Hello, this is Derek broadcasting live from warm, sunny Colorado. Always sunny, always warm, sometimes Colorado. Today we are very lucky to uh schedule a one-on-one interview with, in my opinion, the greatest of all time in blockchain technology, Charles Hoskinson.

Thank you so much, Ramon, and Derek. Thank you for coming all this way, man. It's a little bit of a flight.

Oh, no. It's an honor. I'm I'm

I couldn't wait. And then uh Charles is not only the co-founder of uh Ethereum but also the founder of Cardono. I think uh you are the only person in the world with uh two top 10 crypto um projects under your belt.

Uh briefly three because there was also Bitshares before Ethereum. I did Bitshares. That was the first algorithmic stable coin in the first decks.

Okay.

Yeah. It was one of those also ran that if you've been in the industry a long time you you'd know. And then we got Midnight. So we'll see maybe if we get another one.

Okay. So we're going to talk about a lot of macro stuff. We're going to talk about Cardono. We obviously going to talk about ADA pricing and a lot of Cardono projects. Uh let's start with ADA because uh in the past I'll say like year in 2025. It was a really difficult year for all the investors, all the ADA holders including myself as a content creator.

Yeah.

Cuz nobody saw this coming when uh Trump won the election last year, end of last year. We all foresee a great 2025. But turn out the past year is basically a sideway show and then a lot of um not so great things happened this year and then the the end result is obviously ADA pricing is back to in the morning 38 cents.

Yeah.

Um I just want to know like what do you um what's your take on ADA pricing like staying around like the sub $1 range for quite some times.

Yeah. For four years. You know it's one of those tale of two cities. So, you know, it's the best of times and it's the worst of times. And the thing is that we as an ecosystem have made amazing progress. When you look at the underlying technology, like it's more decentralized than it's ever been, more scalable than it's ever been, best development experience of all time, you know, really strong onchain government. You know, this is the year we passed a constitutional uh uh an actual constitution from the constitutional committee. Uh we have a full onchain government. We had a treasury withdrawal with over $150 million uh of value. You know, there's there was there were so many good things that indicate a healthy, flourishing, decentralized, resilient ecosystem. So, when you put your engineer hat on and you put your scientist hat on, you say, "Yeah, we're doing a good job." But then you look at the markets and they're just god-awful terrible. And I think there's a variety of reasons for that. You know, one is the ecosystem, the cryptocurrency ecosystem hasn't fully recovered from the 2022 collapse. FTX. Yeah, it wasn't just FTX and Luna. It was also retail got destroyed. Absolutely destroyed. And it's hard when retail gets destroyed because like think about the real life experience of that. You go home to your wife or your kids or you go home to your husband, you say, "I just lost our life savings on this cryptocurrency thing." It's hard to go and say two years later, "Hey, come back." They have to have a compelling reason to come back. There has to be a narrative there, a story there, something different, new, and interesting. And instead of trying to create that narrative from 2022 on, we descended into memecoin mania, you know, and uh and so there was just all these projects which by their very construction have no utility or use case or true value. And all these people are getting rich and there's all this wash trading and this other stuff and it just looked like a giant casino. So then the US government started cracking down on crypto and they were very aggressive. They sued every single exchange in the United States. They put CZ in jail. They tried to put Roger in jail. they just they were going hard on us as an industry. So then Trump comes around in December of 2024 and he says, "You know what? I'm going to be the crypto guy. I'm going to save the industry and do all these great things for the industry." So we were all very excited and you know uh people like myself and others we were interviewing for the cryptozar we were talking about like how to steer policy, what do we need to do and there was a seriousness in December of 2024 where we said okay we're going to turn a page. war is over and what we can do is not only regulate the markets correctly, we can restore retail faith and confidence in the markets. Instead, [laughter] the day before Trump took office is Trumpcoin came out. You know, it was just a continuation of that memecoin culture. Then Melaniacoin came out just a double down on the same point. Uh and then, you know, obviously you had tons of ups and downs and and the cryptos thing was also merged with the AI thing and it was not a very serious effort. Yeah, we got some legislation passed like the Genius Act which was mostly self- serving to the banks. Uh, and clarity was always put on the back burner which was the market structure regulation. So, we worked on it mostly through the Senate and the House. We met with senators and congressmen hundreds of times, but it went from a bipartisan effort where this is Democrats and Republicans in America both agreeing we need need to do something to Democrats saying crypto equals Trump equals bad. And they recently even issued a report saying like the Trump cryptocorruption report, you know, and so they're going to run in 2026 with crypto equals corruption. And so that means they can't vote for a crypto bill, you know, because they're running against the crypto bill.

So we saw that and the downstream consequences were a bifurcated market. Bitcoin went way up, but most of the altcoins stayed stagnant for the most part. Uh Salana had some momentum from memecoins, but their volume's down 85% and XRP was always an institutional coin. And you know, once the SEC was gone, they went back to their historic all-time high. But everybody else was kind of left behind and it was stagnant and it was really challenging. And we asked, well, why didn't value leak out of Bitcoin into altcoins? Because all the buyers of the Bitcoin were institutional.

Correct.

Normally, when the retail buyer buys Bitcoin, uh the retail buyer after they make a lot of money, they say, "Oh, I'm going to sell my Bitcoin and go like double down and, you know, play with the house's money and do some altcoin stuff." That's what we saw in 2021 and that's what we saw in 2017. We didn't see it this cycle because the institutions can't sell their Bitcoin. They're indexed to ETFs or these other things. So, they just bought and hold and inventory was low and you know demand high. We tried as an industry to create a Wall Street version of what Bitcoin was doing with DATs. And the industry is so greedy and aistic they did what they always do. They created these DATs that were very poorly structured and they went way up and then way down. And every time they did it, Citadel would do the shorts and longs and make a lot of money. And now DATs are all washed up and you know it's it's a dying vehicle and it's creating a lot of problems for Micro Strategy amongst others. So, it's been a frustrating year because if we got a doover and we just did things from first principles the right way, by the middle part of the year, we could have had great regulation and by the end of the year, retail confidence would have been fully restored inside the space and trillions of dollars would have entered in and we'd have created a unified global market between the Mika framework with the European Union and what Asia's been doing, the different regulatory frameworks there in the Middle East. And then we could get to the business of the next narrative, which is how do we merge DeFi and Tradfi and make it just FI. You know, I still believe it's possible, but unfortunately the United States looks like it's again going to sit out of this revolution and uh it's it's going to fall to Asia and fall to Europe and the Middle East to solve the problem.

So can we can we put this like when we um you just talked about like how the money stay in Bitcoin.

Mhm.

Uh maybe we can explain that by um the retail just never returned.

Yeah.

Since 2022, even when Bitcoin was over 120,000,

like for me as a content creator, I saw no hype. I saw no engagement.

From the retail

because you're not going to get that from Black Rockck or any of these others. They're dispassionate asset managers, you So, so, so I feel like even though Bitcoin went from 15,000 all the way to 126,

but I feel like just the retail engagement never come back.

In order to change that, what do we do? Because uh I think we're in a really weird place where um decentralized versus centralized, right? So, a lot of VC obviously like the central like a more centralized coin like XRP or Salana, they have a lot of VC backing, right? But at the same time, we have Bitcoin and then we have Cardono. Like I think we focus way more on the decentralized area. But at the same time, we we don't get the same amount of funding from the VC.

Yeah.

So, how do we balance that? Cuz um to me, I feel like decentralization is very important for the blockchain technology cuz without it, it's just like a like a new generation of traditional finance.

Then what are we doing?

Yeah. Well, I'll give you a great example. Like it's a real practical example. I like numbers, you know, studied math. Um, he when you look at like the best in the business, A16Z and Coinbase and these other guys, uh, they're supposed to be smart money, like the smartest of money. And so they put about $300 million into a venture called Alleo. And generationally, Alo is correct. Um, it's a, uh, it's a private smart contract system. It's a hybrid system with proof of work and proof of stake. It has a lot to love. And if it was launched in 2021 with a lot of fanfare, it'd probably be a 20 or 30 billion project. You know, people say, "Wow, this is revolutionary." Alo is sitting at $75 million market cap and 75 million

75 million and with like a 10-15 million trading, you know, and not a lot of hype, not a lot of volume or anything like that. Now, contrast it with Midnight, which is is our entrance for that. It's over a billion of uh of value. Just launched a week ago, and there's $2 billion of trading a day, which is insane. and it's not even on Binance spot yet. And there's this enormous excitement. Now, what's the difference between the two? One was a VC style distribution. You know, they had VC money, they had all the insider, they got the circle listing, they got all that stuff they're supposed to get. Uh but retail is not back. And of the people who have stayed, they're smart now. And they're like, why wouldn't we let you dump on us? With Midnight, there was Glacier Drop. Eight ecosystems, seven different blockchains. 33 million people were eligible. About 1.5 million took it. But there's no insider distribution. Everybody had right of first refusal. There's no ICO or any of this stuff. So I do believe that there's an appetite for first principles. Again, I do believe there's an appetite in the market based on the numbers we've seen. By the way, Midnight is more valuable than ZKYNC, Starkware, Mina, and Alo combined right now, which were all like multi-billion dollar very prominent projects with big VCs. Vitalic invested, Intel invested, you know, all the big guys invest in these things. Angelist, Naval Ravocon. So, I think there was an overindexing on VCs because at the end of the day, what the VCs got addicted to was launch a token, get an insider distribution, dump the token on retail the minute it comes out. We call it the Ponzanomics, right? And retail got smart. It used to be, wow, look at all these VCs. This must be a real credible project. And they're like, no, we don't want to do anything that a VC has touched because they're going to dump on us the minute that uh this thing comes out because they have investors, they have LPs they have to make money for. I understand why they do it. So, uh, there's a skepticism there and there's a return to first principles and there's a return to retail and there's a return to just good old-fashioned organic growth and honoring the commitments. You know, why are people excited about Midnight? Because it's easy to understand. You know, you say, I have a private side in life and I have a public side. Okay, so you know my name, but maybe you don't know what I look like when I'm in the shower. You know, it's like, and I have a right to that privacy. You know, we have a right to privacy. So, uh, why don't we have a blockchain where you're in the driver's seat there and you get to decide what's private and what's public and not Circle and not JP Morgan Chase and not the American government or the Chinese government or whatever the heck that to me is is just a fundamental human right and it's very compatible with Satoshi's vision and what he wanted to do with blockchain and you know where we all came from. So you build something where that's the promise and commitment. You build it in a very open decentralized way and just give it away to people like Satoshi did Bitcoin and it gives people a chance to kind of be young again and imagine the olden days when things were good not insane and we didn't have million-dollar banana NFTts and dogwolf hat and all this other nonsense or the president rugging people you know we we instead had the pure philosophy of why are we here to change the economic political and social systems of the world and uh that will always be appealing because at the end of the day, we're not happy with our institutions and everybody's scared.

You know, in America in particular, we're more divided than we've ever been. And every event, there's always multiple sides to it. No one trusts each other. Charlie Kirk gets assassinated. Depending on who you ask, it's either a conspiracy or not. And he's either a good event or a bad event. I just I used to grow up in a day like somebody gets shot as bad.

Yeah.

But now it's different because Yeah. People were celebrating. Yeah. It's because it's just so so polarized as a society. And the reason being is we have no ground truth anymore. There's no institutional legitimacy anymore. If you hear something, you say, "Does this agree with my politics and does this agree with my worldview?" Not, "What were the facts and what happened?" Uh, so uh to return to first principles means it's a return to ground truth and objective reality and it's return to institutional legitimacy. The value of that especially in a world where China and America and Russia aren't getting along and we have great powers conflict is incalculable because how do you do transnational business? Like how do we make sure that if I have a contract with somebody in Taiwan or in Ethiopia or Argentina or Guatemala or Germany that everybody's going to be treated equally and we're all going to have rule of law and all of our currencies are going to be respected and all the rules are going to be respected. Blockchain gives you that for free. That's what this is about. And so if you want to do trillions of dollars of international commerce and you want to have rules in a ruleless world, this is the only way that you can do that. So people say, "Okay, that kind of makes sense." And they say, "Well, if you rebuild your institutions with this technology, they go from don't be evil to can't be evil." And so they have institutional legitimacy. So even if you disagree with who won the election, you won't attack the voting system and you won't attack the ballot. You'll say, "No, it was a fair election. I don't like the outcome, but it's a fair election." instead of I didn't like the outcome and therefore the election was rigged and wrong and bad and this person cheated, you know, which is what's happened now for several election cycles in the United States. It's been very problematic for us. Uh so, uh I think the long-term value is there, but you're only going to get there if you can demonstrate it and you don't rug people and you thus have to eskeew the pontinomics and you have to be willing to endure the ups and downs. You know, uh, Japan was where we launched Cardano because the Japanese are the most patient people in the world. You know, I was in the Shikanszan and I was talking to one of the guys on the tracks and his grandfather uh worked there and was laying train track and his father worked there, he worked there, his son had just started his first day of work and they have plans to build that train till like 2070. It gives you a sense of the long arc thinking that they have. And so the Japanese look back, they, you know, they 72 million was what the ICO was for uh Cardano, and now it's at 13 billion, and they've seen all the progress over a 10-year period, and they say, "Oh, yeah, a decade or two, yeah, they'll finally get it right, and it's going to be great." So, they're prepared to come back to it in 2035 or 2045. It's that mindset because they understand what we're achieving here. We built a decentralized government. We built a fully decentralized ecosystem. There's millions of people. It's in 100 plus countries. We were the first liquid non-custodial proof ofstake system, the first UTXO system to extend to have smart contracts at scale. You know, we have a full-on chain government and everybody got to participate. People from Japan went to the constitutional committee in Argentina. And they look at the totality of all that from just two guys standing in a bar moon tower in Osaka to where we're at today and they say that's how greatness is achieved. You have to come every day and do that. So that earns the right to run the institutions of the world and run the trading of the world and these other things. The flashes in the pan, they're very sexy because the price goes way up and it goes way down.

But you got to understand, look at the top 10 from 2017, 2018, 2019, 2020, 2021, 2020. It changes. Cardano's been in it since the very beginning.

Uh so there's a durability there. And just the recent fork, you know, was a great example of the durability of the system. We we encountered one of the worst hacks a network can have and we recovered organically without having to manually shut down the system and restore it uh with in a decentralized way within 12 hours, you know, and the network is running just fine. That to me was just a testimony to how powerful what we've built is and the durability of what we built is and the fact that Cardono can launch a midnight a billion plus dollar project that outperformed the darlings of all the VCs and has more trading volume than most of the coins in the top 10 is a really impressive thing. It means Cardano is still here to stay. It can still launch billion-dollar projects. It can still get Binance listings. It can still do all kinds of things. It's very impressive. I I feel like um one of the biggest problem for most investors who lost money, they only look at the price of the coin or price of the project, they don't focus on what we're building or what's good fundamentally about the project. They only care about if the price goes up, it's a good project. Price goes down, it's a terrible project.

Yeah.

I think people need to change that. Like in order for people to change that is to educate them about focusing on the right thing. And then since we talk about a lot of macro stuff um I want to bring up one of the biggest issue I see uh as an American like the US uh debt

and then the global depth. So US debt is uh just exceed uh 38 trillion.

Mhm.

And global debt not not only US China is around like 19 trillion in depth. Japan is around 10 trillion in depth. So every country are in depth and the money has to go come from somewhere.

It's a very very strange thing. Uh I brought this up briefly in my um recent re videos about like all if every single country owns a debt then where did the money go? Right.

Right.

And so so it's basically like a I don't want to call it a Ponzi but then like it's a system where if it it people just have to keep printing money.

Right.

If they start printing money the system basically collapse for the debt issue like for us to have 38 trillion debt like how do we fix that? Is it even possible to fix that?

This is not a new story. Um there were four stages for the creation of this system that we currently have. It started with the Bank of the England I think in like the 18th century and basically they invented because back in those days like a sovereign would borrow money and then the sovereign would have to repay the money you know and so either they default or repay but there was never this conception of like infinite debt like lingering forever. So what the bank of England did is said,"Well, what if we just borrow the money and we just use taxes to repay the interest payments, but we never actually repay the principal." So that was their first innovation and they said, 'Well, that kind of works, but the problem is that you want to spread it around a little bit so you don't have all this existential issue with just one group of people holding it. So the Rothschilds invented the ability to trade debt and that's how they made enormous sums of money. uh then the Federal Reserve system was basically invented and then they created uh you know a way to socialize that amongst a larger and broader international society and then then Paul Vulker who is the um head of the Federal Reserve in the 70s and early 80s he created a system where no one could ever default and so the default-free system they just renegotiate the debt and so what's happened globally is the global debt load's about $338 trillion depending on how you count it because that that's just absolute debts not the unfunded liabilities that a lot of people have because a lot of people in China are going to retire. In Japan, they're already retired. They're working past their retirement age and the same for America. We have these pyramid that are getting inverted for the age dynamics and how do you pay those unfunded tail liabilities for it? And you're right to point out America's about $ 38 trillion. So, the only way to get out of this is to escape into sound money. And that's another reason why when you look at the monetary policy of Bitcoin or Cardano uh or Midnight for that matter, these chains are fixed function monetary policies. They have a ceiling. You can't ever have more than a certain amount. So they're deflationary in nature. They get more valuable over time relative to the same use. Um so that's like gold or any real estate or any of these things. The scarcity creates an incentive to save and the scarcity creates an incentive for people to grow their wealth over time. The current monies were built for spending your money over inflation. They're a consumption economy. They're inflationary. If you save your money, you are taxed every year 3 to 8%. Just on the inflation. Your spending value goes down. So what are you incentivized to do? Buy stuff today because your money will be worth less tomorrow. Correct? And that is very problematic because you never build wealth in society and then everybody becomes in debt to each other and then eventually the system becomes unsustainable because the only way the government can actually continue to repay its obligations because taxes won't cover it is through inflation and so they hyperinflate the currency and that's what we saw in Venezuela that's what we saw in Zimbabwe or the wormark republic in the 1930s in Germany uh and 20s in Germany and as a consequence uh you have economic collapse. So that's why I think crypto's fundamentals are so sound because it's a return to sound money that we've had from most of human history and uh it's a skewing away from this massive debt application that we have and it's allowing people to opt out of the system and live in a parallel system. I think that was uh how Satoshi um vision were.

Yeah.

But at the same time I feel like 2025 um going towards 2026 Bitcoin kind of lost that original purpose. Don't you think like the VCs, all the rich people, they're in control of Bitcoin now. So, in order for Bitcoin to solve this kind of monetary problem, is this still possible or

well, Bitcoin is digital gold and um you know, there there's certainly a lot of VC participation and there's certainly a lot of institutional participation, but I I liken it more like an institution being scared about the macro. So, they take, you know, 5% or 1% of their balance sheet in gold. and this is the new gold for them. So that's how they've been sold. And uh actually one thing you should read since you do advising u is Morgan Stanley's private wealth group. They uh they just recently told all their private wealth adviserss they can start recommending cryptocurrency purchases.

3% right? I remember

1 to 5%. Um and what's crazy about that 17,000 private wealth adviserss, you know, so it's an army of people. Well, there's now 17,000 people having a million plus conversations every year about crypto, you know, and what are they telling these people in the family office side or what are they telling all the affluent people that they're managing wealth for? Crypto is digital gold. And so that's what they're doing with Bitcoin. So, I I think there's that. The challenge with Bitcoin is, and I've made peace with this, being in the space for 15 years, we've all had to make peace with this, is Bitcoin just won't upgrade. You know, it's never going to be a smart contract system at scale. It's never going to do DeFi or any of this other stuff. It doesn't have to. It can just be digital gold. It can be there. But here's the thing about digital gold. Do you only think gold is valuable if it's next to the gold mine?

Yeah. You take gold out of the mine and you make jewelry out of it. You do other stuff. So, if a Bitcoin is mined on the Bitcoin network, why can't I move that Bitcoin to another network like Ethereum or Cardano or SWE or these types of things? So, uh, there's going to be an exodus of Bitcoin from the main Bitcoin network chasing yield and we're starting to see that in increasingly larger numbers. In fact, you go to DeFi Llama, Bitcoin DeFi, I think is now the top five in terms of TVL be number one within 24 months. So, that's how some of the institutional money is going to work its way out is non-custodial stuff where you take your Bitcoin, you lend it, um you get stable coins, you deploy the stable coins, you've never actually sold the Bitcoin, but you're realizing the value enough to be able to create a yield, and then uh after you're done with your yield, you go back to your original Bitcoin holding. Um so, I think more and more of that is going to happen, just like putting your gold in a bank, and you get a certificate, and then you lend that certificate and you know, make some money for the use of it for a period of time. Um has it lost the vision? Well, depends on how Satoshi framed the vision.

Uh, inclusive accountability where everybody can verify everything. Uh, probably yes, because no one runs a full node.

You some people do, but the vast majority of users uh have their Bitcoin in someone else's hand. They're custodial and uh they use, you know, wallets that are on their phone and things like that. So, yeah, they've lost that part of it. Second, um, can it run the economic, political, and social systems of the world? No. It can produce value for those systems and that it's digital gold. So that digital gold is is sound money. It can make sound money, but it doesn't let you run a voting system or a social network or, you know, allow you to have a different relationship with your podcast customers or whatever the heck your goal is. You need a smart contract system for that. So it's not digital oil. You know, it doesn't have utility from that lens. Um, and so that's a problem. And third, uh, who controls the network in terms of mining? It's large institutions now, you know, American Bitcoin and dozens of these other mining cartels. It's not a distributed system where Uncle Sally is running, you know, a small mining operation on her laptop or something. I used to mine back in the day. I was both a CPU and a GPU miner, and I opted out after um I couldn't make any more money on it. But when I was running 1.2 two gigahashes on uh GPUs uh AMD 5850s,

you know, I had them Crossfire in that little configuration and I get a Bitcoin a week.

Yeah.

You know, wasn't too bad, you know. So, that was like the last year I mined and I think it was like a 100 bucks a bitcoin or something like that, but back in the day, Bitcoin was worthless, but that was a distributed time. We'd use pools like slush or other things like that and it worked really well. Now you have these large institutions that do it with subsidized power and uh you know first access to the data centers and first access to the to the uh you know the AS6 it's not a poor man's game

that's impossible for regular retail bitcoin. If your goal is homogeneity where everybody has a full node, if your goal is homogeneity of participation where everybody mines like Bit Torrent, like everybody shares, it really hasn't achieved that. You need to upgrade and change the protocol, but there's no governance system for Bitcoin.

So when people ask like what's the ultimate value proposition of Cardano when we return to that,

the biggest differentiator is not the proof of stake or the UTXO or whatever. It's the onchain governance which is what we spent the last two years investing heavily in because onchain governance gives you a mechanism to have an adult conversation about when and how to change the protocol and bring everybody along for the ride. Now if you look at any piece of technology no matter how good that technology is after five or 10 or 15 or 20 years it gets stale it needs to be upgraded you know like the iPhone it's a great example like it was so revolutionary in 2007 Steve Jobs comes out on stage and he shows the iPhone which wow that's so cool and now would anybody buy the original iPhone and use it as their daily driver? It's like of course not you know because the world moved on and so technology is like this and if you want a protocol to run the economic political and social systems of the world that protocol by its very design has to upgrade as society upgrades. If you don't have an onchain government system you can't upgrade the system once you have too many holders and too many people even small changes take months or years or decades to coordinate. So, since we talk about Cardono, let's talk about a couple Cardono projects that I'm interested to to hear your thoughts. First, since we talk about Bitcoin, let's go with the Bitcoin DeFi. How's the progress and then how it's going to uh change the Bitcoin?

Well, there are three levers. There's three three buckets I should say for uh for Bitcoin DeFi. So, one is how do you get the Bitcoin out of Bitcoin? You know, you got to get Bitcoin from the network of Bitcoin to Cardano. So that's the bridge infrastructure and what's the trust model there and how do you vary that model. The second is how do you convert the Bitcoin into an instrument that can directly participate in DeFi. You could certainly use Bitcoin but then the DeFi application has to figure out what to do with that. So typically it's a lending scheme. So you have something that locks your Bitcoin. You get some stable coin for it and then you can deploy that stable coin in DeFi which is the third part of it. What generates yield? So you have bridge, credit, yield. These are the three components of it on the infrastructure side. Then on the experience side, like how do you make that easy for people? Okay. So on the experience side, those are wallets and like do you just click a button and it just magically works and you have a D app store and you just go there or is it a really complicated process with a command line interface and all this other stuff. So we spent a lot of time in the plumbing uh this year. We we brought everybody together. We talked to the BitVMX guys. We one of the BitVM2 people works with us at our research group. We wrote a ton of code. We did a ton of research. And we learned a lot about the bridge infrastructure. So we learned how taproot worked. We learned how we can use Bitcoin as the model of security. We thought a lot about how you can pay transaction fees in Bitcoin and get yield back in Bitcoin. These types of things. Uh so that was one of the big accomplishments of this year. And we've gotten to a point where we have a design and model that we're very comfortable with and it's going to be ra rather straightforward to bring Bitcoin in. Next year is the other two parts where we think about the credit component of how do I take my Bitcoin in a non-custodial way and lend it in a way where I get a stable coin and then how do I deploy that stable coin to make a predictable return. So we have a product coming out next year in June called Realy for the return side and that does yield with micro finance. So it goes back to our roots of banking the unbanked in uh Cardano and we have another product that we're working on right now for the credit side and so we're going to roll those two in. Then what's nice about that is you have a beautiful end to end experience because there are three rules for Bitcoin DeFi. You can never violate them. One is there's only Bitcoin. Bitcoiners don't want to talk about altcoins or any of this. There's just Bitcoin. So it's got to be in an experience where there's Bitcoin and DeFi Bitcoin, but that's it. There can't be like ADA or other tokens.

Um the second is you pay your fees in Bitcoin. Third is you get your yield back in Bitcoin or stable coin. So I said these are our our invariants. we can't violate it or else it won't be successful. And so we've been building the technology in a very deliberate and systematic way. And uh it's a partner-driven process. So you have things like Sun Dial on the Cardano ecosystem. Uh Bitcoin OS is another one. Uh there's probably about two dozen people uh companies and people that are working uh internally externally on these types of concerns. And that's just in the Cardano ecosystem. Then Sui ecosystem, I think about 20% of their volume is Bitcoin. So it's a very significant when you look at it. So there's a lot of people that realize like this is a gargantuan multi-t trillion dollar opportunity and it's only going to grow over time. So they're investing very heavily in it. And I think this is going to be in the next 3 to 5 years probably one of the largest TVL and transaction growers for the Cardano ecosystem because at the end of the day, you know, you're saying to people, you don't have to sell your Bitcoin, but you can start getting a yield on your Bitcoin. not maybe not a huge yield, but you're going from a zero yield environment to like maybe two or 3%. Plus, plus you get the increase of value of Bitcoin, you because it's deflationary, so increases in value over time. That's really appealing to a lot of these institutional players because if you're sitting as a CFO and you have a billion dollars worth of Bitcoin on your balance sheet,

3% a lot of money

is a lot of money, just free money to basically get through, especially if it has a very low risk relative to the rest of the portfolio. So that can be a billion dollars of TVL from one customer in in the ecosystem. You don't have to do that a lot of times before you're in the top five of uh TVL inside. The other is XRP. You know, that's uh that's another one that's very similar to Bitcoin. It's a quasi fixed function ledger. There's no smart contracts. Um there's no yield opportunities right now. They don't even have staking revenue. So if you're a large XRP holder like the Ripple company, they have $46 billion worth of XRP last time I checked. goes up and down based on the markets, but when you got 11 figures worth of something, you want to generate a yield on that thing. You really, really do, you know, because even a one or two percentage points can be more than your entire opex for that year and it's non-dilutive. You know, you're not losing any XRP. So, UTXO, DeFi, like so Bitcoin based systems like Litecoin, Doge, Bitcoin, and XRP based DeFi, these are vast untapped markets that are going to produce an enormous amount of value. And it's something we're betting big on as an ecosystem. And why we think we have a competitive advantage is we are accounting compatible with these people. We're UTXO, they're UTXO. It's very easy for Cardano to talk to Bitcoin and Bitcoin to talk to Cardano. much harder with Salana and Ethereum because they just have this account-based model. Uh the other thing is we are investing heavily in allowing people to use Cardano's dev tools to write Bitcoin smart contracts. So if you're a taproot developer, you may not even know about Cardano, not even care about Cardano, but use Cardano related tools to build smart contracts and test them as a hybrid application where part runs on Cardano and part runs on Bitcoin. So we have a language called Akin for the Cardano smart contract and we found a way to compile it to Bitcoin script. So you can write an Aken smart contract and run it on Bitcoin through cap route. So that I think is going to be a big differentiator and uh you know next quarter we'll start having some things come out for it and then uh by quarter two and three we're going to start consuming it because we're working the yield side at the same time. It'll be in lace wallet. It's a toggle. We added Bitcoin support for it. But the fast follows will likely be blockchain.com and Bitcoin and Brave and that's about 100 million users. So it's a large enough TAM that uh I think you can move the numbers quite a bit.

So I guess that's something that we we can look forward to in the next 3 to 5 years. Let's talk about something we can look forward to right now which is midnight.

Yes sir.

Um let's talk about I I have heard and watch and rewatch your midnight explanation video like many many times. It's still very hard to understand. Um, since we're here, can you explain to our viewers like why is Midnight such a big deal and then how is Midnight going to change the blockchain world?

Well, I've had the great privilege of seeing every generation of cryptocurrency. And there's a symptom when you're getting ready for a generational change. It feels hopeless and stagnant and everything just seems to be a copy of a copy of a copy. Like I remember when we were first generation Bitcoin and we created Ethereum and it was the the true second generation. Well, right right at that time in 2013 when we were in the transition, um you know, we had Feathercoin and Freycoin and this coin and this coin, they're all just copies of Bitcoin. And then we tried to make Bitcoin better with like Mastercoin and Color Coins and it's just not working. And everybody's frustrated. The markets were stagnant and Malcox collapsed and Silk Road collapsed and just a bad time. And everybody was in the sticks. You know, we were all excited because Bitcoin hit $1,200 and then it collapsed to 250 and it was just stagnant. And then Ethereum comes out. Oh, Ethereum. Whoa, this is new. This is different. And then that worked for a while. You know, CryptoKitties came out. It was amazing. You know, Ethereum was very exciting. And it got a little stagnant, right? And then suddenly you have like Cardano and Tasos and Algrand and, you know, Salana and these other gen 3 years. Now we're late gen 3. And just like the prior generations, people are looking for something new. But every generation brings fundamentally new things to the table. You know, the first generation was about value transfer in a decentralized way. The second generation was about smart contracts. The third was about scalability and interoperability and onchain governance. Well, now the fourth generation is fundamentally different. It's about computational privacy, rational privacy, selective disclosure and cooperation. It's saying you keep your network effect. You know, we don't care if you're Ethereum person or Salana person or Bitcoin person. Please don't sell your tokens. You don't need to. Just pay your transaction fees and whatever token you want. And you look at fourth generation infrastructure like you would chat GPT. You know, why chat GPT went from nothing to 800 million users so quickly is it didn't tell the cell phone developer they have to radically change anything. It just gave them an API.

It said hey guys all you got to do is just like there's this magic black box. You ask it a question and answer comes back out. You don't have to know how it works but it just works.

Yeah.

And the cost of building chat GPT yourself is astronomically expensive. It's a very expensive, delicate, and dangerous to build piece of infrastructure. Imagine having to build a 10 billion dollar data center and train all these AI models and hire all these world-class engineers and pay them $5 million a year and everything. It's like, are you going to do that for your $30,000 cat application on Android? No, just going to call chat GPT. And every six months it gets better. You know, now it makes images and now it does video and it does all this other stuff. So privacy is the exact same way when you look at privacy-enhancing technologies, homorphic encryption and multi-party computation and uh zero knowledge uh and trust execution environments. These foundational pillars of PET, they're all extremely difficult to work with and they're very temperamental and they have delicate security models. They go bad really quickly. Uh and so you don't really want to mess with it if you're unis swap or if you're a regular DAP developer, but you need it because you need to be able to do selective disclosure. You need to be able to trade regulated assets like how do you do KYC know your customer anti-moneyaundering like how do you trade a security on a blockchain you don't want to have to figure out how to build that whole system and then rewrite all the code of unis swap. What you want to do is say if it's a regulated asset goes through midnight and there's a workflow there and if it's an unregulated asset it goes through this other workflow and settlement is compliance. If it settles, it works and we trade it the same way and we don't have to write any new code and it's like two weeks of hacking and they're good to go and they're all fired up and then you know when the new fangled great privacy thing comes out we just add at midnight you expand the API just like you have image generation or video generation. Well then that's equally valuable for the Ethereum developer as it is the Salana developer as it is the Bitcoin developer. Like let's imagine if Bitcoin DeFi is successful. You're gonna have all these Bitcoiners with all these altcoins and all these other things and maybe they want to sell their altcoins for like something else. Do they want to go onto exchanges and do that? Like maybe they live in Hong Kong or something. The Chinese government's not really down with these types of things,

right? No. So maybe they want to do that on a DEX, and maybe they want some privacy with that DEX. So they have a private DEX. There you go. You know, and and so that's what, or a prediction market. Do you want, if you live in mainland China, like a prediction market, when will Xi leave? You know, your name publicly revealed that you're betting, that's a bad, right? That's really bad. So you maybe you want that to be anonymous that you're betting on these types of things in a prediction market.

So it's just self-evident that people want privacy, whether it be a stable coin or a DEX or a prediction market. And so if you have this thing that can just talk to all the chains, it can talk to to Ethereum and Solana and Bitcoin and so forth, it becomes an aggregator for intents and liquidity, and it becomes an aggregator for, uh, for users to do things in a private workspace. And, and if you tell them that they can do it in any token that they want, and it feels like a natural extension of their infrastructure, like they haven't left their blockchain. That's how cooperation works. That's really the most important pillar of the fourth generation. Governance was the most important of the third.

Um, so there's a lot you have to do to make that work well, and we spent six years working on it. You know, it was an enormous lift. We have hundreds of scientists and engineers and all these people, and it, we just kept doing it and doing it until we cracked the model. And then we said, we got to do a distribution. We invented the Glacier Drop, and it was a three-stage distribution. So we did an airdrop to 33.6 million eligible addresses, eight ecosystems, seven blockchains. Then we did a proof-of-work style thing, the scavenger hunt, and we had tons of people participate in that. The big winners were actually Google and Microsoft because they were doing a lot of cloud mining with for people and they made millions of dollars in fees from that over a 21-day period. [laughter] They did very good there. Uh, and then obviously the, um, uh, the exchange distributions because when you do an airdrop, then people also get their exchange stuff. So amongst all three of those mechanisms, we estimate about 1.5 million unique people, which is just really remarkable when you, you think about that.

>> Just the airdrop process was pretty much flawless.

>> It was, it, it exceeded my expectation. Like,

>> It took 18 months to design that, cuz remember, I had to learn how every one of the chains worked.

>> In fact, in some of the chains, they had never done it before. Like XRP, we did it on Ripple. We had to call David Schwartz and sit down with him and be like, "We're really trying to understand how your ledger works and, you know, like how to do an airdrop for XRP, like how does this actually work?"

>> He's like, "Oh, yeah, yeah, I guess we can do it this way." We're like, "Yeah, okay." You know, we're so we're brainstorm with the guy who created the technology, like how do we make this happen? But it really made us, um, it changed the mindset of the team because you tend to be a maximalist in cryptocurrency, and you tend to wake up be like, Cardano, Cardano, or, you know, Midnight, or, you know, Bitcoin, or. But with Midnight, what we were doing is we were like, well, my engineers have to know how Solana works, Ethereum works, Avalanche works, Binance Smart Chain works, you know, XRP works, Cardano works. You really can't be a maximalist if you spend that much time like running nodes and building things because you find stuff you like in each ecosystem. And, uh, that also means the technology of Midnight has a lot of hybridization. We have consensus from Aptos, and the base ledger parity substrate is there. The, the privacy model started from Zcash with Plonk and Halo 2. We have some stuff we're doing with Near Protocol. There's, there's just a lot there, you know, and obviously we put our own flavor and put Cardano magic inside of it. Uh, but really, it's, it's an assemblage of the best ideas from many different places, which meant we were able to bring it to market much faster and solve problems much faster. But more importantly, it meant that we get to be friends with everybody because when we make improvements, we can do upstream. Like we've already done a lot of improvements to parity substrate, so we can bring that upstream to the Polkadot ecosystem. And when we finished Aptos' uh, Julian implementation, we're the first to have a safety and liveness proof for that, so that benefits their security of their network because they now know what's safe and what's not safe about the protocol. So that's been a real joy, you know, to, to work that way. It was very adversarial for the first like six months to a year, but then when people realized we were serious about cooperation, the, the walls came down and they started viewing us like an extension of their own projects, and that's what makes Midnight so special.

>> So, so I guess I, there's one question, right? So in the past couple years, there's sometimes an environment where you feel like a Solana holder is going to hate a Cardano holder's, ADA holders, and ADA holder doesn't like XRP holders, whatever. It's kind of like a competition kind of vibe, and then like people don't dislike each other. Do you see that condition getting better now?

>> Yeah, it will. Or if we have things like Midnight, because then we view everybody as a business opportunity as opposed to, um, an adversary. You know, the reason we view people as adversaries is we have some zero-sum thinking.

>> For the ADA token to be valuable, the thinking is the Solana token has to go down.

>> No, it's a,

>> For the Solana token to be valuable, our thinking is the ADA token has to go down. We have to flip them on CoinMarketCap.

>> And that's how we did it as an industry for a long time, and it created this neurosis where we would just find vanity metrics to social each other over. And if it's not price, it's TVL. And if it's not TVL, it's transactions. And if it's not transactions, it's TPS. And if it's not TPS, it's partnerships, or, you know, pick your favorite poison. But everybody would pick something. You know, with us, it was decentralization. We're the most decentralized thing. It was measured by the EDCI. We're better than you because we're decentralized. Yay. Okay. Uh, and, and it's like, great, what the hell does it have to do with an everyday user being able to do something interesting on the network?

>> Do you think you care so much when you plug something into that outlet over there, whether the watt was made, uh, you know, from coal or solar or nuclear? It's a fungible good at the end of the day.

>> You care when you plug it in, it doesn't work. That's what you care about. So, infrastructure has to be reliable, cheap, safe, effective. Uh, and what we need to do is realize that if we share liquidity with each other, we can grow as the TAM grows, and there's plenty of wealth to spread around, given that there's a half a billion users in the ecosystem and a multi-trillion dollar market cap. Collectively speaking, we're going to grow to two billion users over the next 10 years, and we're going to be at a $10 trillion market cap when you look at the macro, because of the real-world asset revolution and the unification of the financial markets. So why the hell do we squabble so much?

>> Exactly. I feel like we should all like work together.

>> And then, um, the pie is just too big. And then, um, I don't think there's going to be one chain winner. It's going to be a multi-chain winner in my opinion. And then hopefully everybody can get along better from this point on. Uh, I guess since we talk about, um, TPS, I want to talk about Hydra.

>> Because Hydra was very, very exciting, like, like,

>> But then like recently, less people talk about it. Can you share more about the, the Hydra progression?

>> Well, usually they talk about it when somebody launches something. It's ironic because Hydra's on mainnet. We're using it today in multi, like the Glacier Drop for Cardano on for Midnight was done on Hydra.

>> Wow.

>> It cost him like $11,000 to airdrop to 33.6 million addresses. That's not bad.

>> Wow.

>> You know, it's a really cheap thing to do, all, all things considered. Um, and, uh, Delta DeFi just launched on Cardano. They're an exchange with Hydra.

>> Uh, we have a vending machine now that runs on Hydra. So, you, you were at Token 2049.

>> I was.

>> Yeah. At our booth, we actually had a vending machine, and you actually bought stuff out of the vending machine with your cell phone on Hydra.

>> Oh, wow.

>> Yeah. So, there's just a lot of cool stuff on Hydra. And what I tried to keep telling people is Hydra is not like this magic switch that you flip it, and then there's like, before Hydra, after Hydra. Okay.

>> It's a DApp by DApp thing. And really, the goal of Hydra is, it's supposed to reduce the transaction fees, and it's supposed to speed up the settlement time and reduce the bloat on the network.

>> Mmm. So you want instant finality. Like, you do podcasting, and you have these people, well, it'd be nice if people tip you. They can tip you a penny, and it'd be nice that if you have 10,000 people watching a live stream, that you know, if they're doing a 100,000 tips, for them it's like 10 cents. For you, it's 100,000 transactions. The cost of that is minuscule, right? Now, you can't do that with credit card transactions, for example, or Bitcoin transactions, or ADA transactions, for that matter. So it opens up micro-payments, it opens up instant payments. Like, why we did the vending machine is nobody wants to stand at a vending machine for two minutes or three minutes waiting for something to go through. You want to tap your phone, it works.

>> Point of sale systems, ATMs, these things. So we're proving out all those different use cases. The video game example, HydraDoom, having every frame be a transaction, that gave us a model through multiplayer to show the peak throughput of the system. We got it to a million transactions a second for peak, peak throughput. This is crazy. [clears throat] Cuz, uh,

>> So, so, but that's on a DApp DApp basis, you know, so everybody can configure it the way that they need it. And, and it's a parallel scaling mechanism to, or L1s, which is the other way you can make the network faster. And that's taking the consensus algorithm, just speeding it up. And so we spent years and years figuring out how to do that and preserve the same level of decentralization because typically when you look at like a Solana or a Suite, or any of these really fast ledgers, how they make the system faster is, first, they reduce the security parameter. So you go from 50% Byzantine resistance to 33 or 25%.

>> And then second, they increase the operating cost of each node. So yeah, it's easy to have a high TPS rate if a node has 256 GB of RAM and 150 processing cores and, you know, a 10 GB fiber optic connection, and these types of things, and you, and your five friends will run the network.

>> As you see with like Solana validators or these other things. You don't really get decentralization yet. So what made L1s challenging is we really like having thousands of stake pool operators, and you can run it on a Raspberry Pi and do all this stuff. But how do you get Solana-style speed but preserve the same level of decentralization and security inside the system? So that's what we did. We just, uh, we spent years and figured it all out. And so that will turn on next year, and we think it'll be about a 60x to 100x increase in throughput of the system. So we'll go from a decent transaction rate to enough transactions that we can comfortably run pretty much anything in the next three to five years without much incident. And what's nice about L1s is it's kind of on a tick-tock model. So you do a bunch of desk research, then you implement and deploy. Then you do a bunch of desk research, then you implement and deploy. So we have L1s coming out next year, and next year there'll be a parallel track effort where we're researching the next generation of it, and then we'll build it the following year, and then deploy it the year after. So you kind of have a nice 24-month window where you're on that version, and then you get the next version, the next version, and even if you're doing a 10x each time, I mean, that's just exponential, you know? It's so many more TPS.

>> That is crazy, cuz a couple days ago, I read a post saying that Cardano only does 250 TPS.

>> Yeah. [laughter]

>> Shows a lot, like people are just not like, they, they're not familiar with the ecosystem.

>> And the most important thing is network utilization, you know. So he's like, well, I don't care about the transaction rate. I care, are you having mostly saturated blocks, or are they empty blocks? And we're only about 30 to 40% utilization on average across the network. So even with today's technology, the network is not saturated. So there's not like this existential demand, but we know that if there's a bull run, there will be. So we got to get Hydra, and we got to get, um, the, uh, the L1s done. You'll notice I didn't mention the third thing, which is the only thing in the world Vitalik thinks about. You know, he goes in the shower every day and covers himself in it. You know, roll-ups, snarks, recursion, the ZK stuff. We can also implement at the same time that, and we've already done a lot of experiments with how would we do roll-ups on Cardano. And there's several community projects like Midgard is one that's looking at roll-up systems. And we've even added, uh, all the cryptography for roll-ups in like BLS support, for example. Uh, so we have the right curves and we have the right technology, and it's quite trivial for us to pull a Scroll-style approach or, you know, any of these things into the network. And actually, Midnight by its design is the best roll-up system ever conceived, because it's going to have lattice-based folding in its roadmap. So it takes what is on Ethereum and crushes it. It's significantly better than Starks, which I think are a road to nowhere. Um, so, you know, we, we have the right technology, and we haven't had to draw into the ZK space yet to achieve scale. We will, and it'll be done in a very organic way, thanks to the existence of Midnight. And so a combination of those three things, uh, ZK, and, uh, and Hydra, and L1s, it will give us infinite TPS. You know, there's, there's not going to be a transactions per second problem. You're more talking about use and utility, and you have to predict like how will crypto change over time. The nature of the transaction is changing. Okay? So transactions right now are very procedural. They're not, they're not declarative. And this is not how the world works. If you say to your friends, be like, "Hey, meet me at Applebee's." You don't say, "I want you to get in the car and pull out of your driveway and then drive 25 miles an hour and then take a left, stop at the stop sign, resume driving, drive for at 35 miles an hour, take a right, you know." No, you say, "Meet me at Applebee's at 1:00 and here's the address."

>> Okay.

>> You've given the intention, I want you to meet me here, and here's, uh, here's the place you need to go. You're not telling the driver how to get there. And so financial transactions for the most part in the legacy world work like that. They work in the declarative sense. Unfortunately, in the crypto world, they work like the procedural sense where we have to tell it exactly what you want step by step. You want to say something like, "I want to buy $150 worth of Bitcoin, and I want $150 worth of Bitcoin at, you know, no more than this price. Uh, and I'd like it filled before the end of the day."

>> That's an intention.

>> Okay. So when you look at the future of a transaction, it has to have identity on the wire. It's likely going to have to have geographic data. It has to have privacy because you want private intents because you don't want people to trade against them. Because if you say you're willing to pay X, well, I'm just going to charge you X. I'm not going to give you a discount on that, right? I'm going to always give you the worst possible price. So you want private intentions. Well, the vast majority of transactions are going to settle that way. Well, does that in the transaction say it has to settle on the Bitcoin blockchain or the Solana blockchain or the Ethereum blockchain? No. It'll be best available for your intention.

>> Mhm.

>> That's another reason why systems like Midnight are are so remarkably powerful as infrastructure, because they can be an objective neutral routing layer for all of these different systems. And there may be days where Ethereum is more competitive than Cardano, or, you know, Solana is more competitive than Ethereum, or these types of things. And if the system is built the right way, the user knows Midnight's just going to figure it out.

>> And by having privacy, too, no one can trade against it. You know, you'll get fair filing of these types of things, which reduces a ton of theoretical attacks. So, I think it's not just TPS, but it's also what goes into the transaction. Um, transactions also have to have proofs.

>> You know, we have become addicted to the network will just figure it all out. But when you get a transaction, you need a payload with it that says, well, why do I know what you're saying is true? Do I have a full copy of the blockchain? How could I? For the Solana network, it's like terabytes and terabytes and terabytes, and it just won't fit on your phone.

>> So it's, "trust me, bro." You get this thing, and you're like, well, you know, I hope the back end is actually validating transactions properly. But if you have recursive snarks and folding schemes, then what you're going to be able to do is you're going to be able to not just send a transaction, but you generate a proof at the time of sending the transaction that the balance is correct and the coins have not been double spent. So when you get it on your phone, it checks the proof, and the proof checks out, and it means you know that that's real, and you didn't have to trust a server, and you didn't have to trust third parties. That's the other thing that Midnight can do because of the multi-resource consensus and the direct observation of different chains.

>> In a folding system, it's going to be able to fold up all those different systems, and it'll be able to tell you, uh, allow you to build transactions with proofs and then submit them, and then your, your cell phone has the same level of security as a full node. So that's also very exciting because that was part of Satoshi's vision, this idea of inclusive accountability and network homogeneity. Why? He wanted everybody to be a full node. He didn't trust anybody. He wanted every node to be able to check the math and verify that when you said you had a Bitcoin, it's real and it hasn't been double spent.

>> But it's not possible in a multi-chain world to have a full node for everything single thing you integrate. So, you have to have proofs on the wire.

>> Okay. So, next we're going to talk about a question. Uh, myself and all my viewers are really, really interested to know your take. So, stablecoins, USDC, USDT integration to Cardano. Uh, why has it been so hard for Cardano to integrate USDC and USDT? And do you see, um, us implementing USDC, USDT in the short future, or it'll be done next year?

>> I think there's a path for it with the Pentad structure. The, the historic reason was that it was just a game of finger-pointing of like, who was the actual accountable party, and we missed our window. We could have easily done it in 2021. Uh, the foundation was still too young, and it didn't want to take accountability. And as a moral thing, I didn't want to have IOHK sign five-year contracts to integrate these types of things when it was supposed to be done by the foundation. And Emurgo never wanted to do it. So the founding entities kind of squabbled a little bit about the accountability. And back then, you know, integration was only a few million dollars. It was very cheap. Then the guys got big, and when they got big, like seven figures turns to eight figures. It was very big ticket prices, and further exacerbated the foundation just wanting to pay for it. Uh, and then it got to a point where the other companies were like, well, you're too small for us to integrate.

>> Wow.

>> You know, they looked at the TVL, they look at the stable coin issuance, the TVL, and they said, well, you know, your competitors are 50 times or 100 times larger in terms of stable coin issuance. So what assurances do we have that somebody's going to go mint half a billion or a billion dollars worth of our token on your network? Uh, you know, and that's one of the reasons why you'll notice certain patterns, like Algorand, when they integrated, they minted $300 million worth of USDC. You know, that was kind of like a part of the deal, you know, because they want the money. You know, the USDC wants the treasury bill, uh, uh, revenue. So there's an inevitability about it, but you have to work your metrics. You have to show that Cardano has a real DeFi ecosystem, and you have to show that there's real value there. So you work your way into it. And it's not just stable coins, it's also oracle infrastructure, bridge infrastructure, analytics infrastructure, and custodians. Midnight has fixed a lot of it. We got BitGo and all these other guys for the custodial side. We got tier-one oracles like Pyth, for example, to come on in. Uh, bridge infrastructure is coming, and when you get those types of things, then the stable coins come, and, uh, then you start getting the liquidity, the TVL goes way up, and the stable coin issuance goes way up, and there's sustainability in the relationships. So, it's an, it's an inevitability, but the first proof point was to show that Cardano could launch a billion-dollar product.

>> You know, there was a lot of open questions like, why would you launch this precious amazing Midnight thing in the Cardano ecosystem? So many VCs asked us that. They're like, we met with them, and they said, like, we love Midnight. It's one of the crazy, the only bad part of Midnight is it's launching on Cardano. Like, it'll never be successful. Cardano is an island.

>> And we said, no, actually, there's a lot of value there. Cardano is the best platform to launch something like this. Well, now that we've had a successful launch, and it's a billion heading to 10, Cardano has shown to the entire industry it can create something of value in the nine or 10 figures.

>> Well, then that will naturally create transaction volume, naturally create TVL, naturally create an ecosystem, and then it makes significantly easier to go and get a Circle or Tether or, you know, any of these things because now it's not like just pay us a giant pile of money and just be like a constant negative carry. It's like, we want the business.

>> Mhm.

>> It's like, we'll never be delisted Midnight, why? Because there's $2 billion in trading right now. If you're a tier-one exchange, you capture half of that. It's almost $20 million a year in trading fees, and that's with all the VIP discounts and other stuff.

>> So, they can hem and haw, but they're like, "Yeah, we, as long as you're trading volume like that, yeah, you get liquidity. That's, that's easy." And, and the, the stupid exchanges that are either political or anti-competitive, um, that don't list, it's self-evident how stupid they are. You know, like Gemini with Cardano is the canonical example of that where,

>> Guys, I, I get that maybe somewhere along the way at some dinner party I offended you or something. I, I'm not actually sure what the,

>> GMI trade.

>> They don't trade ADA. It's still the only major exchange that doesn't do it. We did a calculation. We think based on their volume trade and everything else over the last five years, had they listed ADA, they probably would have made more than $70 million.

>> So somebody in that organization made a business decision that all it was is just flipping a switch like trading ADA, right? That cost them $70 million. Binance trades it, Coinbase trades it, all these guys trade it. It's not like it's a small thing. It's a top 10 cryptocurrency, and they have never integrated.

>> I thought they did.

>> They haven't.

>> They've never integrated. And in fact, I ran into one of the Winklevoss twins when I was with Mark and Andreessen and Brad Armstrong and others, uh, with Tim Scott and Senator Lummis in, uh, in DC, and I, I mentioned it to him. I'm like, like, why haven't you listed goddamn,

>> That's crazy.

>> You know, Cardano, man. Let's, let's, let's just get this done.

>> There's a lot of that in the industry. There's just a lot of this, uh, usurious and altruistic behavior, and there's a lot of ego that exists inside the industry as well. It's not so bad anymore with a lot of the infrastructure providers, but there are a few exchanges that are very problematic. And, uh, but for the most part, the rest have been great. And the most part, the rest of them, they're businesses, and they look at spreadsheets and they look at revenue, and they're like,

>> Makes sense.

>> We kind of like the trading money, right? You know, it'd be one thing if we had $10 million of trading volume like Alogrand, but when we got $2 billion of trading volume, it's like,

>> Yeah, we kind of like this. This is good, man. There's profit here. There's all this other stuff here. It's, it's good stuff. It's good money where you can find it.

>> Let's talk about Pyth Network.

>> Yeah.

>> Uh, very interesting because I think they're,

>> One of two legitimate, um, oracles.

>> Yeah.

>> Alongside with, uh, Chainlink.

>> Yeah.

>> Can you tell us about Pyth Network and Cardano integration?

>> Yeah. Well, Pyth is just an example of everything, right? You know, they're a great product. It's a phenomenal team, wonderful founder, very easy to work with, very easy to negotiate with. They want to be here, and every conversation wasn't about integration fee. It was about utility and use, you know, who's going to use it. So, one of the things we did immediately after announcing is we announced a hackathon for Cardano applications to use Pyth. So, we call it the Pythathon, and we're having it March down in, uh, in, uh, Argentina with TXpipe, and they're, they're going to help host it. But that's what we do. It's like, uh, we announced a major integration touchpoint. Pyth is one of two that shares information for the Department of Commerce in the United States. They have information for 113 blockchains. It's sub-second latency. You know, they're a great organization, and Cardano DApps are going to adopt it now. And there's more coming, more oracles coming. But you come to Cardano, you get a very friendly, welcoming community. You get a lot of technical support, you get a hackathon, you get a lot of free marketing, and you get new customers coming. That's what we offer to these critical integrations. And a lot of them love it. And they were so surprised, you know, they were like, "We've integrated 113 blockchains. We've never been treated so good, you know, from from here." I was like, "Yeah, because we want you, you know, we want to actually be partners. We want to actually consume the service and use the service." Uh, and it's a phenomenal product. It's like millisecond latency on these Oracle streams. They're extremely robust and resilient.

>> Uh, so we're very happy, uh, with that. And as I mentioned, more to come. Dune Analytics was just announced today.

>> So that's going to be a lot of fun to get them to start tracking Cardano stuff because they never did before. Uh, and more analytics companies are coming. Uh, Fireblocks was announced by iGOM. So that's that's a great one as well. That's a good custodian, and most institutions use it. Uh, and then, you know, the next wave will be bridge infrastructure and, uh, stablecoin infrastructure. So I'm going to have a really fun time with those.

>> Okay. Okay. So, next question might be a little bit, uh, dicey.

>> Yeah.

>> Uh, so, outside of hundreds of, uh, Cardano projects, I think right now a lot of people will argue Snack, the main coin is one of the most viewed or most attractive, um, Cardano project. What's your take on that?

>> Oh, I know Rafa and his team, and the Snack team has been very cordial. Uh, you know, they're a great, for a meme coin to survive, like Dogecoin is around, right? You know, they can survive. For for them to survive, they can't just be a meme. They have to be a community. That's the number one thing you have to do. And if you have a strong community, then it's like a club. You know, and people, there's Freemasons, you know, people are part of clubs, okay?

>> Sock has formed a culture, it's formed a community, uh, it is a club, and they, they build utilities for that club, like SnackSwap, and, you know, other things like that. And eventually, those utilities actually are useful. They can create liquidity. They can bring new users in. They can do payments. You can issue assets. Uh, so SNE has been able to cross the Rubicon from a short-term meme project to a real culture, real community, and real utility. And so they're here to stay, and they will continue to grow in value. And what's nice about them is they, they have been able to punch above their weight.

>> You know, they're able to do treasury withdrawals, they're able to get listed on Kraken, they're able to do all kinds of things that you typically don't see from a Cardano project. Uh, and, uh, and they have good leadership, and they have good people. And we learn a lot from them. You know, when we were thinking about the Discord management for Midnight, we looked at Hosky and Snack as two examples. Uh, when we thought about social media management, we looked at the Snack project, uh, for these types of things, and we'll take those lessons into the Midnight community building, uh, which is the single most important thing for the durability of the project as a whole. I, uh, don't spend a lot of time saying like, your project's bad, or I wish the project was this way or this way. I look at it just basically very simply. Are people building on the chain or not? Am I getting, am I getting TVL? Am I getting transaction volume? SNE is creating active users, transaction volume, and they're building on the chain. So they're equally important to Strike, equally important to Sundae, equally important to Minswap. They matter just as much as anybody else because they bring people in. Uh, and as long as, as they're doing that in an ethical way, and as long as they're doing that in a way that's sustainable, uh, that's what we look for as an ecosystem. Otherwise, you're a gatekeeper, and then how are you any better? You go around saying censorship resistance and decentralized and freedom of speech and expression, except for the things I don't like, and then those things will go ahead and censor and prevent run out of the system. It's like you're hypocritical if you do that.

>> So, let's talk about the recent hack.

>> So, it was a Cardano bug that was, um, I think originated from 2022. Yeah.

>> And then, um, we never took care of it, and then it becomes like, uh, sort of like a big, big thing, but then not really anything damaging happened.

>> Well, we're still doing the forensics on it. Um, so, generally, when you have complex distributed systems bugs, it's usually the case where it's not the bug itself. It's a collection of things working together that create the incident. So, the bug existed since 2022, but people couldn't do anything with it. It was just a bug. Um, but it wouldn't create a valid transaction. And so, what ended up happening is that we updated the node software, and we had two versions of the node software. We had an older version and a newer version. Um, and the older version would would ignore this bug, and the newer version would, uh, would actually accept the transaction, would not accept the transaction. So a person realized that they could construct a very special transaction, and half the network would accept it, and the other half the network would reject it.

>> So when you have irreconcilable history, you create a fork, and you have two networks running, basically. Uh, and this is a worst-case scenario. Typically, when this happens in a BFT system, the only way to resolve it is to shut the network down and manually edit the chain and put the pieces back together, which is as bad as it gets in cryptocurrency. So if this happened on Ethereum or Solana or anything, it would be a hard fork and stall situation. But Cardano was built like Bitcoin, where it has a Nakamoto proof-of-stake system. It's the only one around, actually. So it has a self-healing property. And basically, the idea is that it can pull back together, um, if you have enough nodes and enough window of time, upgrade to pick a chain, and then you have an unbroken chain of history. Now, this is not a get out of jail free card because during that period of time, you have two sets of ADA, one on this fork and one on that fork. And so if you have bridges and exchanges and certain DeFi applications, you could potentially double spend during that time period. So it's really important that you detect this early. So those guys just shut their services off and they wait, and, uh, and then when the network comes back together, you're okay. That's why in Bitcoin, historically, you wait six confirmations because actually this forking and coming back together, it's happened 3,000 times in Bitcoin. And because they're called orphan blocks, and it typically is not a long chain reorg, but it's one or two orphan blocks, and it's because a minor over here has discovered a block around the same time as a minor over here, and their clocks differ. So the guy over here thinks he's the longest chain, and the guy over here thinks he's the longest chain. So the only way you resolve it is whoever builds the block first.

>> Oh.

>> So the problem is the minute that one of those chains builds it, you throw away that other block.

>> Yeah.

>> So for a little while, you think you just got 50 Bitcoin or 25 Bitcoin or whatever the block reward was, and then when, if this guy built first, then you lose that entire block, but all those transactions get dropped inside that block.

>> So that's what Nakamoto proof of work does, and our system is based on very similar principles, but this was a long chain reorg, so it was a several hours of history. So forensically, what we've been doing, because we collected history on both sides, is reconciling, and about 94% of the transactions were replayed on the U chain that survived, and about 6% were dropped. Okay.

>> Um, and we're trying to see if that resulted in any economic damage to exchanges or other things, but it looks like we caught it in time. So that didn't happen. Um, these come up from time to time in cryptocurrencies. They're unavoidable. It's the first time in eight years. You know, it happened in Cardano. We got a little egg on our face because we were always like, we're invincible. Yay. But it's important to understand the network didn't stop.

>> Uh, the network ran. In fact, we had double, double networks running during that 12-hour window, which was a very exciting time. And, you know, it self-healed, and it didn't require centralized coordination. It was healed in a decentralized way. So that's a good testimony to the resilience of the system as a whole. But it did indicate the need for a canary network for an early detection system in case something like this ever happened again. Uh, it could be broadcasted quickly to certain key players so they could stop service, you know, don't leave Cardano, you just stop trading for 12 hours or something. Also brought everyone together.

>> It did. It created the Pentad structure, you know, because we worked with the foundation, and we worked with IOHK, and we worked with everybody. And things had gotten a little crazy, and we said, let's just all come back together and just all talk to each other again. Uh, so we did that as well, and it, uh, it really healed the ecosystem, you know. Um, one bug every eight years, uh, is not too bad. Yeah.

>> Uh, but it does bug me, you know, and I want perfection.

>> The problem is that,

>> AI is going to make this worse, not better. And actually, this is one of the reasons why I think Cardano is going to do so well in the next five years because these exotic attacks, every single blockchain, including Bitcoin, has had them. In fact, there was an inflation bug on Bitcoin that was discovered in 2010 that they had to roll back, uh, that resulted in the creation of billions of bitcoins. It's a very old bug, and it was a script mismatch, and so you could mint Bitcoin out of thin air using this attack, and they had to roll that one back very quickly. Every chain has it because it's just the nature of these languages. If you have AI, you can load the entire codebase into a large language model and then you can ask it, attack the network and figure out a transaction that can do this. So if you don't use formal methods and you don't use, uh, you know, sophisticated software engineering techniques like we do, the probability is you have at least one today, a zero-day exploit that they're going to be able to to hit and destroy the [clears throat] network.

>> Well, the people who did stuff like that five years ago were like super turbo smart black hats, or very lucky script kiddies.

>> But now you have a situation where anybody can do this, any, because of AI. So the frequency of these attacks on both the smart contract side and the ledger side are going to go up exponentially.

>> Wow.

>> So you need fundamentally different software engineering to be able to protect against it. And there's only a few chains that have this engineering, like Tezos is one with OCaml, and, uh, and we're one with Haskell and Agda. So it, uh, actually to me, it gave me more confidence in the Cardano model, not less confidence in the Cardano model. It made me believe the system is built for the future. That's actually my next topic, which is AI and blockchain integration. Right? So in the future, we see a world with AI, we see a world with blockchain. How do those two technologies working together, or if it's even possible to integrate them?

>> You can't really wholesale integrate AI and blockchain the way blockchain works because they do fundamentally different things. I spoke at a conference years ago called AI4, and Geoffrey Hinton was there. He was one of the inventors of the Transformer, and he got a Nobel Prize for it, uh, amongst others. And I said that blockchain and AI, in a blockchain system, you're talking about a deterministic system which is very low resource and high degree of replication. AI system, you're talking about a non-deterministic system with lots of resources and a lot of uncertainty, and a lot of proprietary private data. So, you know, blockchain, you want to create a common state of truth for everyone everywhere. If you use ChatGPT or Claude or Gemini, when you use those systems, you'll notice they're non-deterministic. You ask the same question, sometimes you get a different answer.

>> They hallucinate. You know, they have different views of history.

>> And also, it's very private. You don't probably don't want your ChatGPT logs, you know, publicly leaked everywhere. It's like, hey, that that rash looks problematic. You know, it's like that's a problem. So, uh, so these things are, are, you, they don't work together because they're impedance mismatches. It's like, uh, it's like hot and cold. But what blockchain can do is create economic agency for the data that we train on. Do the royalty management system. Like, if you use the blockchain, if you use the AI to generate some music, maybe Snoop Dogg gets a royalty, you know, or something like that, cuz you trained on his data.

>> And this is a concern that all the artists have, all the content creators have. Your own content, what if I create a digital twin of you and I just start doing podcasts and compete with you, and I can release content every day, you know, three times a day because, you know, I'm using AI to do this. You're like, well, that's my content and that's my likeness. How dare you? Like, where's my royalty? You can't do this without licensing it.

>> Well, every musician, every artist, uh, every mathematician, all the, all their work is being scraped right now, and it's being used for generative AI. So, uh, blockchain can help sort that out and establish provenance of where did the information come from, and when you pay a royalty to use the system to generate something, uh, where it goes and handle that payment layer. The other thing is it can sort out marketplaces for agents.

>> I don't think people realize, but Google and Facebook have to change in the next 10 years because consumer behavior is changing. So back in the day, and today, if you want to find something, what do you do? You go to Google, you ask a question. Yeah.

>> And Google gives you some search results, but you're in the driver's seat. You, the human being. Okay. So you're navigating the websites, you're collecting the information. Now, we have agentic search. So you tell the agent what you're looking for, and it goes off into the internet and spends some time there. It comes back to you with the answer.

>> Oh, I didn't know that.

>> Yeah. So you have like Perplexity or these other things that are emerging. So you'll ask a question like, um, "I want to know how many people in Taiwan are over the age of 50 have asthma." That's a question you can ask Perplexity, and it'll give you a number.

>> Wow.

>> Now, what it's doing is it's going to hundreds of websites. It's pulling public reports from the public health ministry. It's reading all of them. It's seeing what's real, what's not real. It's giving you an estimate, and then it just gives you some text back. It may take an hour to process that query. So you ask the question and you go off and go to lunch, you come back, the query's processed, you have an answer. Well, that already has radically changed search because how does Google make its money?

>> When you search for something, it gives you ads, and you click the ads. The agent goes around the ads.

>> So it never clicks it. So there's no search revenue from from that agent searching.

>> The other thing is purchasing decisions. So what if you say something like, "I'm looking for a car. I want to buy a car." Okay. Well, what are you looking for? Well, this is my price range, and, you know, my reliability, and the types of roads I drive on, and all this type of stuff. Well, what if an agent goes and does all this research, and it's become like your personal Consumer Reports? You remember the old Consumer Reports, and they had the cars inside of them, and they tell you the ratings. So, go off and tell, come back and say, "You want a Toyota Corolla made from this age range, and, uh, here's the price point, here's the warranty package, and all the other things you're looking for, and here are the top three dealerships that sell that in your region." Okay, that's agentic commerce. Well, it takes a lot of resources to build the perfect car agent. It has to have a lot of programming and contextualization. So I don't really want to give you like the world's greatest car agent for free. You should pay me.

>> All right. Well, how much would you be willing to pay? You know, maybe $3 or $4, right? Okay. I'll like buying a Consumer Reports magazine. You buy it. It tells you Popular Mechanics or whatever. It says these cars do all these things. You

buy it, you have it. So there needs to be a marketplace for people to buy and use. So consume agents and license them. Blockchain could be the broker for that as well.

So uh you can make a whole business doing nothing but creating customized agents like the best car advisor or the best medical adviser or the best lawyer adviser, these types of things. And then people basically pay a small fee and then those agents go and you give the agent usually a budget uh and it goes and buys all the information, aggregates the information and it comes back and gives you a beautiful report and the report gives you a superhuman level of analysis. You know where all the bodies are buried.

Well, here's the problem. That bypasses all marketing. They don't watch the car commercials. You know, they're they're not like influenced by an influencer or anything like that.

Like you were just talking about exchanges earlier. Well, what if you had an agent tell you which is the best exchange to trade on? You're not listening to a podcaster tell you that this is the best exchange to trade on. You're getting an agent doing fact-based stuff and it's coming back to you giving you the actual answer for your needs.

That is so massively disruptive. Two of the mag seven, Facebook and Google make all their money by being in a privileged position to help steer your eyeballs in a particular direction. And now they realize that agents are going to completely disrupt that. So there's going to be a trillion dollar business built in the next 10 years uh that focuses on uh basically creating a marketplace for these things to get information and also to steer consumer opinion and to uh and to give you objective information. In many cases buy the thing on your behalf. You're like find best available and just buy it. You tell it your intention and it'll come back to you with the thing and it arrives in your home.

Midnight was built for this because you don't want to share a ton of personally identifiable information. You know, you don't want you don't want some rando agent guy knowing where you live and knowing, you know, you when you pick up your kids from school and these types of things. That's kind of really creepy and weird. On the other hand, you do need to semantically convey this information to the agent because the agent has to know you have kids in order to make a good recommendation for the right car for you, right? Or else he's going to say, "Buy the Corvette." And you're I can't really put a kid seat in a Corvette. I mean, I can, but it's not a very bright thing to do, right? You know, want the minivan, you know? So, it has to know that about you. So, how do you tell it without telling it? That's a zero knowledge proof. That's midnight. That's midnight, you know? So, we built it for that. And uh in private intents, it's the same thing because you're disclosing what you want without revealing what you want.

So you're telling the agent what you want but you're not revealing to the owner of the agent or the operator of the agent what you're you're actually looking for. It's just doing that work.

So uh before we get to the QA I have one last question. So um in the past you have said that um you could have communication is what Cardano and IOHK sometimes lacks. Um for me personally I just want to share my experience. So I tried to contact you guys end of last year and we exchanged a couple emails and then people just disappeared.

Yeah. And then we waited a year. Um, I just want to say like if I'm getting this kind of treatment, I'm pretty sure like hundreds others probably feel the same way. How do we improve the communication side um to be more on time, more efficient um how do we improve in that area?

Yeah, you know, it's been a busy year and we were not prepared for being at the epicenter of millions of people's hopes and dreams. You know, I I am an engineer and scientist at heart and a lot of my communications are with people I know or people I know of and we like collaborating and writing code and writing papers and how I tend to communicate is in a broadcast mechanism. So I do AMAs and these types of things and then it gives me to them. But then I have this enormous inbound but I'm not selling any products you know I'm not I'm not saying like call Charles Hoskinson and I'm going to sell you some ADA or something like that or call Charles Hoskinson I'm going to do that. So when we started selling products like lace for example we did build people and uh I started hiring people like JJ Syler for example our our EVP of commerce. Uh and there they've been very responsive but me personally it's been a little difficult uh you know because the other thing too is just it's a lot of cognitive work to decide who's real and who's not real.

True. Like a great example would be Alex Mashinsky kept reaching out to us and saying, "Hey, come on my podcast. He's the Celsius guy, you know, and I know Alex. I've met him at numerous conferences and things like that and and it's like now he's bad guy, you know, and and so so there has to be a whole vetting team when you deal with a podcast or a media appearance who have to go and filter out like who's real and who's not real, who's there just to leverage your reputation to help them sell a product.

I completely understand.

Yeah. You know, versus other things and and so we didn't have the best processes or systems in place and so that created a bit of latency with all of that. The other thing is my availability is directly proportional to my travel, you know. So I traveled this year 264 days.

Oh wow.

And so I was I was bas I went to 18 countries. So, we were trying to like schedule podcasts and typically how we do it with guys like you is we try to find a mutual event and I'm sorry they didn't get back to you on that because what we would have done is done the interview at actually Token 249.

At my booth I had a recording studio.

Oh wow.

Yeah. We brought one in. It's a really cool little thing and and we did I think eight interviews inside that booth. So we we tried new models like can we take interviews on the road or other things and it's just one of those things where we're always moving time zones and other things like that and it just made it a little bit more difficult to connect uh and that's the Charles Hoskinson the community now the input output to the community depends on what reason are we talking so we created intersect with Emergo because we wanted a members-based organization to take product function and technical function for Cardono and what this allowed people to do is actually have an opinion. And then they could tell us that opinion in a structured way. And and so what was nice was that when we looked at our product roadmap, we'd be able to be like, is this good for you, you know? So, do you like this feature or do you want a different feature and what priority should we have it show? So, is it all hands- on deck with improving Plutous or do we create a competing language like Aken, uh, Laos, you know, how badly do you need scalability? If we have a dollar to spend, should we spend it on Hydra or should we spend it on Laos?

That's a different kind of communication because you need to talk to actual builders and you go to talk to Snack and Strike and Mins Swap and these other guys and say, "What is keeping you guys up at night?"

By having an institution like Intersect, it radically improved our communication ability with those people. Uh, because then you now have a mechanism to have a dialogue that's productive. Otherwise, how do you rank it? Cuz like who has the biggest Twitter following, you know, they go and complain about it.

It could be fake too.

Yeah. Exactly. You're right. You know, like Tap Tools just reached out the other day through Twitter and they're like, "Oh, you know, the Midnight Foundation's ignoring us and they they're they're not giving us the data that we need to be able to list them properly and all this other stuff." It's like, "Guys, just send us a damn email." Oh, they don't reply to their emails. Well, maybe we just like launched a major cryptocurrency. I don't know, you know? It's like, give us a week, man. It's been busy. We've been traveling. They were just in Abu Dhabi. Like, the whole team was there. And so, he goes to Twitter. He becomes a squeaky wheel. I see the tweet. I send it to Fami. and the father's like, "Fine, we'll deal with it." You know, so he sends an urgent thing and some guy at 2:00 in the morning has to send something to them and they get it done. So there's a little bit of that, too. And it creates a bit of fatigue because the more of it you see, it's like reading negative comments or other things, the the the the more engrossing it becomes and problematic to the organization. So there's no silver bullet for good communication. You know, it's a it's a layer of what are we communicating about? Who are we communicating with? What are the expectations of this communication? Are they commercial or non-commercial and then ultimately what is the outcome that would be good for both parties? I could literally spend the next two years of my life doing nothing but podcast and Xaces and other things and there would be unlimited demand for all those types of things. So obviously I can't do that.

Uh, but what I can do is make priorities and then even if it's not me, maybe there's a better person to go and talk to people about that. Uh, and we've been trying to figure out that uh that balancing act. Um, and in some cases it's just, you know, you drop the ball. You know, there's been numerous missed emails where I probably should have communicated back. Like I literally have uh a Signal channel with uh Tucker Carlson that I was supposed to reply back to.

[laughter] It's been like a week and I'm just like one of my friends connected me and he's like, "Hey, you should go on the show." And I was like, "Oh, yeah, I should I should get back to that." He's kind of a big guy, you know? He's got a large. Yeah. So, it was the same for Sean Ryan, you know, he's like, "Hey, when do you want to come to Tennessee and record?" I'm like, "Yeah, let me get back to you." And it's like proddding me. Do you want to come on or not? I was like, "Ah, yeah, that's right. I need to I need to get around to that." Okay. All right. All right. I'll coming. I'm coming. Don't worry. I'm going to reply back. You know, these types of things. I'm one of the worst people for this. And uh I live and die by the quality of my administrative staff. And sometimes they're on the ball and sometimes they're not, too, because I'm never on the ball for for these types of

I really appreciate that. We spent almost two hours together and then um I'm really proud of it and then um I was support today was the first time we met and I was supporting you for almost four years and I I'll continue to do that in the

I appreciate that. Thank you.

So I just have a couple question from our viewers. So the first one uh one of the viewer asks why UTXO? Uh what's the pros and cons of UTXO?

So the big advantage of UTXO is it's really built with an appreciation that your off-chain and onchain are equally important. And Vitalik had to learn this lesson the hard way. Like Satoshi knew this lesson. He tried both systems. There's evidence in the design of Bitcoin where it was clear that he tried the account system first and then he pivoted to UTXO with later variants. Um because he worked on Bitcoin for like 2 three years before releasing it to the general public. And there's hints in the Bitcoin talk where the version we got January 3rd, 2009 was not like an iteration of the same codebase, but rather he built something, stopped, built something, stopped, built something, and discover the need for X and then the discover the need for Y and discover the need. Even like like base 58 like the the formatting for Bitcoin addresses omitting certain characters. It's because he was probably having trouble distinguishing characters from each other when he was typing addresses and said, "Oh, I should just omit those from the set." So, there's a lot of that iterative learning and UTXO is like one of those things you discover is the best way of doing this stuff. Cash register accounting, which is what UTXO is, is so powerful because you can get formal proofs of the balancing of the transaction. You have inputs, you have outputs, they have to match. If they don't match in one direction, you're creating tokens out of thin air. If they don't match in the other direction, you're literally destroying tokens. So you can write really nice mathematical proofs to show a balancing of inputs and outputs. So from a formal methods when you're modeling the semantics of a transaction graph, you get much better provability about things. Second, you when you use layer 2 solutions, you can design your TXO system in just the right way because it's stateless and you know it's it's atomic either passes or fails. You can design it for isomorphism which means whatever happens in the other system can be preserved and happen on the other system. That's not the case with layer 2s on Ethereum right now. there's a lot of inconsistencies and non-determinism there and and so if something happens here in this layer two and here an enormous amount of code has to be written to reconcile the history of the layer 2 and the layer 1. We just wanted isomeorphism. That's what Hydra does. And so if it happens in Hydra, it happens down here. It happens down here, it happens in Hydra, you know, and that state channel is a super powerful property because like the vast majority of the stuff you're going to do is going to eventually be offchain and you're going to have some stuff onchain. Third, UTXO because of its nature eventually instead of having atomic transactions in the in the output graph, they're going to be proofs and those proofs will be aggregations of many events. Okay? And it's very easy to roll up UTXOs because you just roll up the outputs. You know, it's super super easy to do that. So, when you think about the world and where it's going, you're like, "Oh, okay. All this stuff is going to happen offchain. It's going to aggregate together." Like, let's say you have a poker application. Why in God's name would you want every hand in that poker application to be a unique transaction on your blockchain? It doesn't make any sense. What are you playing? I want a fair deck.

I want uh every round to be fair, no cheating, and I want to guarantee that my winnings and losses are preserved so people can't steal, right?

So, you have an entry point into the game. It runs in a state channel. You play hundreds if not thousands of hands inside the game. And when the game's over, the money comes back down. The winnings and losses are distributed. one transaction, two transactions, proofs, millions of transactions inside here and proof of randomness for a fair deck and the house can't cheat and you know all these types of things, right? Okay, so the UTXO does that really really well and it's very easy to work with that.

Now, why don't people use UTXO? Well, because it's harder. You have it's like the difference between programming for a single core processor and a multi-core processor. you have to figure out how to balance the graph and you have to figure out where all the outputs go and how to do concurrency and these types of things. It's not that you can't do it. It's like saying you can't do program for for parallel cores on a processor. Of course, you can do it. There's models for how to do these things, but you have to build that. Second, Satoshi tried to create a touring complete language, failed, and it resulted in an inflation bug that nearly destroyed Bitcoin. So, they got so scared they just never went back to it. And so no one on the Bitcoin side had ever created a smart contract language on top of Bitcoin until Taproot existed. And that was like 2021, years and years later from when Bitcoin first came out almost 12 years later. U so so what we did is we created the first programming language on top of UTXO that actually works and scales called extended UTXO. So it allows you to carry state on the thread which meant we had a not only a completely new programming model a completely new programming language and a new resource model a new pro and new concurrency model and this was what one of the challenges with Cardono smart contracts now it's easy there's still a lot of little things like comp composition and event sourcing and other things you got to figure out and it's a DAP by and we'll make it easier with StarStream and other programs but at in 2021 when it first launched no one had ever done anything like this so all these developers came in like Ethereum devs. Well, I know how to do this. They didn't know how to do that and then they just they just did it in this stupid way and they got one transaction a block and all this other stuff.

Um, the batching of transactions is also another huge thing where uh one transaction can be like dozens or hundreds of transactions. So if you go to eutxo.org you can actually see it. I love that visualization. Um, but basically that that transaction graph you can in a single transaction be issuing NFTTS doing smart contract transactions transferring money to your aunt and also uh you know uh doing an info

I have seen the video it's really cool.

It's phenomenal right you can't do this in an accountbased system those are intrinsically sequential so what ends up happening is the transactions get more sophisticated they have proofs on the wire so one transaction can represent the economic activity of a hundred or a thousand transactions on a salano or Ethereum. So you can do more of them with Laos, you can do them offchain with Hydra and they eventually get more efficient individually. So you have now three dimensions you can make your system scale with UTXO in addition to getting all the security properties of state channel isomorphism.

So it just made so much sense to you know to do a UTXO system over the other one. We had to pay the price. We had to actually build it. We had to actually do the theoretical modeling and figure out a resource model and all this other stuff for it. And it was horrendously timeconuming and we and I didn't know how to do it myself. So I had to go and like find these gigabrain programming language guys that you know from the from the old olden days and the two big guys that really figured out were Phil Wadler and Manuel Shakavari and Wadler invented the Haskell programming language. More importantly he also helped create the internet.

He was at Stanford the genius.

Yeah he's a legit genius. He's a crazy guy and I love him. But Wadler was at um uh Vince Surf's lab at Stanford when he was an undergrad and his job was to test the first network connection. So he created the first online video game to test the link between San Jose and Stanford. Uh so so Wilder is just a turbo genius and he's 25,000 citations and a fellow in the Royal Society like Sir Isaac Newton, but he's one of the creators of Plutus and UTXO, extended UTXO. He did that for Cardano and we had like 30 other guys that we had to bring together and we did all this theory and these advanced papers and everything because we were trying to convince ourselves like this wouldn't blow up in our face because we had nothing to draw from. There was no like well this guy did it over here just take it modify it. That was the biggest problem I'd say with Cardano in the early days was we did too much build instead of buy. Midnight we did a lot of buy and a little bit of build. With Cardano we did just everything build.

Basically be the 100% innovator.

Yeah. So the problem is if you're 100% innovator you're slow. Yeah. Because everything's new. Liquid non-custodial staking and extended UTXO and full on chain governance system and this thing and this thing and this thing and this thing and like any one of these things is a PhD dissertation and a dozen research papers and like five engineers. The composition of all of these things, god damn, it was so hard and was so complicated. And now that we're on the other side of it and we're starting to reap the rewards of all this research, we feel pretty good about it. But then the problem is that the marketing is is is is outpaced by the latency. You know, people think, "Oh, because they were slow in the past, they're always slow." And, "Oh, because they made these weird technical decisions, they're always wrong." Vitalik wants liquid non-custodial staking. I mean, why does Lido exist for God's sakes? You know, he's writing positively about UTXO now, and Aztec is pursuing that model. We're we've been vindicated again and again and again in our designs. Uh, you know, it's just being the first mover meant we made all the mistakes in being a first mover and we took all the arrows in our back. And so it uh fast follows typically out compete you in those things. But um I think it was the right decision. And ironically I actually hedged myself and and we almost launched as a hybrid ledger. We had a paper we wrote called Chime ledgers and we showed how to combine account and UTXO together. And originally we were going to run UTXO with Marlo with SAT proofs and then we were going to run accounts with something called Yella that we designed out of University of Illinois or Bana Champagne. I had 19 people working on the K framework that was runtime verification with the company and god they hated the Plutous people and the Plutous people hated them. They were they were fighting just like nonstop with each other. It was crazy and eventually I had to pick a side like the UTXO guys are all Haskell people and Cardano was written at Haskell. It's like they're going to win. So the RV people got cut loose and we weren't able to get that in. That's one of the reasons why our dev model was a little late to market because we always intended the UTXO side to be touring incomplete with SAP proofs and asset issuance and the full programming language to be on the yellow side and it was EVM compatible. So we had both things in the road map. It was called the island, the ocean, the pond as the development strategy and it was just um an unused part of the road map and it really bothered me. So it's unfinished business and ironically we've come back to the dual ledger because under the hood midnight is a dual ledger. public ledger and a private ledger and they have slightly different accounting.

So, you know, sometimes you get to get a doover and you get to do it again and we midnight gave me a doover for that.

Nice. So, the second question um a lot of people ask um Bitcoin quantum risk also uh Cardano quantum risk.

You know, this is one of those Schroinger's cat things where it's both a threat, not a threat. Yes, it's a threat. Yeah, Grovers and Shores algorithm exists and uh yes, you can use a quantum computer if it existed to create all kinds of shenanigans and chaos. Why am I not worried about it? Well, because it's a ubiquitous problem. Everybody has this problem. US government with classified information has this problem, right? Banking, everybody. So, what does that mean? It means there's billions of dollars that have been spent to resolve the problem. And it's not a problem of technology. It's a problem of standards. We have the technology. We have hashbased crypto and lattice based crypto and all these things. What I was waiting for was for the US government through NIST to standardize crypto. So how it works is that NIST will get together and they'll say this is the official block cipher of the US government. This is the official signature scheme of the US government. Then every US government contract will mandate the use of those things if they need it. And they're called FIPS. Um and so FIPS 203, 204, 205, and 206 are the postquantum FIPS. Now, what happens if you don't follow the FIPS? Well, here's what happens. All the hardware manufacturers, Apple and ARM and, you know, Nvidia and AMD and Intel, they build specialized circuits inside their chips to accelerate the FIP standards. So, if you don't follow them, you don't get to use those specialized circuits and you're 100 times slower than your competition. You see? So, we knew the math. We knew the math as of like 2017. You know, we knew how to defend against quantum computers. It was more of a question of will the federal government finally give us some standards because once they have the standards well then everybody's going to start building hardware against it and then you could adopt it.

Then there's a question of when do you adopt it? Well, here's the problem with lattice and hashbased crypto. It is slower and more space inefficient than elliptic curve crypto. Okay, so what does that mean? It means that if you adopt lattises or hash, you are 10 to 100 times less throughput in your system. So if you're a thousand transactions per second, uh you know, maybe you're at 10 to 100 transactions per second now inside your system for the same amount of space and network utilization.

So who wants to go and pay that tax first?

Who's going to be the network to go and be like, you know, we're trying to compete against Salana and Su and all these other guys, and our strategy to compete against them is to be 10 times slower, 100 times slower than those guys.

That probably won't work.

Exactly. Right. to defend against this hypothetical quantum computer that will one day exist, right? It'd be one thing if it existed today, you know, you may, you may not, right? But, you know, it's it doesn't. So, then the other thing is, is anybody actually going to give you an honest answer about when and how a quantum computer is going to come in existence? DARPA got so angry they just threw in the towel and they created something called QBI, the quantum benchmark initiative at DARPA. It's a three-stage program and so far 11 companies have survived phase A and now they're entering phase B and C. But the question they're asking is will any of these companies have a working useful quantum computer by the year 2033. So if you want to follow that, you can look at the DARPA quantum benchmarking initiative and you can see all the different companies like IBM and Quantinium and others that are competing and you can look at the rigorous uh stuff they're setting and by 2027 they're going to issue a report. So we'll have you know data from DARPA of whether they're actually going to be real or not and if they are real they'll be real by 2033. So, I'm waiting for a little bit more data next year and the year after to decide how aggressive we want to be with quantum, but Midnight is already going down the postquantum train. Um, you know, Lattis Fold and Neo or Lattisbased crypto systems and the long-term privacy engine of Midnight is going to be a Lattisbased folding system and Lattis crypto is immune to quantum computers for the most part. Um, I'm not happy with some of the theoretical security. there's no universal quantum adversary modeling that uh exists in the system yet and there's a lot of theoretical issues uh and I just have to convince myself things look good and I've spent enormous amounts of time recently dealing with like cyclomic polomials and you know all these weird finite fields and goldilocks fields and other things because I've been studying latisfold extensively and doing knowledge soundness proofs and other things um and the theoretical foundations are are rich but dangerous in that base. Another reason why postquantum is a little scary is while we have all the algorithms, we're not 100% certain that they're actually immune to quantum computers and we're not 100% certain that they're secure these algorithms. Typically in cryptography, your shelf life, you have to wait about 20 years to 30 years before you get comfortable with the crypto.

So there's a wonderful paper, a friend of mine wrote it. He's the creator of elliptic curve crypto, Neil Kobitz, and it's called the serpentine path of elliptic curve cryptography. So Neil when he was at Harvard, he came up with elliptic curve crypto in 1985. But it wasn't until like the the 2000s that people started adopting elliptic curve crypto. So he wrote this paper about the 20-year journey he had to go on to convince people that like elliptic curve crypto is a real thing and it's actually should be the dominant thing. It had all these benefits. It's 10 to 100 times more efficient than RSA and much smaller proof sizes and you have all these amazing algebraic properties of elliptic curves. It's like everybody acknowledged this was a good idea. It still took 20 years to convince people it was a good idea. So we've have these lattice things and these hash things. The hash things are old, but the lattice things are relatively new. Like the module SIS stuff is very new and it's very cutting edge and most modern cryptographers aren't well trained in this area because it's so mathy. And so they're like, "Yeah, that seems like it'll work, but we're not really sure." You know, I mean, kind of. I don't know. The other thing is um most of that math actually doesn't come from trying to be postquantum. It comes from something called fully homorphic encryption. Craig Gentry created that with Dan Bonet back in '07 and uh basically operating on encrypted data without ever decryting it. And uh they spent enormous amounts of time using lattisbased math for all that stuff. And it's is some many cases a thousand to 10,000 times slower than running it on silicon. So it's just it's one of those things like we know how to do it. It's just not optimized. worth it to do it now.

Yeah, exactly. And again, what are we protecting against like this future hypothetical thing that will exist? So, what will end up happening, if I had to guess, is there's going to be continue mega investments into these things. Harden implementations and schemes in theory will work its way in and it'll be a layered model which uses both hash and lattis based crypto until a winner is selected. And this is like the Blu-ray versus HD DVD type of thing. Two completely legitimate standards. you have Toshiba and Sony and all these other guys fighting each other and eventually the market picks one. Blu-ray was this guy. So, you know, maybe the market will pick hashbased crypto. Those are the Starks and this other things and that would be very sad if that happened. Um, and that's what Vitalik wants because he's usually wrong with these things. [laughter] And then, you know, and maybe the market will pick lattises. That's happy time. Yeah. Everything's great. We have these beautiful algebraic properties and much more elegant proofs and so forth. But we'll see. We'll see what happens with that.

Okay. So, the next question is

We're thinking about it. Okay, [laughter] next one is a little bit more uh relaxing. So, Charles, do you ever consider getting involved with politics?

Oh, that's very relaxing. Yeah. Um, American politics, it's so bad. It's irredeemably bad. I mean, every election cycle, I'm always amazed because they say there's at least it can't get any worse and then it gets worse. It kept getting worse. It's so bad. Like the last election was a choice between dementia versus demented. You know, literally you had a guy with Alzheimer's who had metastatic cancer going against an insane person. Uh it's just so bad. And and what's so crazy is like America has all these brilliant, incredibly talented, high integrity people and our politics is this this horrific swamp of deception and mal integrity. And the reason being is there's no alignment on the KPIs and the mission.

You see if politics was about we all as a nation get together and say these are the top 10 KPIs we care about you're accountable to an outcome. You'd say okay I was president for four years how did the KPIs improve instead we don't have KPIs so we don't really know what being the president is about so

You can read them.

Yeah, you know, so so you're like okay, well what's my job then to say that the other guy is literally Hitler and if you put him in power, you know Babies will be murdered in their cribs. Yeah. I mean, that's that's that's the thing cuz then you're like, well, I really hate this guy and you know, the Epstein this and this this, but the other guy, oh my god, if that guy was there, literally person would just show up and shoot me in the face.

So, what does that mean? It means that if you enter politics, half of this nation will hate you. You just pick which half. Do you want the California, New York to hate you, or do you want Wyoming and Colorado to hate you? You know, you pick your half. And that's so crazy because I'm in the business of trying to be friends with everybody. I'm in the business of uh you know trying to solve problems for people and be respected by everybody. Uh so we as a society don't deserve good politicians if we create an expectation that and play into 50% of people hating each other all the time and everybody's the other and the enemy and so forth. The other problem with American politics is, you know, compared to China, the Chinese do many things wrong, but one of the things they do right is the political bureau comes together every 5 years. They create a national agenda and they have a real good conversation about how to win in the long term.

And this is why after 14 cycles of doing that, China's gone from a backwater that millions of people starved and they couldn't feed their own people to this leviathan that has global standing that has astronauts in space and millions of miles of rail track and all this stuff. It's like the you can clearly see the country is improving. Yes. You know, it's objectively true. Now, we can argue the methodologies are deplorable. Like, you know, when they built the three gorgeous dam, the the asterisk they don't tell you is that 2.2 2 million people lost their homes because they got flooded out, right? Can't do that in America. You can do that in an autocratic system. But but at least they have a national agenda where they can have an adult conversation about what is required to beat America, what is required to beat Europe. We have no mechanism for that in American politics because that mechanism doesn't involve a cult of personality. We don't know the faces of the Chinese bureaucrats that came together, the technocrats to discuss that national agenda. I would get heavily involved in politics if we had an ability to set a national agenda that way because I don't need my name to be known. I don't need any credit. I just want to be in the room where we discuss what are we going to do to win in synthetic biology? What are we going to do to win in AI? What are we going to do to win in nanotechnology? How do we have modernized infrastructure? What are we going to do to win in national security? How do we beat the $38 trillion debt? What's our blockchain strategy? What's our AI strategy as a country? You know, these types of things. I would love to be in that room. And that's politics because you're deciding in a future. But then there's accountability behind it because that's the national agenda and then every president is elected into that. Instead, we pick the president and the agenda at the same time. And we never talk about the agenda and there's no validation behind the agenda. In fact, Trump is now living in a parallel reality where he just says stuff that's materially not true. It's verifiably not true. He'll just make stuff up and babble incoherently and then something about Biden and something about this and something about that. And some of your listeners, if they're in America, you know, and they're on the right, the political right, they'll immediately say, "Yes, but yes, but Hillary Clinton, yes, but Biden, and yes, but this, and yes, but this." It's propaganda speaking in their mind. It's not reason speaking in their mind. So, no, I have no desire to enter American politics. It's so broken.

That's good to know because I feel like American politics has gone downhill super quickly in the past 30 years in I I feel like 20 25 years ago it was a lot better than what we are getting right now.

Yeah.

So the very last question uh Charles what is your ultimate dream?

Um I'd like the things we're building to be successful you know I'd like Cardano to have a billion users. I'd like Midnight to be you know the privacy layer for everyone everywhere. I I would like this model to work and rewrite the world's economic, political, and social systems. You know, everybody's what about money and all this other I've I've been broken poor. I've been broke a billionaire twice. Um you know, I I've been up and down through all the things. I don't particularly care if I end up with money uh or great legacy or great reputation. What I care about is that I had some agency in the destiny of humanity. uh you know I don't want to live in a world wake up in 2035 where every single thing I say and do is recorded and monitored and AI decides whether I'm a threat or not and that's the world of social credit you know that's the world of of of all these dispotss and dictators and tyrants which by the way the UK is embracing and the United States would love to embrace too if not for the Constitution getting in their pesky way. It's so bad. And and so many people say, "Yeah, well, but what are you going to do?" I'll tell you what I'm going to do. I'm just going to build my own economy, you know? So, that's the world I want to live in. So, I I say if I reflect back at my life and say, "Hey, I didn't make a lot of money. I made and lost a lot and you know, everybody hates me and all this stuff." But I say, "Yeah, but what about humanity? Are we doing okay? Do kids today have economic agency? Do kids today actually have uh some control over their money? Are they their own bank? Do they have sound money? When you vote, can do you know the voting system is high integrity and it works? Basic stuff like that. Because if that's true, then everything's going to be okay. We're all going to be okay. Uh I've always had this viewpoint and I had to because when I first came in the blockchain space, Bitcoin was worthless. It was under a dollar. No one cared about it. There were Starcraft tournaments where fifth prize was 50 Bitcoin. Okay? You know, so so it was you couldn't give it away. All right? They're like, "What is this drug money thing, Bitcoin?" Like, "I get it away from me. I'll go to jail if I have it." You know, everybody was just like, "This is crazy shit." So, to me, it was more like, "Okay, I just want a better world and a better future and some control and agency over that world and future." Uh, so that's my goal and uh and you know, it's reflected in the products. Cardono, 10 years of my life in I'm one of the last of the old cryptocurrency founders still in the industry and still pushing hard. Uh, and now we have midnight for a second helping of that same philosophy and to do new and interesting things. And I'm really excited. I, you know, I I get to still be here and still do this. At some point, the market will retire me, you know, and then I have to know I'm no longer effective and I can't get it done. Uh but I I take great pride in the fact that we did it the honest way and we're still winning. You know, uh the fact that our cap is better than Mina and ZKync and Starkware and ALO combined and those are all VC darlings with all the smart money behind it. It's saying that people still want, you know, that vision. They still want that dream. And if we can get retail back and we get a retail army, I think we can get hundreds of millions of users to believe in this as well. and then we can have a legitimate adult conversation about how are we going to change the economic, political and social systems of the world.

Thank you so much for your time and then um I feel like this past two hours have been priceless for me and then I'm very excited to share our conversation with u all our viewers and thank you for your time again and until next time.

Thank you so much.

Yeah, [music] let's talk facts. logical emotion. Yeah. [music and singing] [singing] [music] >> [singing] [music] >> Fore [music] [singing] [music] machine. [music] >> [singing] >> Look at Trump. >> [music] [music] >> CEO say no [music] strategy [music] [music] >> [singing] [music] [singing] [music] >> Yeah. [music] [music] the drum. [music] Yeah. [music] >> [music] [music] [music] [music] >> Stay calm. Stay rich. [music] Peace. Yeah. Yeah. Yeah. [music]

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Cardano的創辦人以太坊Ethereum的共同創辦人比特幣OG 區塊鏈之神 @charleshoskinsoncrypto 獨家一對一訪談 #ADA #ETH #BTC #THEGOAT

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Cardano的創辦人 以太坊Ethereum的共同創辦人 比特幣OG 區塊鏈之神 @charleshoskinsoncrypto 獨家一對一訪談 #ADA #ETH #BTC #THEGOAT

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Cardano的創辦人以太坊Ethereum的共同創辦人比特幣OG 區塊鏈之神 @charleshoskinsoncrypto 獨家一對一訪談 #ADA #ETH #BTC #THEGOAT