to coinbase and you have over 100 million users now on the lightning Network because of it uh and you have a lot of really cool programmability and other things that are coming you know so I I uh always uh try to give people their due and and Bitcoin is no different now of course I have reasons to believe that that ecosystem is not the end all be all um and that's why obviously I help create ethereum and cardano uh but you know it's a positive thing for the industry as a whole when you create more liquidity and you create more interest and you attract a lot of good developers and talent to to come in and start thinking about our problems and solving that cool thank you for that I would like to actually understand a little bit about the creation of card right the cardano ecosystem uses extended ux so I think that's obviously a nod to you know Bitcoin however I I'd like to understand the differences and why you chose that path I mean there are many other people who built after you who chose a different path so you can shed a little bit of light on on that choice and how do you feel about that choice and how's that working out in general uh for you so utxo is cash register accounting you know so the kids today they're having a little bit of trouble with it but you know if you're a little older you actually used cash and you go and paid for things was $20 bills $50 bills those are Atomic units you don't tear your $20 bill in half or something like that and you know give them half the $20 bill you know you give them a whole unit and then they give you change um so we're all used to that uh with a sufficient level experience the problem with utxo and Bitcoin is it doesn't really carry a degree of state programmability and so the question was how do you extend utxo so that you actually can do smart contracts and you have to program them a little differently it looks much more like a functional programming Paradigm uh as opposed to an imperative par uh Paradigm and uh also you you kind of think a little bit differently about parallelism and determinism inside the system now why you want to do that as layer one is that if you look at the the trajectory of all layer one blockchains they have a rich and vibrant cross chain and Layer Two uh world and they also want a Shard you know because you do a lot of stuff you have enormous amount of transactions it's not really scalable to have a replicated system and if you have this non-deterministic thing where you have to kind of create some sort of patch together Global state it is super super hard to Shard that and super hard to get strong security guarantees about what happens onchain and offchain as they go back and forth so a lot of the complexity of ethereum layer 2 ecosystem is a direct result of the account model that they use so one of the things we did is we said if we could extend utxo sufficiently that it gets relative atively equivalent expressiveness to the ethereum evm this would give us a huge Advantage when we start talking about payment Channels State channels as well as uh side chains layer twos you know all these types of things in our ecosystem and we would also be able to preserve things that were really important to us for example uh determinism so the things that happen locally should also happen at the network level and also verifiability so the semantics you think your app is going to follow the the code you write for the app uh it's much e easier to verify the program and all the different execution behaviors what we expect so you talk about sat solvers you talk about property based testing you know these types of things you have a much more direct path of correctness especially when you apply formal methods to your uh to your applications we said well you know it's kind of like Aerospace or you know big banking software it's kind of a high Assurance software domain so pick an accounting model that matches the reality of where you want to go in terms of how you want to scale and pick an accounting model that also helps you reason about the software's correctness so that when you write applications your QA is much easier and you get much more predictability of uh Behavior now why people typically don't do that it's kind of like when you go from single core to multicore you have to learn new tricks and you have to kind of learn how to load balance your utxl graph and there's a lot of additional things you have to do um and luckily you could build models and patterns kind of like we did in concurrency with actor model or these things to help you kind of think around around and reason these things but it's not as simple as just a straight up virtual machine and writing an accounts based model so you pay more complexity in your Dev model upfront but then you get a lot of Downstream benefits and when you think about the directionality of things over five years 10 years 15 years a lot of that cost uh is going to be returned to you in Spades when you talk about software maintenance and interoperability so we bit the bullet and went down that road and uh what's really cool about it is it's actually worked out really well for us was very painful the first two years but we got to a point where we now have hundreds of daps that are deployed a lot of great design patterns uh we kind of have this beautiful untied core and then we have different languages that have been written that compiled to it so we have like a Russ dialect a hasal dialect and we're getting a typescript dialect so we have pretty adequate representation of everything from the high Assurance to kind of the web oriented those three languages I think will be uh capable of covering 90% of people's devs and what's nice is the community's built great libraries we've built some libraries and uh we're having a great time actually writing uh daps in this Paradigm uh and then the next step is to kind of take it to the next level with Hydra which allows you to go offchain and then take it to the next level with sharding which is oror Leos which we're going to now here in a bit and that will get us uh you know that that that really really high throughput the other cool part is transactions through transactions so if people go to utxo dorg you can see this real time uh it's a good block BL chain explorer that visualizes the uh the model but what happens one transaction can have many different unrelated events batch together so you can issue some nfts uh you know you you can also uh go ahead and interface with a DEX and you can you could do a stable coin transaction and all those things are in one transaction so over time what happens is you can get fatter transactions which contain lots of outputs inside the model so one unit of change under the hood uh changes a lot of uh of things so that's why extended utxo is is is such a powerful thing is that because if you think about where this is all going all those outputs will will be recursively compressed and start being less about directly changing the state but more about a proof representation and then behind it is like a rollup or you know a layer two transaction these things and so you just get this amazing telescoping scale inside the system you don't get that with a machine like the evf it's not really built for that and you don't have to really think around God how do I predict gas fees and you know you have all these non-deterministic threads that chase down plus when you want to Shard sharding these these graphs is significantly easier uh to deal with than uh and there's already beautiful formal Logics like P calculus and things like that that help you reason about that that we've had for over 40 years in computer science and thanks to Robin Milner and the other guys so I just love the approach and you know we're functional programming people you know the guy who created has works for Roose Phil wadler these other things so obviously you do what you know um and also Bitcoin created this model they just didn't know how to extend it and create expressiveness there was an initial attempt and then there was an inflation bug that got everybody terrified so they purposely scaled down the expressiveness and capability of the system and kind of kept it in a pseudo Turing complete world where you can't do very much on chain which has hindered the smart contract side but allowed it to be very reliable we have 15 plus years of history there to draw from to look to uh for it so we're very happy with that extension and we've written a lot of peer-reviewed papers about it and obviously it's now working at scale for several years on the cardano network so you can actually see and parse the chain and you understand all the consequences of the model yeah I would say just calling out a couple different things worrying about scalability how do you move forward as well as even just a paper aspect uh my understanding is there are quite a few papers that card has pushed out maybe over the last several number of years 204 yeah 204 right so you know it's great that everyone could take a read of it and everyone can learn from it I I feel like some sometimes we're missing the idea of everyone working together and sharing their work so I I appreciate that that aspect of of what you have focused on for the most recent time I'd like to just switch gears a little bit uh we are in an election year so that brings up a lot of fun conversations but I'd like to just kind of f focus on the idea of governance within crypto and cardano's approach to doing that and the idea that having this idea of governance is really not optional right it's something that has to be built in uh some folks have maybe thought about it after the fact I think that uh you always talk about doing that from the beginning so can you talk a little bit about the onchain uh governance approach that cardano is taking yeah you know governance is not optional uh no matter who you are what you when you create something that other people use the first question people ask is how do we upgrade maintain and change it uh to meet our needs and who gets to decide when there's a collision like everybody's friends until they're not and then suddenly somebody wins somebody loses somebody has to decide that's why you construct governance systems uh so there's a whole spectrum of governance of Open Source projects there's a whole spectrum of governance of close Source projects but cryptocurrency Protocols are really interesting because it's governance around not just a capability but also a resource so your capability is the protocol itself and the things the protocol does for you the resource is a token associated with the pro protocol that kind of gets things moving where they need to be no no matter what you do if you start abstractly looking you go interact with Gemini for a little bit and talk to it you start really thinking okay there's some common themes that come up with all governance and usually there are three broad categories that you need to have in order for governance to work well for you so the first category is democratic consent so somehow some way with your user base you have to get them to consent to things you want to do where you want to go and that can be through uh delegation that can be through direct voting uh that can be from them electing representatives kind of like a constitutional republic you can do all kinds of different things but there's some notion of I I agreed to this if you don't it's it's a dictatorship second you have institutions institutions take very complicated things uh and they convert them into yes no questions they convert them to up down they convert them to simple things that people can understand for example you know let's let's talk about like evolving TCP IP or UDP oh that's a really complicated question because there's so many stakeholders and other things and and if you have an institution like ietf or something that you can work through it and you know maybe it's slow maybe it's not slow but you could at least make some meaningful change and get to a point of here's of standard should we support XYZ or a and C it's a simple decision once it's been distilled and there's various degrees of efficacy of Institutions the legitimacy of it then you have constitutions and Constitutions are basically there as universal bills of Rights for the people who use the system so for example if you're a Bitcoin holder say well I signed up for there's only ever going to be 21 million Bitcoin so if Bill goes and says hey I want to do a hard fork and add another million Bitcoin because we're going to use it you know like for marketing or something like doesn't happen because there's a social contract in case of Bitcoin implicit that basically says the monetary policy is fixed regardless if it's convenient or not okay so constitutions protect the rights of minorities in constitutions enable you to get some continuity and certainty you can certainly change your Constitution but typically speaking that takes a long protracted significant effort in order to get it over the fence and so you typically only do that when there's an overwhelming demand amongst the government uh to do that so it doesn't matter if your nation state your corporation or your club or a protocol you have to have some sort of sampling of these three things then on the other side of it you typically look at three parameters that you you measure in order to say do we have a good governance system you look at efficiency you look at efficacy and you look at Integrity so on the efficiency side how quickly do we converge to making a decision so some institutions are very slow but they're effective in that when they make a decision it typically is a good one and Switzerland's a great example of that very slow moving country it's Confederacy but overall the standard living is very good the country is very stable they haven't gone a war in 300 years you know most people say it's a good country to live in so it's an effective leadership structure fiscally speaking they're doing okay but you know it's good luck getting things done quickly you can argue over building a building in Zurich for 15 years if you've ever lived in Switzerland so very painful process on the other hand you have governments that are very fast or companies are very fast at making decisions but maybe they reverse decisions all the time like many of us have worked inside leadership teams or companies where you know one boss says one thing one day one boss says another thing another day it's like I guess this week we're doing this and this week we're doing that so that's a very efficient system but it's not a very effective system if you're changing your mind all the time or making bad decisions all the time then you have like the the China case where you have uh efficiency and Effectiveness but not necessarily Integrity inside the process depending upon your belief structure so Integrity is the hard one because it's always connected to belief structures so if you value for example human rights if you value for example freedom of expression and speech if you value for example rule of law all these types of things maybe just maybe that particular regime uh is is not your cup of tea because the types of decisions that they make tend repeatedly violate those types of things in well documented ways on the other hand if you don't value those things it's incredibly hard to argue with the fact that they have all these high-speed trains and amazing infrastructure and the economy grows at an exponential rate it's really remarkable to see what they've achieved so Integrity is really connected to your Constitution and it's really connected to your base rules so that's a framework to think about all it and what we tried to do with cardano is is look at 2,000 plus years of governance history and pull all of that into a stack and say could we do all three so we founded an institution a members based organization modeled after Apache Linux Foundation that allows uh it to go and take the product function and budget function of cardono and take all that complexity and turn it to simple decisions to make we created an onchain representation system where people can register as DS and have a liquid democracy view where that they can basically get delegated authority but it could be revoked on demand like Stak pools and then also we have an onchain Constitution that we've written for Cardon that in some parts is machine understandable and constrains the governing class and prevents them from going a little crazy and that's turning on in the next few months and as it turns on then we can start looking at its Effectiveness its efficiency and also if it preserves and protects the Integrity of the institution as a whole so there are seven different governate actions you can do from initiating a hard Fork to withdrawing from the treasury because it turns out Cardon has an onchain treasury with over a billion dollars in it so it's probably pretty important that that's well constrained um and that there's some sensibility behind those outflows uh to changing protocol parameters to uh voting on arbitrary things to firing certain members in the government or these other things so it's a it's a quite intricate thing and we spent years thinking about it we were really inspired by like Peter sub's work on nomic we were really inspired by a lot of work um that were was done by several governance experts throughout the the world and we looked at everything from the internet Society to open source governance from Linux foundation and things like that that kind of give us that right framework but you know it's as with anything it's an experiment and when you roll it out you have to see where it goes but my belief this is the single biggest differentiating factor between cryptocurrencies because the two other big guys Bitcoin and ethereum and for you know this year salana have decided to recuse themselves from onchain governance and basically leave it to either complete Anarchy meaning you can't really change anything uh or leave it to uh basically consent of the dictator you know a small group of people get to decide where to go and how to go and how to get there um and in both cases I think that's the wrong model for something that you want to be around for 10 years or 50 years or 100 years uh people need to understand that there's a there's rights and protections there's integrity and there's a government that doesn't particularly care about which leader is in it has enough operational resilience to be able to survive various things that kind of hit it allows it to bounce back if that makes sense yeah definitely so does that all fall within the Sip 1694 um yeah environment it does right yeah and uh and and extensions so there's sip 1694 there's the cardono Constitution and then there's intersect they kind of map into those three different pillars and they give you end to end and onchain government and then recursively you look at it and every year you try to improve it so you try to update modernize your Constitution and there's an onchain mechanism to do that and then you also look at the efficacy of the institutions and if you don't like them or they're ineffective you can fire them and replace them with other institutions and that's why we even put in things like votes of no confidence and so if enough Ada holders like don't like it they actually shut the whole government down and start over so it's a it's a pretty cool system and uh there's a lot of political theory that uh went into it and and it's been very hard because we had to create you know consent so we had workshops in 25 different countries we even had a member of parliament from the UK come in and join us and his name is Marcus and he provided a lot of great advice because you know he's doing it with real table Stakes uh in the UK and uh we've learned an enormous amount along the way and we're at the final stages of uh implementation uh and that's going to be done with u uh right now with our test Nets called sonano net and uh you know very soon we'll actually start seeing a network scale upgrade uh be done then we actually get to see real time if the governance is working or not which is pretty terrifying for me but uh I hope I hope we make a good contribution to because it's a it's a model for all cryptocurrencies whether you like cardano or not you know what cardano does is it it really goes out there and does really hard things like how do you add programming utxo or how do you add governance to a blockchain and it's a case study win or lose on uh what we learned and it becomes useful for all Builders because we don't have any patents everything is open source all the code is under Apache to all the papers in are Creative Commons so that's a public good effectively the lessons and the content and the capabilities for everybody to explore yeah it's one of those things where you have to not be afraid to fail for something so important that you have to get done and if everyone works together then you have a higher possibility and everyone has an actual chance to speak their mind in an eable way that that would make the difference so appreciate your thoughts on that for sure uh I do want to just give you a second to touch upon intersect before we move on to the next topic so did you want to just cover that uh tldr version yeah I mean if you're if you're familiar with how the Linux Foundation Works where they have 140 projects from kubernetes to hyperledger under it it's very similar it's members based organization and it has both the budget and product function of cardano so the annual budget the discussions are held there and the product backlog of cardano and how you go from special interest groups to a PRD to a TRD these types of things uh PRD that that whole process and flow is regulated there and as an NBO it's bu and for the members so the projects of cardano join it they participate in the working groups and committees they create consensus uh obviously various members have different levels of influence depending upon Merit and contribution uh and then the goal like any institution is to turn complexity into Simplicity yeah so each and every one of us have complex needs and wants you know if you're an nft project maybe you want like royalties on chain so it's easy for you to you know every time you sell your nft to get a royalty as the author or something like that and maybe if you're a defi project maybe you need some change to unti plutus core so it's easier for your decks to work or something like that who knows um that's a request and you're you have a product uh you know problem description document you kind of write that down somebody has to go and grind that away and translate that to a collection of features that are prioritized in a backlog so that Engineers can go and work on that like they would any product great thank you for that switching topics a little bit to think about the future and and somewhat similar to roadmap priorities one of the biggest things that I've seen since I've been you know been a fan or studying crypto is the idea of collaboration and uh Community collaboration and partnering with other chains how do things interoperate these kind of very basic topics can be very complex as well I've been following midnight quite a bit so I'm understanding that that's one of the first partner chain can you talk a little bit about you know why partner chains are are needed and also why um midnight for your first partner chain so there's this problem of how do you actually do interoperability you know the third generation has three pillars or scalability everybody talks about that and we just talked about governance but that third one's interoperability how does everything talk to each other and the problem is if if your version of interoperability is everybody comes to my chain and everybody else dies um that's that's not exactly very satisfying like could you imagine Wi-Fi if your Samsung phone only works with a Samsung router and your pixel phone only works with a Google router it just be nuts at the end of the day so you need interoperability which means you need the ability for chains to not only talk to each other but to move assets people State and other concerns across each other so the web does this really well you know if you're an AI developer and you say Hey you know I I want to do uh you know an AI app where you upload your picture of a cat and it turns it into this beautiful cartoon or something well then maybe you use Google or open Ai and there's an API so you collect that data you send it over to a service the service does something it sends it back that's a standard model we all know how to do it multi-billion dollar companies do this every day cryptocurrencies don't do that very well so let's say midnight which is a blockchain built for computational privacy and also selective disclosure meaning it allows you to add a privacy schema onto your application logic if I go and say well the only way for midnight to be successful is you have to migrate your ethereum application or your Bitcoin application your salana app or cardano app to it it would work instead I say you just call it you write the logic you need there and then that adds computational privacy to your system uh and then you pay your transaction fee in your underlying currency so if you're an ethereum User it's ether your Bitcoin User it's Bitcoin cardono User it's Ada and all Aggregates there and it kind of just sorts its way out so we call this cardono service layer model and and those are called partner chains and the idea is that they have well defined infrastructure decentralized llm decentralized social network decentralized telecommunication like World mobile is the partner chain for example uh which is building a competing cell phone network to go against Verizon and T-Mobile you have a decentralized uh privacy stack you know and those need predictable pricing and they want to sell that service to every app in the entire ecosystem and they basically provide batteries included Bridges that enable that to happen and from an app development Viewpoint let you stay in the ecosystems you're comfortable in where your customers exist and you call it on demand otherwise it either have to implement the whole thing on their side or they have to migrate to that entire ecosystem that doesn't make any sense so it's really cool because that allows cardano to extend itself in both the Legacy Direction but also extend itself in the blockchain direction and start doing blockchain to blockchain sales and midnight really is the first blockchain we think is going to be able to keep a secret and do it well because no matter who you are any business has a private side and a public side you're McDonald's you're still probably not revealing how much money's in the cash register or how much you pay your employees or whose hours or where to the general public just not doing that so you need privacy there but on the other hand you know when HR comes or the tax man comes or these typ they have to have transparency so there's a selective disclosure regime it's the same with security tokens carbon markets Supply chains uh medical record systems any real life use case there's always a disclosure and privacy schema that comes associated with that data and there's some desire to compute and operate on it for a public good or for a business good uh that you have so we created midnight for that reason we've been working out for six years it's in testet so if you go to midnight. network you can actually go and take a look at it you write typescript to be able to interface with it so it's it's pretty cool um I kind of want a dart but they like typ script so uh so we kind of went down that uh that road and um uh what's nice about it is that uh it it's something that we can begin offering very soon across the entire blockchain ecosystem and it creates a whole framework and then that framework can be used by many projects that want to migrate one of the coolest features I'd say there's two is the dual token model and also the existence of something called minur multi-resource consensus so the dual token model means you separate the ownership governance and maintenance of the system from the fuel that powers the system what we found is in the ownership side of tokenomics people really like deflationary monetary policies that's like Bitcoin cardano and other ecosystems okay well that doesn't map very well if you're a business and you want predictable pricing if I'm using a service layer I don't want a situation where my cost of that service goes up 40% or 30% uh or down 20% on a weekly basis you can't plan ahead you can't it doesn't make sense you want to be able to pre- buby or have subscriptions or consistency in your price and when they do change it that they change it with you know a regular Cadence you separate the two tokens you actually can do this where you have one with a deflationary monetary policy and they have another token that can kind of flow and then you can create far more predictable pricing in the system for the resources of the system uh so people get that certainty and we think that's going to be very important for things like the centralized llms and algorithmic stable coins super important for computational privacy or or decentralized infrastructure or you know whatever you know people want minor is the other really cool on the paper we wrote with Shere who later on went to create igen layer and uh that is multi-resource consensus so what it allows you to do is to chain multiple consensus algorithms together in one ledger so instead of being I'm a proof of work guy or I'm a proof of steak person you can combine them together and have proof of steak and proof of work it's the it's the peanut butter and jelly of the ecosystem but you can chain and consensus protocols together and what's so cool about that is that means then partner chains actually can divorce the main chain when you look at the parach chains model the cosmos model or any of these guys that I've got this secondary primary model where you have a primary chain and these satellite chains that connect to it they're like the hotel California you can't check out once you're in you're in very hard late well with minor what you can do is you just basically reparameterize and say you know what we're going to get 30% of our security from cardano and then we'll get the other 70% from other chains or internally and maybe you wake up next year and the owners of the system the governance token can say Hey you know actually we want to become a true layer one and run everything ourselves or we're having consensus problems we want to dynamically shift back over and let cardano Run for the time being like maybe salana has an outage or algr has an incentive problem they need to fix it so let's let cardano run the network for a year or something like that so that's why we call it a partner chain instead of a side chain because a side chain kind of denotes a servatory relationship a partner chain denotes that they're working with each other card provid security and infrastructure and liquidity and users and all this beautiful stuff and this other chain is paying for that with its inflation but that's a partnership and like any partnership you can get stronger or you can get a divorce and and move on minor is the first protocol built specifically to accommodate that so we think it's going to be a great way of attracting a lot of amazing projects to come in because um it gives them a larger option space and I kind of lik it it way back in the day when Steve Jobs said hey we got to get off Flash and he went to HTML 5 even though it was a less evolved ecosystem at the time people liked the idea that they were building an open standard they weren't locked into the whims and wills of a particular vendor same for Internet Explorer with active X versus Open Standards so whenever you create an open ecosystem you typically actually create a reality where people migrate to that and right now when you look at these par chains or IBC or Things They Don't Really provide that and for a service layer model to get all this stuff for free uh is is a very powerful place so it's one of our biggest bets we've made as an ecosystem and uh we spent tens of billions of dollars in engineering uh you know for facilitating it there's big teams and a lot of stuff and it's going to be really exciting to see that roll out in the coming 24 months and see how well it's received by the cryptocurrency ecosystem but I do believe it'll create interoperability Because by the way a partner chain can share its inflation with any ecosystem so ethereum may want to provide security for midnight in which case they actually like it because they get staking rewards you know from it so that's conceivable it creates an alignment for interoperability as opposed to this Silo tokenomics disincentive for interoperability that's super fascinating I think that most people don't think about it that way where you want to create an open environment where you can pick up and go and and decide to do different things along the way so that that seems to be I'll just call it a radical approach because I I haven't heard too much about that kind of an idea I've heard more about side chains uh in general so appreciate that thought process and being able to create a system that allows ultimate freedom and flexibility uh depending on your need right so everyone would have a different need at a different time and you're accounting for that which is pretty awesome great uh let's move on a a little bit uh I'd like to talk about uh just a general crypto environment give you a chance to speak about something which I I know you talk about a lot which is the number go up versus building idea uh the idea that maybe the token price is not actually the value of the price it's a very interesting conversation because you've been in this industry for 12 years and you've seen the number go up and the number go down for everything around you and it it just doesn't almost make sense to always focus on the number uh Beyond just the Investment Portfolio but more of what is the purpose of things so if you could talk about that I'd be really interested to hear your opinion well you know I think there are three Damons that we have to slay in terms of quantification of blockchain ecosystems um decentralization throughput Network value so decentralization we created an index called EDI if you post a link uh people could see it but it it was created at the University of Edinburgh and there's eight different factors that they measure and they allow you to actually answer the question of how decentralized is a cryptocurrency it's kind of interesting right it's we all talk about it you hear the word again and again but what does it actually mean uh and it's actually super hard to measure and that's why you have to look at it from eight different parameters second in terms of throughput what does TPS mean like extended utx is a radically different system that accounts so we one transaction could be like a hundred transactions with us so if we have 10 of those transactions that's a thousand transactions that just occurred seems like you have an incredible TPS rate but if you're just me measuring raw TPS or t TPS or something meanwhile it's you know accounts are running really fast but it's a a sequential process kind of Rand this with processors when we started going from single core to multicore and the clock rate wasn't going up but the productivity of the processor was going up dramatically so we had to create different metrics and benchmarks to be able to measure performance of CPUs and gpus and then finally what you're asking is like this network value question so what makes a cryptocurrency valuable now in the investment world we have things like Benjamin Grahams fundamental analysis that Warren Buffett was inspired by it led to the creation of BR Shire Hathaway tremendously successful but uh at the end of the day you can't really apply those standards in the cryptocurrency space and the example I like giving is Dogecoin you know it's it's like this thing that was just on the side of the street basically dead and then El musk was walking by he picked it up and dusted off and took it home and cared for kind of like Ned Flanders with the gremlin um and uh he turned it into this thing and at given moment he could wake up and decide to integrate it to X and what would happen is he would have 300 million users and they would all have cryptocurrency wallets at X and he could use it for payments and subscriptions and tipping and it have gargantuan demand so it's a meme coin it has no real utility currently but one guy can just go and pick the grimlin up dust it off and you know give it some sweet love and train it then suddenly grows up and it's a big thing uh so things change very rapidly scams can turn legit legit things could turn into scams uh and then also utility can radically change in a hat like for example uh ethereum was a proof of work system now it's proof of stake system it has radically different Notions when you held ether and proof of work there was no positive carry now you hold it there's staking reward the facts and circumstances of the entire system have changed it's the same protocol but now what does Network value look like so we try to aggregate this in markets but the issue is the markets are also controlled less 10 actors have a humongous influence on the overall liquidity and value of your ecosystem the big exchanges the top five control 90% of all trade volume and the stable coin the asset back stable coin operators tether and circle their absence or presence and how they work within your ecosystem plus certain VC actors basically can create overnight a multi-billion dollar ecosystem or prevent one from becoming very successful so I'll give you a great example Ergo ergo uh it's started by absolutely brilliant kid his name is Alex chero he used to work for me but he's been space forever he helped start chain link um he created scorex which is a modular blockchain framework and he's a technical genius a wonderful engineer he wrote this incredible framework uh called Ergo that has all these new Next Generation ideas useful proof of work and epow and sigma protocols and he also is using exteded uel in a slightly different way um and when you look at get a structured project like that with no pre-mine or anything it really does deserve to be in the top 25 but nobody lists it so because it doesn't have listing it falls way way down and and nobody cares about it it's almost like a dead project even though you have a Founder who's been around for more than 10 years with an incredible track record All This brilliant technology and also there's a vibrant amazing Community there in Ergo that's it's very Evangelistic and they're interesting okay well you know those 10 actors decided not to bless it meanwhile they bless other things uh and those things go to$ 80 billion even though you have to turn them on it off occasionally and half the transactions fail and you know these these types of things and and not to name names on it but uh but you know so it's deeply frustrating and then you have this numbers go up crowd that go your entire worth as a CEO uh as an engineer as a scientist the ecosystem entire worth of the protocol is whether you've had a 10x this year or not which is just so crazy cardano our tvl is up over 300% there's 8 million issued assets our blocks are mostly full you guys can see that and extended utxo there's tons of projects building and doing things there's all these amazing upgrades coming to protocol that give you on chain governance and we have great scalability plans all these things but our number didn't go up as much as salana for example so a whole cohort of people basically say cardan is a dying project cardano's falling apart going to fall out the top 10 all the people they are incompetent the road map is wrong their leadership is wrong okay you say well you do burn tokens and and bribe people to get some high wi so they can get a price increase and dumb it it's just a perverse strange incentive and it really shows you that we're measuring the wrong things and we're talking about the wrong things so the reason I bring this up in relation to throughput in decentralization is that you have to balance these things as an ecosystem if you're doing judicious governance the kinds of things you do to improve your throughput would probably increase your network value however perhaps would lower your level of decentralization the kinds of things you would do to make the system more decentralized and resilient May lower your network value uh uh excuse me could increase your network value but lower your throughput inside the system so North Stars and metrics are are really important because they're all in a web and they're interconnected and you you run into this at Google all the time when you're building your large scale Computing systems or you're Building Products Cloud products whatever there's a load balancing consideration there's a pricing consideration there's a competitiveness thing and you have to kind of decide like uh as you build the product how much do you want to take advantage of your incumbency uh advantage in ecosystem versus be fair to the customer and you know how much openness versus closedness what are you disclosing out what what's proprietary what's open source so everybody has different levers they have to pull but it's never an easy answer of what to do um meta for example decided to take something that they've spent tens of billions of dollars on and fully open source it or at least a big chunk of it the the Llama model other people are proprietary you know and it's not really clear what is the best business model and uh how these things work and what will eventually create the most value for the requisite organizations because end of the day it's shareholder appreciation in those two games and they were taking radically different approaches it's the same here when you look at cardano versus salana versus other things we have a price reflection of these types of things okay well we had a price reflection the value of Nvidia three years ago look at the value today we have a price reflection the value of Intel today and they're losing eight billion dollars a year doing all this fap work maybe in 2030 they're the most valuable company in the world because they displace tsmc and they have the entire AI stack verticalized and they get their Monopoly back you see so future value current value the different levers that you pull the business models that you have your time Horizon is incredibly important and unfortunately the way the markets work right now they don't really reflect that accurately and they're very subject to Insider manipulation and they're very subject to Black Swan events much more so than any other Market cool that was a very deep explanation I enjoy that I I find it very interesting to understand everyone's perspective we're so early that it's almost odd to look at value from a monetary perspective because everything's still being built and what will be built and what will be finalized and what will it be in five years is kind of hard so appreciate you just keeping keeping going at it and and trying to drive the best and also working with the community Through 1694 to get feedback from the people and to build an ecosystem that is governed for the People by the people so really appreciate that and I wanted to say again just thank you Charles for joining us today really appreciate you taking time to drop by and hang out with the googlers uh always our pleasure to see you and just wish you the best thank you so much Marlin this is always fun I love the questions that come from the googlers one of the brightest companies around thank you Charles have a great day thank you

Channel: Google TechTalks

Views: 8,374

Keywords:

Id: wSck2IJU7J0

Length: 44min 17sec (2657 seconds)

Published: Fri Apr 12 2024