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From Africa to Asia, What does Global Growth Look Like for Cardano? (Part V)

Contributor Website Inserts CharlesHoskinson 1

Key Highlights

  • Cardano is now looking at Vietnam, Cambodia, Malaysia, and Indonesia for expansion
  • Hoskinson is thinking about Samsung S10, digital identity, and how to manage a public-private key pair for cryptocurrency

Listen to the full podcast version of this interview

Transcript of Part V

At Cardano, you’re moving towards shaping that part of the future. What’s the roadmap for 2019? Everybody is waiting, excited, and anticipating what’s the roadmap for you?

The centralization and smart contracts are the two big lineups for 2019 and they’re going to consume a huge amount of time. We’ll probably get some degree of interoperability wired into our protocol during 2019 to be finished in 2020. And 2020 is all about scalability and governance. It’s basically getting us to the next level in terms of performance so we get to those millions and billions of users, giving us a governing system so that no custodians need to be around. 

The system can kind of pay for its own needs and decide its own future, in which case I could disappear like Satoshi into the wind and the system will persist and service and grow and thrive. That’s the ultimate accomplishment I think for a protocol. That’s what we’re mostly focused on. And it’s just really exciting to say that we kept our principles and we endured Crypto-Winter. But we’re coming up the other side much stronger and better for it, I think.

So products, what products can we see? 19:42

So we’d like to see first a lot of infrastructure. So we have a partnership with Tangem. It’s a beautiful little hardware wallet that costs less than a dollar to make, and will only sell for only a few dollars. Tap it on your phone and you can use it just like a ledger device. We’ll probably try to get some ATM infrastructure and debit card infrastructure. Things like that will just make the acceptance of and payment of data and storage of data a lot easier. So that’s kind of one layer. 

Then another collection of products towards verticals. So things I’m very interested in, digital identity, lending, and insurance. So we’d love to have some microfinance and microinsurance products on our platform and experiment with different things there. 

And of course, inevitably people are going to go for high value applications, so we’ll probably see things like gaming and gambling on the platform that third parties create and other things along those verticals. And there will probably be a lot of hoarding and application, because at the end of the day, if you look at all the depths employed on EOs and ethereum, you know, they’re not really loyal to the platform nor should they be. It’d be crazy if you say, ‘Hey we’re Netflix, but we’re so loyal to Amazon, we are going to build our entire business model around Amazon.’ 

At the end of the day, it’s a service provider for their commercial vision. And if the fees get too high or the platform is not stable enough for them, maybe they go to Microsoft or maybe they go to RackSpace or a different vendor. Well similarly, if you’re running Golem or MakerDAO, or these other things, the theorem is not really working for your needs,   then you’re going to go somewhere else. So we’re going to try to convince some people that it’s a good idea to port from ethereum and other applications. 

How integral is Cardano, IOHK for Asia and how much does Asia support the Cardano vision? Japan and Korea, two of your main markets here.

We have a huge fan base in Japan, it’s pretty overwhelming. Some fans got together about two years ago and they got a bunch of people in panda costumes to run around Osaka. It was a surreal moment. I got a message from somebody saying why is there an army of panda men walking through Osaka with Cardano banners? I said I have no idea what you’re talking about. So when you see these things, you say ‘ok wow!” 

But levity aside, what’s really exciting is we’re building kind of concepts right now, like how would you do supply-chain management for agriculture? If that works for coffee, it works for rice. If that works for rice, it works for any other agricultural good. Just, it has to be retuned. So plenty of places that we are going to try to innovate in Vietnam, and Cambodia, Malaysia, Indonesia. 

In fact, Emurgo, one of our commercial partners, has already gotten a lot of infrastructure in these different areas, and they’re just waiting to basically be able to flip a switch and run along a pilot. And similarly, there’s a lot of rural places in rural Japan that have huge problems, you know it’s getting systematically older. The young people move to the larger cities, you have ghost towns all throughout large chunks of Japan, and so the government is trying to figure out, well, how do we solve these types of problems. So it would be cool to be in that conversation, see if we can revitalize some local economies and give them some new ways of doing things.

I mean, at the end of the day, it really depends on that device that lives in those people’s hands. You walk around the streets of Hong Kong, and nobody knows where they’re going, they’re just staring at their phones and walking into walls and walking into people. But really, this has changed the dynamic for people not only in Asia but around the world. And a lot of blockchain projects and products are taking a look at handheld devices   as a way to engage with the consumer. HTC has come out with Exodus, as you know. There is word that Samsung might be interested in supporting Cardano. Can you talk about that a little bit?

We have nothing to comment on at the moment on the Samsung-Cardano relationship.      

There is a relationship though?

Nothing to say about that, there is no official relationship. We are not in any discussions or negotiations with Samsung. We are very curious, though of how a person can get onto the S10. Samsung, for years has been building up a trusted computer platform within their phone called Samsung Knox, and mostly at the moment it’s used for enterprise-users to do things like digital identity management.  

Well, if you could manage a digital identity in a trusted hardware module, you could also manage a public-private key pair for cryptocurrency in that same setup. So basically Samsung is extending those capabilities to cover that area, but it’s unclear how cryptocurrencies get onto the enclave. They’re not the only company that’s been exploring this. In fact, Stephen Sprague company’s Rivetz has been playing around with for well more than three or four years and they have a great stack of really sophisticated software to get into SIM cards and get into TPMs on many consumer devices. And they’ve been trying to actually work out a partnership on several large phone companies so that they can pre-deploy this software. 

So Samsung is just one of many and we’ll see over a trend over the next three to five years probably universal coverage because these TPMs exist already built into the phones, so it’s repurposing them to now be able to store digital keys for cryptocurrency. 

So basically I will be able to use whichever phone that I am using and it will serve as my crypto-wallet?

Yeah, because it’s just like when Bluetooth and NFC and other things came to the phone, these are fundamental capabilities and trusted computing has been built into the phones. If anything, it’s just for digital rights management, so you know you can store…

In the same way I would have credit cards on my phone, I have my wallet…

Yeah, so that’s coming in and Samsung doesn’t have a monopoly there, it’s going to be pretty ubiquitous I think over the next three to five years. So we’ll see what we can do to get onto the S10. That’d be great. But at the moment, it’s not publicly known how to do that. And they’ll probably make an announcement at some point because it is new to them. And you know the regulatory environment area is one that has ends and flows, they embrace, and they take a step back, so they have to be very careful and systematic with the way they do things. But they’ve been building a payments infrastructure for quite some time with Samsung Pay so, and Apple has…

But that is mass adoption, I mean just take a look at north of us right here in China, they have single-handedly transformed peer-to-peer on social networks in WeChat and really kind of taking over the FinTech space.

Right. So there is a lot of requirements about how do you bind an identity with these transactions — how much meta-data do you need to flow with these transactions? Do you need to pre-register to be able to accept payments? This is the hard part of it. It’s not the actual technology of moving value between Alice to Bob or one trusted enclave to another. It’s how do you fit this into a regulatory model that China is ok with, the United States is ok with, Korea is ok with. Because they’re all snowflakes, they’re all very different, they have their own needs. 

But see, that goes back to the fundamental problem of when you allow a global community to be able to peer-to-peer with each other, what’s the need for borders, what’s the need for capital controls, what’s the need for central banks?

I agree with you completely. There really is not a lot of need for these guys, or at least in their current instantiation. But remember it takes time for governments to catch up with the emergence of technology. It wasn’t too long ago when we had laws in the United States that if you had a car, you’d have to have a person traveling in front of it with flags to alert people. And you couldn’t even sell things online until 1992 with the 1992 repeal of the NSFAUP. You know, so it’s preposterous to think e-commerce would be banned on a public network, but that wasn’t too long ago. 

So it takes time for regulation to catch up with technology. But the trends are pretty clear that we’re becoming more global and things regardless if governments want to or not are trying to become more free. There are regressions. Like Russia recently passed a law you can’t criticize Putin and want to build their own internet and China obviously has their issues. But you don’t look at the particulars, you always look at the trends. And you look at the global environment day-by-day, month-by-month, year-by-year. 

Things are moving towards more travel, more communication, more commercial flow on a global basis, and reduction of things like capital controls and restriction of the flow of information and value. 

In terms of the technological trends that we’re moving from Proof-of-Work to Proof-of-Stake, how important is that evolution and is there a co-layering or a bifurcation: one or the other?

Right. Consensus protocols in a way are almost like religions more so than science. I mean, at the end of the day, you have a collection of things you want to do. You want to go from one state of the ledger to another state. So you have a basket of pending changes that you want to make, and I want to move value from Alice to Bob. I want to run this code. I want to verify that this proof is correct., so somebody has got to do that work. So first thing is who is going to do it? And the second thing is what is the most efficient way of doing it? 

So there is a whole science to how to sort this out and at some point, the science ends and then the philosophy tradeoffs begin. Well is it ok to just have 21 people in control? Or do you want more knowing that if you add more, you’re probably going to slow the system down a little bit. 

And then second, you have to think about other factors like, are you going to preserve everything forever? Bitcoin tends to save everything. But that’s not a sustainable model if you’re talking about global scale systems because eventually you’ll have blockchains that are in the exabytes – that’s either Google or the NSA that has it, you have to pick which one you want to get it from. So you need to have some notion that it’s sometimes ok to throw things away. And who gets to decide that? So these are the difficult questions that we’re running into and they’re much more philosophical than technological and we have solutions and answers for all of them. What Proof-of-Work does really well is it aggregates a lot of computational capability. 

Now, if you do it smart, meaning you’re ASIC-resistant, this is general purpose computational capabilities or CPUs and GPUs. So these are things that can be used for machine learning and to folding proteins and solving complex problems so they’re socially useful. If you’re stupid, you have ASIC that can only do one thing, like compute some hash and that’s not really useful to anybody. 

So the next generation of Proof-of-Work is moving into the direction of being useful in some way — either solving classes of complex problems, verifying a decentralized database so you can have a decentralized dropbox or whatever that may be. 

Now in terms of Proof-of-Stake, this is all about efficiency. It’s saying do everything that Proof-of-Work can do for just running a system, and let’s do that with the least power consumption possible. Like for example with Cardano, one of our fan members came up with a way of getting Cardano to work on a rock pi board and it uses around six watts of power.

What is a rock pi board?

So it’s like a raspberry pie, it’s like an open-source piece of hardware. I’ll show you a picture of it in a bit, and basically this device can be purchased by anybody for less than 100 dollars. It’s an open-source design. It runs commodity hardware the same kinds of things that’s in your tablet, but just cheaper. And suddenly now I can run a global scale financial system with just a few hundred or a few thousand of these devices. And so less power consumption in a single home in the United States compared to a system that requires more power than the country of Ecuador. 

So if it’s like apples to apples where you’re just looking at power consumption and nothing else, Proof-of-Stake is just unbelievably better in every respect. It’s more decentralized. Our system is about 100 times more decentralized once it gets fully decentralized, whereas bitcoin is fifty times anything else, transaction throughput is about thirty times faster than bitcoin and about twelve times faster latency. So transactions sell a lot faster in our system. 

But setting that aside, what Proof-of-Work really does is it gives you lots of computation. And if you do it smart, then you’re actually talking about different systems now. One’s a world computer that you could tap into and use it as a marketplace to go and do stuff for you. And the other one is a kind of special purpose computer just to make sure that your financial system is working, to prove transactions. And I think both of them will coexist if that’s the case. If they’re just replicating the same thing, then there’s no reason to use Proof-of-Work because of Proof-of-Stake is so much better. 

It really boils down to why those fans, fan members, ran around Japan in panda suits. Were they fans of the technology or are they fans of the potential for Cardano, the potential of this really philosophical vision of where we should be going?

I think a lot of them are fans of the philosophical component of Cardano. That we have an obligation to make the world a better place. And right now, whether we like it or not, whether we want to participate in it or not, we are re-writing the DNA of the world governance system. So all the systems, how we vote, how we own property, how we pay taxes, how we move money around, what is money, what is wealth, how to pay people, they’re just being re-written. 

And this happens every few decades to few hundred years. Sometimes as a consequence of a global conflict, sometimes as a result of a plague, you know like when the Black Death came, people said well if the Pope can die, then maybe the Catholic Church isn’t so all-knowing and all-powerful, right? 

So, maybe we should change society a little bit. And it led to the reformation. So when these major events happen, the DNA of the world and how it’s running gets changed. What we realized is we have a chance – a small window of time – to build a very fair system for the people who have the least. People who can’t get credit, people who can’t build up wealth. When a monsoon comes, they lose everything and they starve to death. Suddenly, they can have a financial system equivalent in capabilities to the system that Bill Gates has. 

First time in human history this has ever been the case. And this system is not owned by someone. There is no cult of personality. There’s no great Steve Jobs coming to the stage holding something. This is just as much theirs, as it is mine, as it is yours. And if we get it right, it’s something that is going to be around for the next century or two, if not longer. 

2008 gave us bitcoin. We stared into the abyss as a global system taking a look at capital markets in where we all have to bet on our children’s future to pay off debts of yesterday. Do you think that we learned the lessons of 2008 that gave us bitcoin? Do you think that event is yet to come?

No we haven’t. If you look at every metric from bank centralization to regulatory policy. Look at national debts. You look at how we handled the bailouts — the fact that there were no consequences for the people that caused these things, globally speaking. I don’t think the world economy on the legacy side learned a lesson. They just doubled down, they kicked the can down the road and the next crisis will even be worse. This is why bitcoin exists. If you cannot in an existing system get a recovery from a mistake, then the only option you have is to build a parallel system that is better, and that’s what we’re doing. 

Do you think that system is ready for the next event that’s coming?

No, I really don’t. I mean 23 trillion of debt in the United States. A lot of derivatives are still toxic, floating around the global economy. It’s unbelievable amounts of dangerous stuff there, and we’re just one major global crisis away to knocking all of these nation-states into a big problem. We have a real-estate bubble in China that they’re trying to hide. You know this trade war is really starting to expose that and their markets are not stable. US markets aren’t stable. None of the markets are stable. They’re just being propped up by massive amounts of new money that’s being printed, and we’re kicking the can down the road for a large collapse. And this is nothing new. 

We saw this in the Great Depression. We saw this all throughout the 19th century, and so forth. It just is an invitation to change the way the world economic system works. The other thing is we have a lot of innovation coming that is going to create structural unemployment at very high rates, especially in the service economy. When robotics come and artificial intelligence comes, it’s going to wipe out a good 10, 20 percent of the low-class economies that people make under 30 under 40 thousand dollars. All the truck drivers are inevitably going to lose their jobs, or it’s going to consolidate down to 10, 20 percent. 

One of the big misnomers is somehow all the manufacturing jobs in America disappeared. It’s not like we made less in America than we made in 1980. In fact, we make as much or more. The difference is that instead of needing a manufacturing plant with 5000 people, we can run the same operation with 500 people. So we’ve permanently lost 4500 jobs due to an increase in technology. So when these trends occur, and you get 10, 20 percent of your economy now unemployed or unemployable, and you combine it with this huge amount of debt which we eventually have to pay, and the inflation is going to cause the money, it’s a death spiral and it’s something that is going to really hurt a lot of governments. 

Is blockchain a partial antidote to that?  

Just think about the insanity of our space where we say, hey, there’s this anonymous money, some guy, hacker on the Internet, nobody knows who he is, and there’s like these computers somewhere, you don’t know where they’re at, mint these coins and would you like to buy that? 

I mean 2009, we tried that and people said, “Oh, this is insane.” Now it’s like, yes, I want bitcoin! Everybody wants it, so the very fact bitcoin got adopted on a global scale and it made sense to people tells you that there’s definitely concern at the base level for the health and vibrancy of the world economy. You don’t go and buy gold, and you don’t go and buy land, and you don’t go and diversify outside of national assets, accepting that you don’t get a good return on these things if you’re super happy or super confident in your economic system. 

People are worried because politicians aren’t accountable on a global basis, certainly not in the United States. There is no political solution. I can’t fire Nancy Pelosi or Donald Trump – they’re in, and even if they get replaced, the next person to replace them seems to be categorically worse. And people aren’t listening or talking to each other, and so as a consequence of that, people are taking their own lives into their own hands and say look, I’m just going to move into bitcoin and kind of move into cryptocurrencies, I’m going to move into gold. 

If we see year-by-year more and more people are doing that and if millions and eventually billions of people leave the legacy system and go into the new system, then the new system becomes the legacy system, and that inflection point will inevitably occur at some point. If it takes a global financial crisis to push us into that, or it’s just an organic movement like the option of the Internet, in either case, I think the merit is on our side. Because at the end of the day, money wants to be free, people want to be free, people want to be in control of their own financial future, and if you tell them know you can’t do that or you have to stay in a system that can turn into Venezuela or Zimbabwe and by the way enjoy 20 percent unemployment rates, they’ll never get better. 

There’s going to be a revolution, people just can’t tolerate that. That’s what causes social unrest. So, I like to be productive. I like peace. And I think giving people a class of technology that lets them socially work their way out of this tunnel without violence and without revolution, and without hard times, these are much better alternatives to just riding the legacy system until it burns to the ground and enduring the consequence of that. That’s what leads to food lines, rise to communism, totalitarianism and so forth.

Keep Watching

Part I: Charles Hoskinson, Co-Founder of Ethereum / IOHK, on Why Cardano is a Better Platform
Part II: Launching a Blockchain-Powered Coffee Supply Chain Project in Africa with Cardano
Part III: Of All the Programming Languages in the World, Why Haskell?
Part IV: Revolution or Evolution? The Philosophy of Blockchain with Charles Hoskinson, Co-Founder of Ethereum and IOHK
Part V: From Africa to Asia, What does Global Growth Look Like for Cardano?
Full Interview: In Conversation with Charles Hoskinson