Charles Hoskinson - The Fourth Generation of Cryptocurrencies - TOKEN2049 Singapore 2024

you know I've been very reflective in the last decade because cardano just went through a major upgrade we embraced governance we embraced onchain representation for the last two years the ecosystem has been working very closely together workshops and dozens of countries people from all around the world trying to figure out how do you build an online government that allows you as an ecosystem to make decisions about budgets and road maps upgrades when you look at Windows you got Microsoft when you look at the iPhone you got Apple you have companies Behind these big complicated things but protocols don't have companies they have supporters they have people that work with them people connected to them but at the end of the day if we say we're decentralized who's in control who's in charge so we've been trying to solve that problem onchain government the consent of the government the institutions writing a constitution I was down in Argentina we're having a constitutional convention there boy that's going to be fun delegates from 50 countries 63 different workshops to vote on a constitution and as fun and exciting as that is that's not what I'm here to talk about today talked about the future see I think about cryptocurrencies in terms of generations I've been in this space for so long I was actually in the middle of the very first generation Bitcoin so in 2010 2011 nobody was in it for the money I know that because there was no money we had to buy our own coffee nobody knew what Bitcoin was they thought it was a cult probably still is and what was fun about it and exciting about it is that we had these broad aspirations and goals of where we wanted to go and what we wanted to do it was the cipher Punk movement that came from the 1980s information moves instantaneously so money should email for money let's do that then Bitcoin started catching on first generation was about decentralization disintermediation this idea of being your own bank mission accomplished well what's the first thing you do when something is successful you criticize it we love the iPhone but we love windows but we love Android but so we love Bitcoin but we don't have programmability so the second generation came and the second generation was about smart contracts programmability Eureka at the time everybody thought we were crazy it was but in hindsight it was like when JavaScript came to the web browser you had these static websites they could be pretty but you couldn't do much with them JavaScript comes and you have Amazon and you have Facebook and you have Google you have all these amazing things Eureka awesome and when we have programmability what do we do we say well that's all fine and dandy but damn it's expensive apparently building a virtual machine a shared State amongst millions of people a finite resource doesn't scale very well does it second how do you get it to work with everything where's your interoperability and yes what cardano is dealing with right now how do you build a government because you're not dealing with a simple utility digital gold teleporting Bitcoin around you're talking about a programmable system so you have to upgrade that system you have to evolve that system you have to make that system better okay so the third generation comes in and there's tons of booths all around you see them and they talk about scalability and interoperability and governance you have your squeeze congratulations on Circle missing anyone you have your aptose you have all of these people alaran salana and yes cardano and we're all fighting and we're in the middle part of the third generation and it's exciting and it's fun because every time you have a generation you get a whole new scale of capabilities when you have scalability it means it's cheap to use the systems for millions of people when you have interoperability it means your systems talk to each other you can truly build an internet of money you can build an internet of Finance it's awesome and when you have governance it means you harness the wisdom and the capabilities of millions of people throughout the world the wisdom of the crowds suddenly the people building on your system are your product managers the engineers building daps and defi are the ones talking about how to improve the protocol and grow the protocol the collective wisdom of this is worth billions of dollars of Labor and we get to harness all of that we couldn't with the second generation and we couldn't even possibly tackle the problems we're tackling in this industry from defi to intellectual property and other things with Bitcoin it's why everybody's trying to upgrade it so what is the fourth generation do we need one what do we care about well you'll hear lots of terms like real world assets okay security tokens Dows business on the blockchain all these things why don't we have them it's like the flying car it's like Fusion it's always 5 years away don't worry trillions of dollars are waiting they'll come into our industry why can't we get there because here's the problem blockchains are super awesome at public stuff they're auditable timestamp transparent mutable good great you put it there like a domain name service you put something there like a financial transaction everybody in the world can see it believe it it has an Integrity awesome but what about the private stuff what do we do with that do you like running a business where all your HR is public like running a business where all the money in the cash registers is public how many people want all their Google searches to be public show hands nobody what about Amazon purchases what about your political preferences what about who you voted for in the election turns out that privacy is kind of part of the deal and every real world application asset business transnational agreement always has two sides a public side and a private side the public side we do well and we're starting to master the art of programming it and scaling it and getting it done but the private side is still something that's not clear and in practice how we're solving it is the same way we've always solved it you pick somebody you trust you give them the information and you hope to God they don't lie steal cheat manipulate so if you have a blockchain application with a private and a public side and the private side is offchain and centralized do you have a decentralized application no that's the first challenge the Second Challenge is in the the Legacy Financial world and frankly the real world you don't have this idea of transactions without identity you don't have this idea of businesses and no identity assets and no identity when you see a plot of land what's the first question you ask who owns that when you see a business who owns that who something happened who were the people involved what's the story behind that so where is this in crypto we have accounts we have utxo we have transactions and we have metadata but where's the identity primitive of these types of things the Legacy world has spent centuries regulating and optimizing and figuring out how to answer the question who how to adjudicate the question of who the dispute resolution systems and the property rights systems and the transnational agreements the cryptocurrency space doesn't so how do I bring real world assets how do I build real world businesses in a space that lacks a who I have to invent one a digital who Horton heard the who I need to have Identity On The Chain so you have to have identity with privacy because the minute you have who you have to decide who gets to know who gets to see who gets to decide you have to have this concept of selective disc closure so the fourth generation the generation that's going to merge the Legacy and the web 3 world and bring billions of consumers in really the two big pillars of this is in addition to being scalable and interoperable and having good governance and programmability and decentralization must have privacy private smart contracts and must have some concept of identity the challenge is unlike scalability unlike interoperability unlike decentralization where there seems to be an obvious path of where to go and how to do that more is better cheaper transactions faster transactions and tradeoffs privacy is kind of a nebulous thing what exactly does that mean how exactly does that work and also the same for identity took us as an industry 10 years of discussions and work to figure out how to create a standard just to represent identity it's called the did the decentralized identifier at the w3c we worked on it a lot of other people did in fact formed a foundation the digital identity Foundation 35 members all these people came together built Frameworks great is that the game no we're not over yet we have all kinds of things like well now you have a representation well how do you prove properties of it oh we had to create a non-eds as a standard what about your creditworthiness or your reputation man management that's a subjective not an objective thing objective is when were you born subjective is are you a good person well it depends on who you ask some people in this room like me some people do not they're getting up and leaving so subjectivity of reputation so how do you quantify that how do you build marketplaces for that this is the challenge of identity the same for privacy when you look at privacy what are we actually talking about like to whom what guarantees do you get what's the portability of that how do you disclose that how much overhead is required is it private forever to the end of time is it private for a little while is it private within a certain security model so this is the next Generation as we talk about these things but then there's also a meta problem in the blockchain space we've gone from too few to too many there's more than 40,000 blockchains there's millions of assets all around we all have perverse incentives to hate each other not pay attention to each other dislike each other why because we have tokens you have token a and token B and token C and token D and you put your names in and you go and talk to these people and if the person owns the token it is virtuous and good and if it's competing against another token that token is evil and bad bag holding that's the world we live in and guess what you can never build an economy where people's Financial incentives are at risk people no matter what their politics and beliefs are will always default to their incentives it's a reality of human nature so then how can we build a space that has interoperability and everybody's working together and collaborating and it's good for the consumer if the system by its very design promotes incentivizes and rewards fragmentation it's a problem so that's the fourth generation in a nutshell is there a way to have computational privacy is there a way to have identity is there a way to get around the incentives problem and actually get everybody to work together nope all right well anyway it's been great actually it turns out last six years we've been thinking about this we've been working on this input output is a magical company in addition to being a great engineering firm most noted for building cardano we also have Labs all around the world at Stanford and CMU and University of Edinburgh and Tokyo Institute of Technology 168 scientists that work with us we've published 223 papers over 10,000 citations rigorous academic papers where we asked these questions in a very foundational way a very fundamental way we're thinking about it and what we did with these papers is we tried to figure out a light blend of these types of things and I said you know what would be really cool is I've been in the space for so long and I've gotten to a point where I just like solving problems and I don't like working with the VCS and I don't like the normal economics of this space it would be really cool just to build something and give it to everybody that actually solves a real problem so six years of hard work we created something called Midnight October 1st of this year it's reaching the test net it's been in the dev net for a little while and if you go to midnight. network you can build on it and the first thing we figured out on how to do with midnight is we created a private smart contract stack called Kina and you can write smart contracts and typescript anybody can do that it's pretty simple language second thing we figured out is we're building what's called a hybrid application model so if you're an ethereum salana BNB Bas Bitcoin or cardano developer over time you're going to be able just to basically query midnight and do the private and identity stuff for your application and you can pay your transaction fees with the underlying currency ether or Soul or Bitcoin or what have you so you don't really care too much about tokens now do you call these hybrid applications they're good ideas now it turns out it's really hard under the hood to do this but that's what we do we do the science part and then there's a question of incentives and distribution ordinarily because I've been in space so long I kind of know all the dirty tricks what you do is you go to a VC they give you a bunch of money they get founder tokens and then they dump on retail when the network launches you know who you are you do and they make great money and then the ecosystem collapses and the next thing goes the next thing goes the next thing goes that's not how we get ahead so instead here's what we do just do something called a glacier drop so you take 135 million accounts across all the major cryptocurrencies it just air drop to them and if people want it they mine it in the process of mining it they launch the network so that's how you get a fair distribution right everybody gets it everybody has it and here's the other beautiful part about that in the process of doing this we invented a new protocol called minur we wrote it with Shere who went on to create igen lay with the technology and we created midnight with it and it's called Minotaur and it's multi-resource consensus what's so m iCal and special about multi-resource consensus is it allows you to maintain a blockchain with multiple consensus protocols at the same time you go talk to the Bitcoin Maxis and they say proof of work you go talk to us in the third generation we say proof of stake but you know what you got to get your peanut butter and jelly together so why can't we hybridize things and bring all the consensus protocols together and guess what if you have the validators maintaining the state of the system together you can pay block rewards to them so you start looking like a lay or two to everybody doesn't that bring everybody together if every system is working together so that's midnight it solves real problems if you hold any of the major cryptocurrencies you already own it congratulations you're welcome Papa Charlie took care of you you got hybrid applications you pay in the currency that you know and love you don't have to actually do anything you don't have to leave the network effect of your network and you can borrow security and consensus from all the other systems and because you're doing that your consensus layer is directly observing all of the major cryptocurrencies which means you're also the single best Oracle chain and Bridge system around and because you have all the Privacy Tech what do you have you have recursive snarks which by the way are also upgradeable because we care about these things with love I'm Italian you have to make things with love and because of that cre ability and because of that recursion it also means that you can use it as a data availability layer all kinds of magical things so that's the fourth generation it's the generation that brings us together it's the generation that gives us identity it's a generation that gives us our privacy and for the first time ever allows blockchains to keep us secret and it's the generation that opens up the floodgates and allows us to finally have the trillions of dollars of real world assets that are waiting on the sidelines that require these things to come into the cryptocurrency space that is the last generation we need because at that point everything is just iteration at that point everything is just is it the right asset or is it the right partner but this is what's going to bring the medical records in this is what's going to bring esgn with Supply chains and measure the carbon of every business in the world this is what's going to bring the financial markets in because you don't have to reveal your trading strategies to trade on chain this is what's going to allow you to have Dows that live 100% on chain because the Dows for the first time ever can keep a secret and thus a real business can be on chain and you know what by giving it away to everybody like Satoshi did with Bitcoin just mine it if you want it it means the whole industry for the first time ever has one thing that they can care about together and agree about I have 30 seconds left and I'll spend them this way great things in life come as a result of working together and cooperating with each other the Apollo Mission had a million people work on it and those people are proud because the end result was that they got to go to the Moon we want to go to the moon and Beyond in crypto we have to start working with each other and we do that by giving each other incentives to do so so thanks for spending 20 minutes with me and learning about the generations I really appreciate it and I can't wait to see what you build on midnight and I can't wait to see the next 10 years of crypto it's been a wild ride and it's going to be even more wild cheers