Charles Hoskinson Interview - Cardano ADA Lace Wallet, Vasil Upgrade, Ethiopia Digital Identity

It's wonderful to be here, how've you been?

I appreciate the Cardano pillow behind you.

Sure, we're really excited about this product. So we've been core protocol developers for a long time, and we've done Cardano, we've done work in Ethereum Classic, we do work with Horizon, all across the board, and we've understood a lot through that practice of what is required to construct a protocol, what is required to make it secure, what is required to do that deep engineering work. So one area that we've had to get involved in as a result of that work is the wallet space. We created Daedalus, but Daedalus is a reference. It's not meant to be commercialized, it's just meant to be a representation of the minimum viable functionality for an ecosystem. What we always assumed was that a rich quality ecosystem would start forming around Cardano, and it did. There's Yoroi, Flint Wallet, Typhon, Nami, et cetera, and it's gotten to a point where there's enough diversity that it justifies the existence of some new, exciting, innovative things that are actually commercial, not reference. By being commercial, it means that they're feature-rich and they do lots of cool stuff and there are all kinds of ways that you can partner with people to bring mutual benefit. So about a year ago, we decided to start the Lace project where we asked, what would be required for a next generation wallet? It has to be lightweight, fast, highly usable, but also it has to innovate and bring new things to the table. In addition to all the things you would expect, like having the capacity to vote and delegate, store your money, easy to back up, hardware wallet support, we wanted to do two particular things. One, we wanted to reimagine the security model. Right now it's light wallet versus full node. Full node is super expensive and heavy, you're basically running a database or server and a lot of other infrastructure on your computer. You can't really do that well on a laptop and most desktop computers, and you don't get a good user experience. That's why a lot of people say Daedalus is slow or takes a long time to sync. That's a universal problem amongst all full nodes, whether in the Zcash ecosystem, Bitcoin, or Ethereum. The advantages are great security and you don't trust anybody. When you get a transaction, you can know with certainty that it's completely right. Light clients are very lightweight by design, they work on a cell phone or browser, but the security model involves trusting a third party to a certain extent. So we asked, could we have something that's like a full node but has the light client experience? This required the invention of a new protocol called Mithril. We spent about a year working on that protocol and we've got it to a point where it's almost ready for prime time. Lace, we believe, is going to be the first Mithril-enabled wallet. As it goes through beta, we have to get a lot of things cleaned up, but next year it'll be enabled with Mithril. That effectively means it's as if you're running a full node in terms of security, but you get the performance and user experience of a browser wallet like a light client. That's really cool and exciting, and we hope it can spread throughout the entire Cardano ecosystem. Every Cardano wallet will eventually support that technology, and we're happy to be the first mover there. The second thing we looked at carefully was the idea of an identity-first wallet. We have a great product called Atala PRISM with about 7 million customers doing some great things. It's a data standard identity framework. What's so cool is that you can start talking about how identity operates in the cryptocurrency space, how it fits into DApps and wallets. You go from sending to a synonymous address to a human readable address. You send to Charles, not a pseudonym. You have friends, secure communication channels. Eventually you can talk about higher order things like estate planning. A great example: what if you die, what happens to your crypto? Using smart contracts and identity, it's very easy to create sweep accounts where if you don't have a proof of life or a dead man's switch, it gets swept to a custodian and there's a recovery process. There are also enterprise wallets for organizations with 500 employees where you can give each one spending policy and orchestration. The integration of PRISM into Lace will take some time, but step by step, it'll add new capabilities. You can also talk about how to add the regulated space. For example, some offerings like IPOs say they can only allow non-US citizens to participate. If you go through KYC with a DApp for supporting exchanges, you could have one-click creation of an account with an exchange and start trading without having to go through KYC for each exchange. These are the kinds of things we're excited to explore, in addition to a DApp store that we think will be best in class. We're pushing deeply into the certified software space. We have the problem of how do I know a DApp works, is functional and secure, is not fraudulent, is really Charles's DApp versus a scammer's? Look at Twitter with the bots, it's pervasive. What if you had a certification standard and you visually represent certified software differently? Part of the certification process is answering all those questions. Our DApp store that we're deploying with Lace, which will be in beta this year and launched next year, will be able to visually represent certified DApps differently from uncertified DApps. As a user of software in the Cardano ecosystem, we can start differentiating things where people did their homework and there's a higher probability of security, reliability, and honesty. That's an ecosystem play, spaces for DEXs, NFT stores, identity first, making it more usable so that grandma can finally use the wallet securely and safely. We also maintain our reputation as a protocol developer who understands security, reliability, and performance at a deep level. Everything we do in Lace, we'd like to turn into an open standard for wallet certification. We'd like to use Catalyst so that other wallet developers can get paid to get certified to meet those standards, so that across the board, everybody in the Cardano ecosystem enjoys the same level of security regardless of the commercial experience they choose. This is a way we can work with the industry and learn by doing. Our hope is that eventually it will result in a situation where everybody in the industry, at least in the Cardano space, does well. The other cool part about Lace is that we're planning on a self-serve backend where we can make it easy for third-party cryptocurrencies, whether it be Algorand, Tezos, or Polkadot, to integrate against it, similar to how people integrate with Rosetta and Coinbase. If they can do that, it means it's very easy for us to support new cryptocurrencies. Our long-term vision is for Lace to be a platform for all cryptocurrencies, not just Cardano. We'll do Bitcoin and Ethereum, partner with lots of people to bring them in, and my hope is eventually to have hundreds of cryptocurrencies supported, native assets, ERC20 assets, and other things supported in the Lace platform. Every single one of them will enjoy that same quality of security, performance, and reliability. Hopefully, we create some cross-industry standards for interoperability.

Yeah, and also doing it in a standard-driven way. When we say identity first, we're not inventing a new standard, we're following a standard that the industry has adopted, the W3C standard that's cross-blockchain. The great part about all this is you own it, you own your identity, you own your assets, it's a non-custodial wallet. What's so cool is that you have maximum freedom, you can leave at any time, no one can stop you, you can move from one experience to another. That's really the values of the cryptocurrency ecosystem. But by having these capabilities, it allows you to have much more control over when you trust people and how you trust people to augment services. If you want to live in a world where you think for the rest of time you're always going to remember your keywords and password and always be able to access your wallet, that's a world you can live in. But if you think there might be some scenarios where that's not the case, now we can have a conversation about who you trust and at what level, and how you want to do your estate planning. That needs to be a seamless experience for you as a user. You start in the least trustful world and then you can escalate accordingly and pick your partners along the way. That's why it's a commercial wallet instead of a reference wallet, because a reference wallet can't make those types of decisions or relationships. A commercial wallet can pick preferred partners who are trusted, vetted, and make it very easy and turnkey so that grandma could just click a button and it works. Another thing that was important to us is that we need to bring up the standard. We need to leverage our ecosystem where once we know what is a good open standard for a certified wallet, we need to encourage every single major wallet developer who has access to ADA, who is securing ADA with their wallet software, to get upgraded to it. The community can make decisions of whether they want to compensate that or not through the Catalyst program. I think this is an example where everybody can work together and hold each other to high standards. That effectively will mean that Cardano remains the most secure experience in the cryptocurrency space and ultimately helps us be the most competitive experience.

Yeah, and what's nice is you can escalate from there. Once you introduce an identity standard, then you can create cloud backups and all kinds of backup schemes. We really do want to integrate other technologies like hardware modules, for example, YubiKeys, and the ability to use technology like PGP as part of that process. One of the things I'd love to see done in 2023, and it's on the roadmap, but we're doing so much it might slip a bit, but so far it's looking good, is this idea of a paper wallet generator. Instead of generating a bunch of keywords, it has QR codes on it, a public QR code and a private one. The private one is colored representing how secure the encryption of it is. It would start red and then you can enter a password or encrypt it with a security key and then it gets green over time. Because you have an encrypted private key in QR code format, when you print it, you replay a task on the printer. This is something you can generate as a backup of your wallet. While you're creating your wallet, in addition to having your spending password and your 24 keywords, you also have an option to just click a button and generate a paper wallet at the same time, super easy user experience. If you have a YubiKey, just plug it in, click a button, boom, it's done. Suddenly you have this super secure thing and your backup experience is super easy. If you ever want to move from one thing to another, you just scan the QR code with a webcam and your YubiKey, tap it and you're done. The wallet's fully backed up. These are the cool things you can do when you talk about a commercial wallet. The other thing is we have great partners, like the Human-Computer Interaction group at Carnegie Mellon. We've been in discussions with them, one of the world leaders in interface design and user experience, about ways we can get away from 24 keywords and move to maybe some other standard like a picture or something that you can reconstruct or restore a wallet, to make it more user friendly. Being able to have great data and focus groups and work hand in glove with the people that use the software means we'll have the ability to grow as they grow. As a cloud product, every six to eight weeks we can do an update, so it has a rapid release cycle. We're always experimenting, adding, partnering, and the goal is to always improve usability and security at the same time.

It's a great ecosystem too. There are so many devices, whether it be hardware modules like YubiKeys or Ledgers, there are ways to interplay with cloud software so that you can hook things in. If you want to do a backup with Dropbox or Gmail, there are patterns you can follow to still keep that very secure.

Well, it doesn't make a lot of sense. I think that anytime you see a blockchain phone in this day and age, there was a time where it made a lot of sense, but in this day and age, it doesn't because the cost of developing hardware is in the hundreds of millions to billions. You have to contend with the fact that there's an enormous amount of patents, and at the end of the day, most of the things that go into the phone are fairly commoditized. If you look at the camera design, the chip design, you're probably getting something that's ARM and Qualcomm on the Android side. If you have the money to roll your own silicon, like Apple does or Google does with the Tensor chips, that's great, but we're not a multi-trillion dollar enterprise and it doesn't make a lot of sense to do that. The thing is that you have to ask, do you have software? If you want to have a super secure phone for crypto, I would argue 10 times out of 10, whether it be the Solana phone or all these other things that people are thinking about, just doing something like taking the Google Pixel and putting GrapheneOS on it is probably going to be a better experience, more secure, and ultimately a better phone. Why? Because you're starting from a phone that had billions of dollars of R&D behind it, great hardware, and you're putting an operating system on top that has been built from the ground up specifically for security. It has everything an InfoSec expert would expect, and it's actually used by militaries and other people for secure communication and clearance information. So it's very trivial to put that and just make sure that your cryptocurrency wallet is supported in GrapheneOS, and suddenly you have a great crypto phone. By the way, you'll have much better battery life because all the Google telemetry is turned off, and it actually updates faster than normal Android does. We use it all the time in our COMPSEC in the field when we go to countries like Mongolia or other places where there's a lot of spying and industrial espionage, because it's a great secure communication platform. That's where I think innovation can be done. There are also other phones like Samsung that have crypto wallets already built in, they use the Knox framework for it, much more secure than most people's stuff. Frankly, if you want extra security, just buy a Ledger or Trezor and they work with the phones. So why would we need to buy a completely new phone? Our design space as a cryptocurrency developer is we want you to have a secure experience. A phone design space is you want to take pictures, communicate with people, record high-def 4K video, long battery life, durability. None of those things are core competencies of a cryptocurrency development team. To make those core competencies, you have to spend hundreds of millions to billions of dollars to build up the brain trust and intellectual property if you're doing something proprietary. If you're not doing something proprietary, you're just using off-the-shelf equipment, why not just take a Google Pixel, which is a great phone, and put a new operating system on it, write some software for that operating system? That makes a lot more sense and it's much more accessible. Google Pixels have no supply chain issues. With your own OS, you can do whatever you want. Graphene is a great option in that respect. So I think it's a very bad strategy. Now, it does make sense to say maybe there's room to compete with YubiKey, maybe there's room to compete with Ledger or Trezor for specific use cases and applications. That's what YubiKey and these other guys do, and maybe that makes sense. We had this conversation with Tangem because the chips they were using in the Tangem cards were very old. We were always thinking, is it possible to do some electrical engineering work to create an ASIC that's specifically good for the types of things cryptocurrencies are doing? We were talking about offline off-chain transactions. You go to Africa, somebody in Ethiopia or Burundi doesn't have internet connectivity, so how do we build a system where I can transact cryptocurrencies offline? If I have RFID cards with good secure hardware in them, you can do that through a protocol of secure ratio and proof of uniqueness for key generation. It is possible to build that, and that's a very bespoke design space that Google, Samsung, Ledger, or Trezor aren't going to cover. It makes a lot more sense to say, because I need a price point of a dollar for one of these things, I'm giving them to everybody in the country, let's do some custom work in hardware there. It makes no sense to say, let's build a brand new phone and compete with Apple, Google, and Samsung when they're multi-trillion dollar companies with thousands of engineers. Even if you're successful, they'll sue you into oblivion for patent infringement. You're also competing with the operating system. You could do Android, but then you have a huge backdoor and all these problems, so you'd have to do a fork of Android and then you've basically reconstructed GrapheneOS under the hood. Was that an efficient use of your money and the trust you had in your community? Markets will decide. By the way, Microsoft even failed with their phone, and that's Microsoft. Look at the Windows Phone, they put probably $25 billion into it, they bought Nokia, with all their patents, their legacy, their trillions of dollars, they still failed to bring a third option to market.

Yeah, I will point something out though, that Solana phone will be a world leader in its ability to restart.

You just take it out, you blow it, put it back in.

Yeah, actually it went really well and the community showed its power there. We said, 'Hey, we're ready to go,' and the community said, 'Nope, we want to test more.' They're the ones in charge, so we had to wait a little longer. Actually it was time well spent, we all learned a lot in the process and CIP47 came out of it. But all things considered, what Vasil did, and I see this a lot, but I want to make sure it's not a missed point. You have a few options when you design a smart contract stack, and we call it the spectrum of expressiveness. On the right side of the spectrum, that's all about maximum expressiveness, the level of programmability you have. That's great because you can do everything. The problem is, because you can do everything, attackers can use everything to break your smart contracts, steal all your money, and we see this all the time with bridge hacks, the DAO hack, the $35 billion of money that's been stolen. On the other hand, you could be on the left side of the spectrum that says you can't do a lot. Because you can't do a lot, you don't get capabilities like DEXs and issuing your own assets, but you can exhaustively look at all the attack vectors, lock them off, and that means you have fewer hacks. That's why nobody talks about Bitcoin DApp hacked, because it's not a very expressive system, you can't build DApps on it, so by definition there's nothing to hack. It's a very secure system. So we had to make a decision, which side of the spectrum do we want to be on? With Cardano, we said Bitcoin is a pretty good starting point, but let's extend it. We created Extended UTXO, and then put a very safe language on top, and then upgrade after upgrade, we can move a little bit more to the right, and every time we do it, we can check and make sure we haven't broken anything along the way. Alonzo last year was the very beginning where Extended UTXO was introduced and Plutus was introduced. It was good enough for SundaeSwap to exist and all these other things to exist on the network, but also frustrating in that it didn't have all the capabilities that people would want, it didn't have the data availability that people would want, and a lot of things to optimize contracts. Then we worked with the community and developers for about a year and we threw a standard-driven process, wrote CIP-31, 32, 33, CIP-40 and other things. What we learned from that were basically new things that would make it much easier to write Plutus smart contracts and because of the expressiveness increase, new types of DApps on Cardano. What's happened is if you look between Plutus version one, the old Alonzo era, and Plutus version two, which both are on the chain by the way, people who are rewriting in version two are seeing a 10X reduction in transaction size and a half of transaction cost. That translates to a huge increase in performance, a huge increase in the things that you can do. This was done by Minswap, SundaeSwap, a lot of DApp developers. So better, faster, cheaper. The other thing about Vasil was these new capabilities enable oracles to work, stablecoins, algorithmic stablecoins to work. We're kind of working our way down. Native assets was like bringing colored coins to Cardano, and now that we have it, there are millions of assets that have been issued. Alonzo was about bringing the Extended UTXO model and programmability to the system, and Vasil was about refining that model to now enable us to basically comparably match the DApp space with Ethereum. What's so cool about this is that we didn't give up anything. Every time you start from the left and you move to the right, you maintain backwards compatibility, so any preexisting things that have been issued or built on Cardano still work. If you're on the other side of the spectrum and you decide you have to reduce your expressiveness for security reasons, anything that was built with that needed functionality is now broken, it doesn't work anymore, it has to be rewritten, and in some cases it doesn't work on your system. So I think going left to right makes a lot more sense than going right to left because the consequences of right to left are loss of funds, hacks, and ultimately incompatibility as you scale down. We've had a great time with it, we've learned a huge amount, the community's doing well. We sometimes get criticized for having no chain activity, but we're on the top three to top five for chain activity. People just lie, like we hear all the time, one transaction per second or per block or whatever the lie of the week is. But then people are publishing transactions where one transaction they've done something that impacts 200 people or 300 people, like an NFT drop or paying multiple wallets. I think what people are starting to realize is that Extended UTXO is the most concurrent and most parallelizable way of doing things, and also the way we've designed it, it works best with off-chain stuff. Whether that be a rollup or a state channel or any of these things, it works really well with it, it's isomorphic to these types of things. We've proven those things out, we did all the homework at the end of the day. If you look at Ethereum or these other spaces, what are their scaling models? 'Oh, we have to go off-chain, we have to use rollups, we have to use state channels.' We built our system to do all of that. Accounts don't work so well, you're going to lose money along the way, you're going to lose gas fees along the way. We're deterministic end to end inside of the system. So what you see locally is what the network does. Actually I think the bets that we've made are starting to really bear some fruit. Now that we have equivalent expressiveness, we're in a position where there are going to be tons of DApps. There are over 1,200 projects that we know of that have announced that they're building on Cardano. At least a few hundred of them are going to do some great work, and we should see in 2023 the fruits of those labors, a big increase in TVL, a big increase in adoption. That's above and beyond the fact that we're already the top three to top five, according to Messari, in terms of transaction volume. So things are going well. If this is a ghost chain, I'm pretty terrified to see what isn't.

I have certainly encountered my fair share of criticism throughout the days in the cryptocurrency space, especially on cryptocurrency Reddit.

Well, with New Balance it was a scoped contract and it was for the Kawhi Leonard shoe line that they pushed out. We delivered that and there's a whole system for it. That was done through the Innovation Group at New Balance, so you had a beginning, a middle, and an end, and the contract is completed. The Innovation Group decided not to go end to end with a full authentication system with any vendor. It's not like they said to us and they went to Ethereum or something, they just discontinued that. That said, we always talk to people. Brand protection and asset protection is a big deal. How many counterfeit Rolexes do you see floating around? This is a high growth market. We had a huge amount of interest in 2021, after the recession came, crypto winter came, a lot of that dried up. Usually what ends up happening is it's very easy to get a relationship in the R&D group, but then translating that to general product lines is a little harder. That said, DISH and Boost, that's a different animal entirely because that's across the whole company and that's ongoing. It's a loyalty point system for now, and our hope is to find a way to upgrade that so that it can be end to end software with Boost Mobile. Those are ongoing conversations and the work continues. It's a multi-year enterprise contract that we have with them. On the Ethiopia side, that's well on its way. We published a few updates about it and we should be able to get all the students probably by 2024. It was going to be a little sooner, 2023, but the issue was that the conflict in the region slowed things down. When that happens, you just take it as it is. It's like having a contract in Ukraine, they have other things they're worried about. But what's surprising is that actually we still have minister-level access and the work groups are still exercising and hitting their deadlines. That's pretty exciting. What we'd like to see is if we can find a way to align what's been done there with our values and the values of the community to create some form of national ID system. Those are ongoing conversations, trying to figure out a way to make them compatible with the Digital Ethiopia 2025 Doctrine that Prime Minister Abiy has pushed out. Like many of these things in the cryptocurrency space, they operate in a very fast turnaround, but enterprise and government contracting is a three to seven-year time horizon. You announce the deal, you execute it, it's reliable and repeatable, but it's slower. Still going strong. We learned a lot, it led to the creation of the Africa Credential Alliance, it led to us talking about standards for how to represent academic credentials with the DID, and ultimately a lot of that is going to be reflected eventually in Lace with the Atala PRISM integration as that goes from a B2B and B2G product to a B2C product for consumers.

Yeah, we did look into Latam. The one contract we could have had but we passed on was we flew to El Salvador and spent some time with the Salvadoran government, met with President Bukele, about the Bitcoin integration. There was a lot we could have done. We brought a partner with us, AlphaPoint, and AlphaPoint ended up taking the deal and we decided for values reasons to pass on it. But we did in that process look at the region, we looked at Honduras and Guatemala and a lot of other places, and there's a huge remittance market and microfinance market in Latam. Right now working with a partner in Kenya, we have Pezesha as the partner there, we're developing a real DeFi protocol for lending. Our hope is that as that grows and expands, we can escape Africa, move to Southeast Asia through partners and Latam through partners, and we can get a larger market. At the end of the day, the economics are pretty clear. The loan books are good, but the NPL rate is too high and the rates are too high. The NPLs of non-performing loans are about 40% on average with microfinance. So four out of 10 loans default or get into a bad state, and then the interest rates are very usurious, about 35% to 85%, which is great for investors but terrible for the people there. The hope is you bring liquidity to those marketplaces and then over time, the rates can go down, the NPL rates can go down, and then you can build financial products according to risk that can sit on top. That's where the institutions can come in. There are a lot of pilots that are going to be run, we're already running some now with Pezesha. 2023 hopefully we can integrate that into Lace and other things and create a lending center that people can use and partners can plug into, and regulated actors can handle all of that. Our hope is that that can spread decentralized identity, decentralized reputation, but also peer-to-peer lending where they have direct relationships and that transfer value will lower the rates and actually create better lending marketplaces that are less predatory and usurious. I think the single biggest long-term beneficiary of that in the next five to 10 years is probably the Latin market because they're closest to America, there's a lot more travel back and forth, and those are larger microfinance markets by pound than compared to a lot of African nations. The longest term growth is probably places like Congo, Nigeria, massive population centers that are not where they need to be in banking, but when they do, microfinance will be the principal form of credit for SMEs and consumers. It's an interesting market and we'll have a lot of stuff to say and a lot of products to do. It's really exciting to have Lace and PRISM because they naturally click together, especially when you talk about decentralized reputation and credit scoring. It's really exciting to see what we can bring to the conversation and to the Cardano ecosystem. A lot of people talk and say, 'Oh, we're doing all this stuff,' but it takes patience. These things take years and it's really hard, and every step forward you have a step back. If you talk about crypto lending, then you have a Celsius, and then you say, 'Okay, well, what went wrong there and how do you avoid these types of things going wrong?' You talk about Djed, an algorithmic stablecoin, we think it's a great design, but then you have a Luna and that sets everything back a little bit. You have to be very methodical. The problem is that the incentives in the system were built where you get paid upfront. So everybody was in a gold rush to basically do or say as much as they could, get as many people as they could to make a bunch of money, and then when everything comes collapsing down, laugh about it at their yacht parties. I don't think that's sustainable and I think it's going to invite very predatory and negative regulation on the industry. So we just ignore it and we're very methodical. Step by step by step, from what the regulations need to be like, what the consumer protections need to be, what protocols need to be designed, and how do you build a fair ecosystem. Even with Lace, we're technically competing with Flint and Typhon and all these other things, but at the same time, we're saying, 'How do we make them better?' Because our problems are their problems. If we have a certified wallet standard and we find a way to get them funding through the community to upgrade their wallets, then we know that no matter where your ADA is at, it's in the right hands, it's secure. Similarly with lending, it's not good enough just to open up a marketplace, you actually have to talk a lot about how does the person receiving the loan own their reputation and own their identity, or otherwise they're at the mercy of an MFI network that could be quite predatory and charge them 85% interest and break their legs if they don't repay. It's unethical to get into that business unless you have a plan to improve the very nature of the business. That does require lots of partnerships, regulatory oversight, auditing, and ultimately a lot of no's, because you have to do it ethically.

That's why VCs have a hard time with Cardano. With all these other guys, they carved out 20, 30, 40%, whatever, if you look at the Messari inside ownership of these protocols, a big chunk of stuff for VCs and they make a fuck ton of money upfront off of retail investors. They look at Cardano and say, 'Well, where's our dedicated carve out?' And we're like, 'It's fair, like Bitcoin, it's a fair distribution, you don't get that.' 'Well, we're not interested in that.' Okay, and you can wrap it up in whatever babble you want and lie to people about capabilities. Like the other day I heard somebody say we don't have multisig. I was like, that's news to the NFT people doing drops with multisig, that's news to Typhon Wallet, and that's news to all these other guys. I personally reviewed some of the specifications when we were getting multisig into the ledger. I'm pretty surprised that people would say that, and that wasn't like a random person, that's a VC that said that. So I think there's a disconnect there, and you're absolutely right about financial incentives. They have a financial incentive to be disconnected, so what you do is you just ignore it. You say, 'Look, we've gotten this far bootstrap with our community and it's only growing, every metric is growing.' So all we gotta do is just keep the principles, keep the faith, keep growing, and we're going to wake up one day and have 100,000 people or 200 billion people. One of my most criticized tweets was when I predicted there are going to be thousands of assets and hundreds of DApps on Cardano, and they lord this out in the Ethereum community like somehow we're all liars. I'm like, 'Guys, you are aware we have 5 million assets on Cardano and 1,200 projects that have announced they're building on Cardano, just looking at the Catalyst funding volume as an example of projects.' So the prediction came true. What exactly is the scandal with the tweet? But they pay so little attention that they think they're being clever by tweeting that, not realizing they're self-owning. It's pretty crazy. It's like pretending your team won the Super Bowl and you're tweeting about it while the other team is holding the Super Bowl celebration rally.

Yeah, another thing about Twitter that's amazing to me is I've reported, there's a new type of bot, the verified accounts are being taken over through hacking and then repurposed to look like Vitalik or me or Brad or somebody in the ecosystem. So I reported one of the Vitalik bots, a verified Vitalik bot, not a fake account, but like a verified fake account. And then Twitter does an investigation and then they report back, 'Oh, that doesn't violate our terms of use.' I said, 'Let me get this straight, the whole point of the verification program is to give a user certainty that the person tweeting is the person with the name and the picture. It's obviously not Vitalik, because he has a verified account, there can't be two verified Vitaliks. And this account, the only thing it's tweeting is give money to me for giveaway scam.' And then they tell me that they've conducted an investigation, a human being has looked at it, and that account doesn't violate the terms of service. This is pretty wild, man. It's one thing if it's like a regular bot account, okay, whatever, maybe it's an impersonation. But if a verified account, Twitter is vouching that that person is Vitalik, and that still doesn't go through. This is the state of affairs in our industry with social media. There's no incentive for truth anymore. People just say stuff and they write books and they do things and they just get away with it. You just smile and say, okay, the dog barks, the caravan moves on.

Yeah, that's exactly it. It's one of the best advertisements for PRISM. I did a video when Jack Dorsey was still CEO of Twitter and I said, 'Hey Jack, if you want to get rid of all your bot accounts and you also want to prevent the hack that happened where the admin panel was taken over and people were tweeting on behalf of Obama and Biden and all these other things, then you need to use W3C DIDs and have verified tweets.' So instead of having verification just be a check mark, you create a DID that goes through KYC, then once you've done that, it's an additional thing, you sign every tweet that you do with it. So even if somebody compromises your account, you'd have unsigned tweets versus signed tweets. A hacker could take over your account, but then it would appear red, the tweet's unsigned, so you'd know that it's a scam tweet. Once your namespace is signed, it's very difficult for bots to do anything and those impersonations wouldn't make any sense in that context. The other thing is it's an AI problem and it's extraordinary to me that Silicon Valley claims they're all like magical domain experts in AI and they know all this stuff about AI, and yet, they can't apparently identify the same 26 keywords or 30 keywords. It's nuts, it's absolutely nuts. It's telling you Twitter just doesn't care, they really don't care because they understand the same thing that Musk is saying, which is that once they start looking into bot accounts, probably 20 or 30 or 40% of all the platform is bots. It's the same with Facebook, it's the same with all these guys, and they know that their valuations will go down, their revenue for advertising will go down, but if they announce that, so they all play the shell game that they've somehow solved the bot problem, but they have no incentive to actually do it.

Well, as long as Lace has browser access, meaning that we're able to run a browser-based wallet, we're not shut out, and as long as we can operate that portal the way that we want to, I don't see there's a valid reason to build a browser. That said, Brave has been tremendously successful and they've done great work. I really admire and like the Brave team, they made a lot of big commitments, they talked a lot and they delivered. They built a great ecosystem, they do everything from anonymizing your browser fingerprint to TOR integration, they've thought a lot about the advertising model with privacy, and they've been a great advocate. Frankly, I think the way to build a browser correctly. So had Brave not existed, I'd be a lot more in the mood to say, 'Hey, maybe we should do something here,' but I think Brendan and his team are just doing a phenomenal job, and I'm very glad that they're in the space. Now, what does concern me is that Google and Apple still have enormous amounts of control over the app space on cell phones. Maybe progressive web apps or something is required to help chip away at that, but it's problematic because they're terminating your business models. They can just arbitrarily decide, 'Eh, we don't like NFTs, so fuck you, you're gone.' That's problematic because that compromises the integrity of products. I believe in freedom, I believe in open access, I believe that everybody should have the ability to download and do the things that they want as long as it doesn't violate the law. NFTs do not violate the law as far as we can tell, so why should Apple then get to sculpt the entire marketplace because some mid-level lawyers decided that perhaps there's some arbitrary SEC risk that's not even well defined? That's a very problematic thing and it has to stop. So there, there are some open questions that maybe at the very least, we invest in GrapheneOS and we build an open app store with F-Droid, there are a few that exist, and make sure that at least these things are available there for people who do want alternatives. The problem is that that's not mass consumerable. Grandma doesn't have that, grandpa doesn't have that, the 15-year-old kid doesn't have that, they have a Galaxy phone, they have an iPhone, and until those monopolies get broken up, that's problematic. It would be nice to see regulation move in a direction that prevents app stores from having monopolies over marketplaces and being able to sculpt the markets. By the way, it's not hypothetical, look at Amazon. They're no longer selling books through the Kindle app on Google phones, which is extraordinary. Amazon is a huge company and Google basically gets to shut them out. So what chance do we have as a little guy? That's an example of where Sherman Anti-Trust could potentially be used and explored because it does feel like it's a big problem. We do talk to regulators and we do talk to lawmakers about these problems, and they're all connected to that same collection of things, where a small amount of companies can influence and distract a marketplace. But at least in the browser space, it doesn't seem like they've been able to stop that, and Brave is a great alternative for the time being.

Oh, there's a ton of things that we would have done differently. Knowing what we know now, we probably would have invested a lot more time, effort, and money early in building a proper specification language for formal methods. Also, there was a collection of Haskell technologies that I thought would mature faster, and we would have invested a lot more time, effort, and money in building those technologies out upfront to save us a huge amount of heartache. We would have been much better at interface design, and we'd also have been much better at protocol design and standards. A lot of the wonky, stupid stuff that we did early on, we wouldn't have done it at all, and then you wouldn't have had problems like with DB Sync and the Byron standards that have just... there are a lot of legacy code that are very problematic to maintain. We would have probably invested a lot more effort into developer experience, and instead of launching with what we did with Alonzo, we would have launched with what we had with Vasil. If we had just paid a little bit more attention, we probably could have done that, and it would have saved us a lot of heartache in the initial wave of DApps on Cardano, probably faster development of the on-chain voting artifacts. But it's Monday morning quarterbacking. Probably would have released a browser wallet upfront and not had a full node or have a full GUI, so Daedalus would have just been a command line interface for enterprises to use, and we would have built Yoroi to launch and we'd have had a significantly better consumer experience for adoption for Cardano. We've never had a problem of foresight, we've always known kind of where the space would go, and there's evidence of that because we've written 150 academic papers. You can look at the papers and literally years before people were talking about stuff, we talked about it. So we kind of knew where the world was coming, our problem has been execution, where our time to market has been because of the processes we have, sometimes have been slow. That said, some of the things are starting to now be recognized as big differentiators. Between the Ethereum merge and our consensus protocol, Ethereum is the Hotel California of cryptocurrencies where you can check in but you can't check out. Your money gets locked, you can't unlock, and also if for whatever reason something happens, you lose your money, the slashing mechanism. It turns out that Cardano, none of this is necessary. The Ethereum people say, 'Well, there's no evidence that that'll be secure,' and we're like, 'Well guys, we've been running since 2020 and it's worked, we've never had a problem. By the way, we've published all our papers, we went through the peer review process, so both the practical engineering community, the real life experiment, and the academic community all agree that our model is viable and we know how to scale that model, we know how to build out that model.' So I think we won in the consensus fight, and Ethereum eventually is going to have to admit that, but they're very arrogant people. I got in a fight with an Ethereum core developer and he straight up admitted, the tweets are still there, that the reason why the Ethereum Foundation didn't look into any of our technology is their personal distaste for me. So apparently because they don't like me, they think that every paper we've written is wrong, even though the third-party, independent review agrees that it's right and we actually have more citations in our papers than any other consensus papers in the industry. So I think we won that fight. Would we do that differently? Probably not. Maybe we would have been faster with simulations, maybe we would have been faster to market with partial delegation. There's a lot I'd like a do-over on user experience as well. But all things considered, given the scale of the project where you're talking about innovating with interoperability, governance, scalability, identity, building it in more than 100 countries with 3 million plus users, bootstrapping an entire ecosystem without VCs or a lot of capital, the total project cost was the allocated $72 million to create a $15 billion ecosystem. EOS raised $4 billion, and their ecosystem is what, $2 billion? And now they kept the money, at least Daniel Larimer gets to live the Steve Miller song, 'Take the Money and Run.' But it is what it is, and so you just accept that sometimes you're not perfect and you just move forward. What's really exciting is the community's doing a great job. We probably would have done over the trinity structure with EMURGO, CF, and IOHK. Some things worked really, really well, but the foundation should be a members-based organization and it shouldn't probably be in Switzerland. The stiff Swiss structure in hindsight is not very good. So that, you can complain about it, cry over it, or you can just set up a new NBO and get the community to help bootstrap that and get the existing foundation to help bootstrap that and get it where it needs to go. Probably there should have been some tighter controls on the VC side of Cardano as well, but we created the cFund and Catalyst seems to have been able to bridge that gap, and EMURGO just announced that they're investing $200 million, so that's improving as well. We could have probably done a better job with VC relations. We didn't have any representation in Silicon Valley and New York and other places, so these poor VCs are sitting in a situation where 100% of their opinion of Cardano is coming from Polygon developers, Polkadot developers, Algorand developers, Avalanche developers, and Ethereum developers. These people are just legendary for their love and admiration of me, so I can imagine that's probably not easy to have a positive opinion. It's like probably trying to sell Donald Trump in San Francisco, you're not going to have a good experience with that whole situation. That's okay, but again, it's Monday morning quarterbacking. At the end of the day, it's very easy to get caught in the weeds of, 'Oh, we made all these mistakes,' and ignore the fact that we still are a top 10 ecosystem and we have built so much amazing stuff and we're speeding up, not slowing down. We're gaining traction, every day we have more people, more transaction volume, and ultimately we're delivering on our roadmap. If you pay attention to cryptocurrency Reddit, you're just super obsessed with the months of December 2013 to June of 2014 and think the whole world began and ended there. Meanwhile, if you're actually paying attention, you realize that apparently stuff has been done and continues to be done. Vasil came out, I was on a panel with Ryan Selkis at Messari while Vasil was being rolled out, no problems at all. So there's something that's being done right and the community is really driving forward. They're doing a great job and I'm really proud of that, and I think that our best days are ahead of us as a result.

Well, there are some people in the XRP community that are trying to invent this grand conspiracy that there was blatant corruption between the insiders at the SEC and Ethereum, and I don't honestly think that that's the issue here. I think the issue is that both the CFTC and the SEC are ill-equipped from law and policy to properly regulate the cryptocurrency space. So what they're doing is they're just trying to do it the way that they think they can with the framework they have. The SEC only has the ability to regulate if something is a security. If it's not, then it's not their wheelhouse. They're one of the very few US regulatory bodies that has a consumer arm because everyday people own stock. They have lots of people, lots of enforcement capabilities. Let's be honest here, Luna happened, BitConnect happened, OneCoin happened. So thousands of cases every year of that behavior have occurred in our industry, and the losses have gone from millions to billions to almost a trillion dollars in under 13 years, faster than any industry before. Usually when you have an agency failure in the tens of billions of dollars, it does result in the creation of new law. A great example would be the collapse of Enron, which led to Sarbanes-Oxley, or the 2008 financial crisis, which led to the Dodd-Frank Consumer Protection Act. So what's happened is the legislative branch hasn't done its job. They haven't showed up and they haven't passed new laws to give new powers, new bureaucracies, new standards to properly regulate the cryptocurrency space in every aspect. As a result, what they're trying to do is just navigate this industry as best they can, and different commissioners have different viewpoints. Gensler apparently is trying to take an ecosystem viewpoint. It looks like he's not having the success he wants to have on the layer one side, so he is pursuing the exchanges now and trying a different strategy. He is trying to install some sort of patchwork framework. I don't understand how it's going to actually work when he says, 'Come in and register.' It doesn't make any sense because registration assumes that the equity of the security dies when the issuing agency goes away. There's no notion that Microsoft stock is going to continue trading, be valuable, and be useful to people when Microsoft goes out of business. I don't understand how that works. What policy consideration are you satisfying? What information asymmetries are you resolving? What consumer protections are you putting in by a registration regime? All you're really doing is destroying liquidity, you may be outlawing non-custodial wallets, so suddenly Yoroi is illegal, MetaMask is illegal, all these things are illegal. Are you really helping anybody at the end of the rainbow? No, because the assets are still traded. They just now trade not in the US marketplaces, and billions of people are using them and consuming them. So you're destroying the American industry, which we have a lead in right now. What state would our economy be if we had destroyed the internet in the United States? We wouldn't have Google, Facebook, Amazon, they'd all be European companies. What would that do to our economy? Where would we be right now if we lost all that talent? So I don't understand that part of it. I think it's a very strange and counterproductive way of approaching things. Regulation through enforcement is by definition very, very problematic. Now, the CFTC side does make more sense because cryptocurrencies do kind of look like commodities. I grow hay, for example. I don't have to go to the central hay bureau and say, 'Hey, I need permission to grow hay,' or 'Can you give me a disclosure on hay?' No, I just plant seeds, I irrigate, then I cut it, and when I sell it, I get taxed. When I sell it, I sell it into regulated marketplaces that have protections in place from market manipulation. The CFTC does this, and they are a principles-based regulator from that perspective. Similar with cryptocurrency, who has to ask permission at the moment to build on Cardano or Ethereum? No one. At any given day, you can wake up and have a hair-brained scheme and say, 'You know what, all those pillows behind me, I'm going to go and create an NFT project and issue NFTs and try to get my friends to buy them.' Zero communication is required with any centralized entity to do that, much like zero communication is required for me to grow hay. All commodity markets behave this way. If you happen to be lucky enough to find some oil and you own that area where the oil's at, as long as you comply with local government regulations, you can go and extract it, and then suddenly you are a member of the global oil business, right there with the Saudis, the Russians, ExxonMobil, the big and the small. So I think that CFTC regulation does make more sense, but it doesn't solve a lot of the edge cases, it's not a golden bullet. You still have a situation where you have custodial standards, stablecoin regulations, questions about disclosures and KYC and AML for DApps and DeFi. Again, all these things are out of the scope, mostly of the CFTC and the SEC. For example, Senator Toomey wants to push regulation, and I think it's very reasonable for asset-backed stablecoins to regulate them like banks. Why? Because they basically are a bank. They're taking a deposit, they're issuing something, and the thing they're issuing only is worth that because you trust them. That's exactly how a bank operates. You trust them, and therefore they're the most regulated of all actors in the financial industry. It's not a cryptocurrency, it's a crypto asset, but it doesn't have decentralization. The only reason Tether or Circle or these other things are worth anything is because you trust the companies behind them to be honest, credible actors, and you trust the auditors. So more regulation is better in that particular case. On the other hand, algorithmic stablecoins, the custodian is the blockchain. We can verify on both sides what's the case, so that's a different kind of regulation. The consumer needs to understand at what circumstances the peg will break, because many cases they don't, they treat them exactly the same as an asset-backed stablecoin, and then you have a Luna incident. Luna is a completely different design as a partially collateralized asset versus an over-collateralized asset. So a different regulatory framework needs to be incubated there. I think practically what's going to happen is nothing is going to get done this year because of the midterm election. After that's done, the Financial Innovation Act, the Lummis-Gillibrand Financial Innovation Act, will probably merge with efforts that Toomey has and the Biden executive order, and then something will be patched together to pass. If it's a blue wave and the Democrats hold the Senate and the Congress, it'll probably look a lot more like what the recommendations are on the Biden executive order, with some flavoring of the Financial Innovation Act. If it's a red wave, it'll look a lot more like the Financial Innovation Act with some sprinkles of the Biden executive order, especially around environmental standards, the use of the EPA and DOE for Bitcoin mining. But we'll get it done in 2023 more likely than not. I think as long as there's some sprinkling of the executive order, Biden will sign it.

This is the frustration of regulation by enforcement, and it's the same problem with speeding. If you're a cop and you're standing on the side of the road with your radar out, and let's say everybody on the highway is going 75 miles an hour and the speed limit is 55, you can only pick one at a time. Is that fair to that one person who got picked versus all the other people? It's a systemic problem. That's their argument with enforcement. They say, 'Look, we can only do so much at a time, we only have resources for so much at a time. We're just going to pick what we feel are the most egregious offenders first and work our way down the list.' Okay, but in the process of doing that, you're destroying American innovation, and in the process of doing that, you're putting unusual, and in some cases cruel, burdens upon innovative projects that are just trying to do interesting things. At the end of the day, you're not really in the spirit of what you're trying to do, improving the situation. Is giving traffic tickets to people going 75 miles an hour on a five-lane highway really an efficient use of your time, or is looking for drunk drivers an efficient use of your time? If you had to pick one, which one are you going to go for? The prior administration chose to focus a lot more on fraud. They looked at the BitConnects of the world. This one seems to be a lot more focused, for some reason, on the speeders in their view. But nobody seems to be questioning the judgment of why was the speed limit set at 55 miles an hour to begin with. Maybe this highway can support 75. These people actually aren't violating the law. There's no protection, motorist protection or policy consideration that you're doing, and all you're doing is inconveniencing everybody and hurting American competitiveness. Frankly, I think it's above the SEC's pay grade to make unilaterally these types of decisions. I think the issue is that the Treasury Department at the moment, because of its leadership, is not well equipped to fully appreciate and understand our industry. Part of that is age, part of that is philosophy, and part of that is just the nature of how things are working politically in Washington right now. Right now, they have other things they're worried about. This recession from COVID is traumatic. $9 trillion of value has been lost in the stock market. There's a war in Ukraine. The commodity markets are very shaky right now. Supply chains were devastated from COVID because of the response to lockdowns, and as a result, inflation has crept its way in alongside the monetary policy that exacerbated it. Now you have a situation where the dollar is inflating 8%, 10% per year. The problem is you have all these inflation index things, and that basically means America could be permanently running a horrific deficit. If we're not careful, the dollar could collapse. If we move in the other direction, we could be knocked into a depression. The Treasury Department is right now dealing with that. As important as crypto is to us, we have to remember that we're also in that same conversation of potential nuclear war in the next 90 to 180 days with Putin, mass inflation, an economy that's in a very bad state. There's also a political reality where things have gone from disagreements to personal. The last 20 years, it's gone from 'I disagree with you' to 'You are Hitler, I hate you, and you have to be thrown in jail.' Politics is starting to increasingly get criminalized. Now it's regular that the FBI apparently thinks it's okay to seize congressmen's phones and senators' phones, and apparently there are tons of criminal investigations into various people. The problem is that that's not going to stop with the left to the right. When the right gets back to power, it'll go right to left. I guarantee you, if the Republicans retake the House and Senate, there will be aggressive criminal investigations into Hunter Biden. When you look at that type of politics, how do you get legislation passed, how do you get clarity when the people on the other side of the aisle are actually trying to put you in jail? That's an unprecedented situation that we have, and it is something that I think is going to create a lot of long-term issues for us. The problem is that regulation is downstream of that. By the way, it's not just our industry that's complaining about the SEC. There are a lot of people that are complaining right now about the EPA's involvement in SEC policy and people weaponizing the Securities and Exchange Commission to push an environmentalist policy and the Green Policy. Is that constitutional? Who knows, it'll probably go before the Supreme Court at some point. That's just one of dozens. There are also questions about using the SEC to enforce equity requirements, where if your board is not certainly diversified in a particular direction, maybe you're not in compliance with regulations or you can't do your IPO. There's also soft power. A ton of regulation in the financial industry is done through self-regulatory organizations and customs and standards like FINRA. So it could be the case that technically the policy lets you do it, but then the silent policy is you'll never get a bank account, you'll never be able to get correspondent relationships, you'll never be able to actually do regulated business. You just simply don't get the license unless you comply with these user standards that exist. We've seen this a lot with this type of administration. There was the 'Fast and Furious' program, we saw that with the crackdown of the Obama administration preventing people who sell guns and who do pornography from being able to get bank accounts. They exert soft influence of pressure. So it wouldn't surprise me if there's a crypto provision in that respect in certain contexts. So we as an industry have to work our way through it. We're not immune to the macropolitics of things. We'd like to believe that we're our own thing, but we're beholden to that, and we just have to work our way through it.

Never, that's like, 'Hey, what's your password?'

Sean, I've known for a while. He's also a resident of Wyoming and I think he's got a ranch somewhere out here. I don't know exactly where it's at, but I'll definitely see him. Actually, we're trying to set up a standards institute over at the University of Wyoming, and it'd be a lot of fun to see if we get Algorand involved in that because they think about a lot of things the same way we do. Being Wyoming and Wyoming, I think it's a slam dunk. So whatever Sean's up for it, if he happens to be in the Wheatland area, we certainly can go and ride some horses. Although I just got a bunch of mini horses out here right now, so you can't really ride Mr. Tegus or these other things. You can try, it's not going to work out for you. But maybe I could grab a gypsy van or two and we can have some fun.

Thank you so much, this was a lot of fun, cheers.