Charles Hoskinson On Why Crypto Won’t Go Mainstream Yet

Well, you know, we do a lot of stuff at Input Output. We still have one of the largest research groups in the world for cryptocurrencies. We have about 168 scientists and labs from Stanford to Tokyo Institute of Technology. We've written 250 papers, but most people know us from Cardano. We created the Cardano ecosystem. We kind of watched it grow from nothing to a 100 billion-dollar ecosystem in 2021. And now we're working on Midnight as well, which is a privacy-preserving ecosystem. It's kind of the first fourth-generation cryptocurrency. So, we're bringing it to bear and we're trying to do things in a very different way.

So, what makes Midnight really special is we kind of focus on three things at the same time. First, we look at privacy in a holistic way. So, instead of saying, 'Hey, it's just a ZK system where we do multi-party computation and the end of things.' You look at privacy like waterproofing. Okay? So, water gets in everywhere. And that's privacy when you think about it. So, if you can have a great roof, you can have the great tarp, you can have the great tar, all this stuff. You pour the water, it gets in the cracks. So, you can have great technology, you can have great stuff, but then your cell phone has a back door or there's some issue with malware on your computer or something. So, Midnight seeks to build a universal privacy system and it tries to holistically take care of all the different privacy needs, whether it be zero knowledge or multi-party computation or confidential compute. Second, we're really concerned about abstraction. Right now, we have this big issue where it's really hard to use cryptocurrencies. You know, we're 15 years in. I've been here for a long time. I've talked to all the guys, the Sonys, the Toyotas, the Microsofts. They all have pilots. And I come back a year later, I say, 'How'd that pilot work out?' They say, 'Oh, it was great.' I said, 'Well, did you adopt blockchain?' It's like all of Microsoft running on a blockchain now? They say, 'No, no, no, because we can't do the private side. We have this issue and this issue.' So, we said, 'All right, let's just reset the whole thing and at the protocol level have wallet abstraction, chain abstraction, and make it so simple that to use the cryptocurrency you just tap the button, put your thumb print, enter a pin code, you've got a wallet, it's just working, and it just works.

So, we got to make it ridiculously simple, really easy for consumers to use, not just that technology, but abstracted across so they can actually create wallets to 33 different blockchains. So, across the entire space. And so, we're working real hard with intents and chain abstraction and wallet abstraction and these other things to get a very native experience and to actually allow people to pay in any cryptocurrency they want. So, you can pay in circle, where you use the, you can pay in tether, you can pay in yen, doesn't matter. You pay in Bitcoin, ether, ada. And then the final part of it is smart compliance. So, we have this real-world asset revolution that's happening right now.

Ten trillion dollars of assets want to work their way into the cryptocurrency space. So, how do you automate the KYC? How do you automate the AML? How do you go from when we went from contracts to smart contracts, from compliance to smart compliance? So, settlement is compliance, basically. You have the money, you're in full compliance. So, we have a whole stack of technology we're building there so you can get all those RWAs into the cryptocurrency space. You can trade them where you want them, when you want them, how you want them. So, Midnight's been exciting, and I built it with my own money, my own time. We didn't take any venture capital. I spent $200 million on it. We spent 6 years, and I just gave it away. We did a distribution last year to eight different ecosystems as an airdrop, seven blockchains.

And now it's there. We've got about a million holders of Midnight, and the network is launching soon. We're going to be announcing the launch date actually here at Consensus. So, we're having a lot of fun just turning all this stuff on and getting people into the ecosystem. We also share it with Solana, Ethereum, Cardano, and many other places.

We're getting pretty far. You know, the thing is you have to do it in order. So, the first step was to get token liquidity out. So, the glacier drop was last year. It took about 180 days to do the full distribution. As I said, we got about a million people to participate. So, large population of people. No one had to pay for anything. They just had to do stuff to get on in. So, there was no ICO or VC distribution. So, the fair distribution was a big part. And then the second stage is you got to launch a federated mainnet, get all the dapp developers that have been building on the testnet rolled over, and then you got to decentralize that. So, the entire launch package for all the features should be about 9 to 12 months. So, really fast and we're breaking it down to four major eras and we're just about ready for that second era.

Yeah.

100%. Because there's the golden rule. He who has the gold makes the rules.

And the problem is when you take the VC money, they have to build in for the distribution and exit for themselves. When you don't take any money, you just do the airdrop and give it to everybody. It's like Bitcoin's distribution, you know? Just do what you will with.

Yeah.

Yeah. It was expensive.

And it took six years to do it. I mean, we had to put a lot of very sophisticated cryptography. Under the hood we're using lattice-based crypto and we're translating it so that it works on the same chips that AI works on. So, you can linearly scale with GPUs and you can use these hundreds of billions of dollars of clusters. We have a lot of great partners and relationships like Google Cloud works very closely with us. And they helped with the launch of the system. So, it's been fun to work with Fortune 10 companies. It's been fun to work with everyday people. And also the fact that you can work with the different ecosystems like OpenZeppelin is a partner. So, we're working with Ethereum's smart contracts. But then at the same time we get to work with people's voting ecosystem, the Avalanche ecosystem, the XRP ecosystem, Bitcoin and Cardano. So, we get to be friends with everybody this time around.

It's a lot better

than these adversarial days with one token versus another.

Yeah.

I would say so. I mean, if you look at what we launched at, it's a higher capitalization and population than Aleo, Mina, zkSync, and Starkware combined. And those were all VC darlings. They had like 1.2 billion dollars in capital they raised, Andreessen Horowitz, and Sequoia, and a16z, and Coinbase Ventures, and these other guys, and you know, we beat them. It's just because retail beats institution. You know, this is a market that's always been the many instead of the few, and people understand that when you build something that is designed to benefit a small insider class, it doesn't make any sense. If you're going to be real, just be real, and be honest about what you can do and who you can do it for. And so, we just focus on the technology. We say, we got to make it simple. We got to make privacy like ChatGPT. It went from zero to 800 million users in like 2 years because it's simple. And every 6 months it gets better, you get new features, you get new capabilities. So, similarly, you launch privacy this way, treat it like a black box, you can embed it in your application, and every 6 months you get more privacy tools that you can use for your application. And it's like waterproofing. So, you get the 10 m and then 30 m and 40 m.

You can survive the rainstorm, eventually you can survive the typhoon, right?

And over time it gets better.

Exactly right.

And you got to be honest with the consumer about what's the water resistance level, you

Ah. You know, and so that's what everybody's like, 'Oh, privacy is like a light switch.' No, it's not. It's a depth.

Well, it's like all like Monero Zcash more private. It's like, 'Well, yeah, you have transactional privacy, but what about a network anonymization or what about the hardware you run it on or what about this or what about that?' And any one of those things the water gets at and then you lose all your privacy because they know who you are, they know why you're using it.

Yeah.

So, we built it in a way where not only do you have that, but also you have to select disclosure regimes at the same time. So, you can make it universally private, but then you can disclose to the auditor, disclose to a regulator, disclose to your business or other people various things. So, the rational privacy component is the most important part because you're always disclosing something even if it's Monero, it's disclosing to you.

You have to know what your balance is inside your account. So, the world works better when you're in the driver's seat about what you prove and what you disclose. And once you have that, then you can start deciding rules of engagement. That's what smart compliance is all about. And then what you can start doing is building your way up to automated compliance and then you can treat compliance like smart contracts. And then if you want to have German customers, you pull the German contract. You want to have US customers, you pull the US contract.

And then you just pay a transaction fee and then no lawyers, no compliance people, none of this stuff. It's just automated, it's right there. The agents can use it, the everyday people can use it. That's the key and that's the vision that we have. So, you got to get your privacy primitives right. You got to make it really simple so you have to get the wallet abstraction, the chain abstraction, the intent, all that other stuff. And then you got to get the automation of compliance. And Midnight seeks to do this right.

I say, you know, it's the last mile of cryptocurrency. It's what makes it real. So, I don't care if you're a mom and you just want your children to be in a social network where you can guarantee that there's no 40-year-olds hanging out with them.

I don't care if you're on Tinder and you want to prove you're 6-ft tall and STD-free and you're a doctor. Or I don't care if you want to have a private stable coin and you don't want people to see what you're buying. Because right now when you buy with stable coins on Ethereum or Solana or other things, everything you buy is tracked by everyone everywhere forever.

Right? So everybody has a right to some degree of privacy. But then you say, 'Well, how do I do regulated business?' Well, it's escalating disclosure. So you can prove properties to people, say I'm an accredited investor or

I'm a citizen or I'm that, right? But you're in the driver's seat about that. And it's always contingent on who you're doing business with and you give them the minimum viable amount of information they need and nothing more.

Right.

Exactly.

Yeah, which they don't need that. They just need to know that you're an accredited investor.

you want that privacy

around your

Yeah, and I've seen it inside companies where you think that your data you just assume it's safe, but the people who are in that company operating it just have free reign to this data and it's just waiting for a disaster to happen.

And it's a probability spectrum. So even if it's not company A, it's going to be company B, C, D, E, F.

So you got to get to a zero trust infrastructure and you only disclose what you're legally required to disclose. You disclose it as a proof. So you can verify things.

But the person receiving it doesn't actually get the raw data, raw information. Same for medical records.

Who has a disease, but I don't want to reveal all your medical records, these types of things, right?

Who's qualified for the clinical trial? It costs millions of dollars to find people for that. So when you start thinking about these things, also think about business relationships like Toyota wants to work with the Chinese car company, but if they get too close a relationship, they kind of steal their records, right? Or it's the same with Google doing some work with Huawei or something like that. There's mutual benefit in trade, but you can't get to that trust relationship because the rules aren't set up properly. So, selective disclosure gives you the ability to define that up front, and then you can finally do business in a high-trust way, even though you don't fully trust the other party.

Midnight Ides. It's for everyone everywhere, and we have fair distribution and great technology like Lattice is and Intense, and it was a product of love. And we took tech from so many different ecosystems. It's written in Rust. The programming language is JavaScript, so it's super super easy for people to use. We have Aptos technology, Zcash technology, Near technology, Cardano technology. It's a little bit everything. It's my magnum opus of all the 15 years I've been in this space.