Why My Money Is On Charles Hoskinson
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Charles Hoskinson is the co-founder of Input Output Hong Kong (IOHK), Cardano, and Ethereum.
Based in Colorado, USA, the tech entrepreneur and mathematician studied analytic number theory before cryptography.
Charles currently works as the CEO of IOHK, which was founded in 2015 and is “committed to using peer-to-peer innovations to provide financial services to the three billion people who don’t have them”.
As an investor, I want to bet on what Charles is working on (I hold both ADA and ETH).
He has his finger on the pulse of the industry like I have never seen before, has a thinking process that is uncanny, and he truly wants to advance the human race.
I spoke with Charles at the Blockchain Futurist Conference in Toronto, discussing what continues to drive him – and discovering more about the philosophy behind his world-changing projects.
What is Cardano?
Hoskinson currently spends most of his time working on his most recent project – Cardano, which raised over $60M USD almost two years ago now.
According to IOHK, Cardano is a blockchain platform with more advanced features than any other protocol – and it is the first to evolve out of a scientific method. The platform’s native token is ADA, which at one point was valued at over $30 billion USD in market cap.
For the non-technical audience, the project is similar to Ethereum, but aims to use a Proof of Stake (PoS) consensus mechanism to improve the speed of the blockchain without sacrificing any decentralization or security components.
Hoskinson has identified that current blockchain platforms, such as Ethereum and Bitcoin, as constructed have reached an impasse. There is a trilemma at play – each blockchain is balancing the triangle of speed, decentralization, and security where you can only pick two with current technology.
For example, for Ethereum to scale with current innovations, the platform must sacrifice either its security, or its decentralized nature. It’s clear that Ethereum needs a scaling solution to facilitate meaningful applications, as evidenced recently by the transaction mining trend exponentially increasing the gas fees associated with transacting on the Ethereum blockchain.
According to Hoskinson, who was a co-founder alongside Vitalik Buterin and Anthony Di Iorio:
“Design decisions that went into Ethereum were counterproductive to being a world computer, such as treating every transaction the same. The DAO was treated the same way as every other smart contract.
In poker, do we really care about putting every step of that game onto the chain? Poker is a fair game and there is conservation of value, but you don’t care about every hand you’ve ever played dating back 7 years with time stamping and immutability – this is too high of a burden [for a blockchain]. Inventors of TCCIP had no idea about wifi or 4G or other layers we have today, but their protocol is the bedrock for these technologies because of the design. You can gracefully add things into the system, and that’s what we’re trying to build at Cardano.”
Compare And Contrast: EOS And Cardano
The EOS blockchain, created by Dan Larimer and Block.One, identified that blockchains need to be faster to facilitate large scale, consumer-grade adoption. To do this, Larimer used a Delegated Proof of Stake (DPoS) consensus mechanism that sacrifices decentralization for speed, but to a point where Larimer still believes the system is “decentralized enough” because it is censorship resistant.
In an ideal PoS environment, any token holder can secure the network proportionally to the amount of tokens they hold, but to make the EOS blockchain more efficient, Larimer decided that the community would delegate 21 block producers through dynamic on-chain voting to make decisions and process blocks for the platform.
The censorship resistance of the EOS platform has yet to be rigorously tested, and EOS has faced significant scrutiny since their mainnet launch for censoring transactions and blacklisting certain addresses for not adhering to the rules of their ecosystem.
This is not a concession that Hoskinson wants to make with Cardano, and he says “If you need to ask yourself if you’re okay with centralization and control, then why have a blockchain at all?”
EOS skeptics usually joke that an Amazon Web Server will be your favourite “blockchain” if transactions per second are the only metric you’re assessing.
“The purpose of Cardano is to step back and have a more layered architecture,” explains Hoskinson. “With Cardano we are doing innovation, and that moves the tradeoff profile [between centralization, security, and speed]. What Dan Larimer did was say “I have a philosophy that this tradeoff profile is acceptable, so I am going to take old ideas and make them new.”
Cardano differs from EOS because rather than making a concession in the tradeoff profile, Hoskinson wants to move that profile all together, and the team has been using a scientific method of research that has a slower go-to-market strategy than other projects. Hoskinson notes that his team aims to build a blockchain from the ground up:
“What we’ve done with Cardano is start with asking ourselves what a blockchain is. Does proof of work actually make a blockchain secure? Is there a way to build PoS with the exact same outcome? […] Can we do things in a way where we can achieve classical performance with decentralization so that we’re moving the tradeoff profile in a certain way? […] Every time Cardano publishes a paper we are taking a step forward.”
Does Hoskinson worry about the market?
Hoskinson mentioned that he doesn’t trade – he leaves that to the trading experts who can read a chart with precision to find perfect entry and exit points. He also noted that the markets tend to reward projects on the week and month timeline, but Cardano has taken 3 years just to get comfortable with a base protocol.
When asked about current price levels of ADA, Hoskinson commented:
“We don’t think too much about the price. We haven’t sold a single ADA since receiving ADA. I have lost on paper more than 2 billion dollars, so i feel the pain [of the bear market] more than most. Can’t get caught up in the short term. No matter how Steve Jobs-like you are, you’re going to have a bad quarter. It’s not day by day – it’s do you have principles, vision, and a high level goal to move from high level to something to create real value for your token? If you have that, then the price works itself out.”
Hoskinson remembers asking himself in 2013, when the price of Bitcoin was below $100, what $10k USD Bitcoin would look like, and the current landscape doesn’t meet that bar. He thought the industry would have millions of people in the ecosystem with an amazing user experience with stable, regulated markets. He admits we’re getting there, but we’re not quite there yet.
What does the path to $1T look like for Cardano?
Crypto analysts often have conversations discussing what the “path to trillions” looks like for a specific coin. When asked about this topic for Cardano, Hoskinson noted that there were three dimensions that he looks at:
There needs to be hundreds of utilities with natural demand within the platform. Cardano aims to differentiate itself from a platform like Steem – Steem is/was great at compensating for content, but economically there is little incentive to buy the tokens to drive demand.
There cannot be a hierarchy. Hoskinson mentioned that, “Satoshi did the most valuable thing he could do for Bitcoin – he killed himself – he left the ecosystem. A fundamental lesson that Satoshi taught us was not to create cults”.
Hoskinson’s strategy to accomplish this with Cardano was to start federated; identify self-emerging community leaders and compensate them, and then continue to build a large, diverse community where no one has the keys to the kingdom. As the CEO of IOHK, Hoskinson admits that culture is the key to organizations. He’s tirelessly building a culture of accountability – he has 160 employees in 16 countries, so he understands the importance of trusting your colleagues as a transformational leader. He wants to be a referee rather than a king.
There need to be liquid, regulated markets to buy and sell, where parties can divest significant positions without paying egregious slippage costs.
How will the smart contract wars play out?
Hoskinson does not admit to being a prophet regarding the smart contract wars, but he did relate smart contract platforms in today’s age to the operating system wars from the early days of the Internet.
Hoskinson mentioned that smart contract platforms are committing the same sins that operating system entrepreneurs did in the 1990’s – competing through a strategy that creates friction and moats around a business model. There were no open web standards in the 1990’s.
Smart contract platforms are thinking too much about vendor lock-in as well. According to Hoskinson:
“We’re saying write a smart contract, but an EOS, Ethereum, NEO, or Cardano contract so that you’re locked in a system. As an industry we need to stop thinking about vendor lock-in, and start thinking about contracts above the platforms. You don’t need to create a moat around your business – for example Amazon Web Services doesn’t lock you in.
We need to say our developer experience, privacy, and operations are better than our competitors. At the end of the day this about putting power to the edges, and [remember] these are not products of companies, and one day, some way, somehow, I will […] not be working on Cardano. And if I’ve done my job correctly it should be as powerful or more powerful than when I was there.”
When asked about the comments that William Hinman, Director of Corporate Finance at the SEC, made regarding what makes a token a security and how that relates to Cardano, Hoskinson didn’t seem to be worried. Hoskinson said,
“I don’t worry about this [regulation and Cardano being deemed a security] because it is facts and circumstance. SEC needs to go after the most egregious offenders to allow the market to self-regulate. At the end of the day I don’t plan for regulation – I say “what is moral and right for my community?” Moral hazards come when you start with the law, then the industry, and then the community.
If you think about Alice and Bob in the beginning, then at least you have a story behind it. Regulators negotiate. At least you can have conversation with them – Poloniex was a great example of that! [You need to] know you did right by your customers and acted with integrity and morals and that your investors got a good deal. Regulators are dynamic beings and are dragged in by the acts of consumers, evidence of misconduct and class action lawsuits.”
What is life like for a multiple multi-billion dollar founder?
Hoskinson grew up in Hawaii, but his family moved to Colorado early in his life. He was homeschooled through until the end of highschool, and went onto post-secondary education at the age of 15 because he studied through each summer.
He laughs that he would have made more friends in university if he had known more about Pink Floyd His dad, brother, and grandfather are all doctors, and he admits that it was his plan to become on too, but lost the passion as he grew older. He actually thought he was going to become a surgeon. He ultimately chose to become an entrepreneur because he wanted to work on problems that would impact millions of people, rather than a select few, personal problems as a doctor.
Hoskinson notes, “As a doctor you work on personal problems, and over a career maybe you help 5,000 people. If you do one big discovery as an entrepreneur you can do something that changes the human race.”
Hoskinson currently lives just outside of Boulder, Colorado, but he travels more than 200 days a year. At some point in his life it’s a goal of his to buy a large horse ranch – he goes to the largest cities in the world every year, and notes that it’s nice to go home and not have any neighbours. He says the countryside gives a completely sublime experience that you don’t get in the city, and he likes that everyone is kind to their neighbour.
I am sure his prominence in the crypto community, and the naysayers that troll him on Twitter, have something to do with that philosophy as well… Hoskinson is a big fan of Bob Ross and The Joy of Painting, he plays the piano, listens to the Joe Rogan podcast regularly, is highly interested in the relationship between time and entropy, and has recently started collecting Babylonian tablets to learn more about the history of mathematics.
When he was a kid he thought a lot about the concept of infinity, designed mazes as a hobby, and read a lot of Rudy Rucker’s work in cryptography – he admits he was a bit of a strange one.
In ten years, when he has launched Cardano and it’s (hopefully) a fully functioning ecosystem without his presence, Hoskinson hopes to go back to being a mathematician and make strategic investments. He notes that, “There is a lot of territory [in mathematics] I haven’t had a chance to explore.” Math is going through a revolution right now in set theory and he looks up to people like German mathematician David Hilbert, who led a mathematical revolution in the late 19th century.
He would also like to do strategic investments in areas such as biometric feedback and 3D printing – Hoskinson believes there are technologies out there that can substantially benefit the human race, and all they need is the right strategic structuring and guidance.
The author is invested in ETH, EOS, and ADA, which are mentioned in this article.