Cardano Creator Charles Hoskinson Calls Out Bitcoin Maximalism, Says the Gospel of Satoshi Is a ‘Very Bad View’
The creator of Cardano, co-creator of Ethereum and CEO of IOHK, Charles Hoskinson is an early adopter of Minecraft who got into Bitcoin in 2011 when people were using spreadsheets to track their trades.
He watched BTC climb to its first billion-dollar plateau in 2013. But Bitcoin had limitations and Hoskinson had a vision. In 2015, prior to embarking on Cardano and ADA, a new cryptocurrency project, Hoskinson took a long-range view of the industry and created a collection of design principles to help steer a better platform.
On an episode of Anthony Pompliano’s Off the Chain podcast, Hoskinson made several statements about the limitations of the world’s leading cryptocurrency and how Cardano could expand beyond Bitcoin maximalism and rigid thinking.
“[Cardano] was a high-risk, high-return project… So what we did was say, ‘Ok, if a system was to scale to billions of people, and be useful for those people, and be really a financial operating system so their whole financial lives are in it, from securities and commodities to currencies to their identity to their land, then what would it have to have?
And we identified three areas to go do some research in. So the first was scalability. We said, the system has to get faster or stay at the same performance, regardless of how many users it has. So you gain users, you get faster…
Second, interoperability is a big deal because at the end of the day there’s going to be tons of these systems, and if they can’t talk to each other, it would almost be like WiFi where your Samsung phone can only connect to a Samsung router, or your Apple phone can only connect to an Apple router. That would just be a terrible user experience and WiFi would be useless to us. But because it’s ubiquitous and it’s a standard and we can talk to each other, it’s now a very useful thing to society.
This is going to be the same way. These systems have to have protocols that allow you to move information and value between them. And then finally, sustainability. The governance problem we have in this space is that normally products are curated by a company or a federation of companies. So you have the Apple to iPhone or Windows to Microsoft, and so you have that – who pays and who decides thing. It’s obvious. You say, ‘Microsoft is going to pay and they’re going to decide the future of Windows. Great. And if I have faith in them, I have faith in that product.’
But we’re trying to make the argument that these protocols are headless. Bitcoin has no leader, no controller, but at the same time we’re trying to say that this is a stable, great platform to build your business on and stake your country’s financial future on. And you say, ‘Well, if I don’t have an explicit way of understanding how this protocol will evolve or change, and who will pay for it’, then I run into two problems.
One is the golden rule. It’s ‘he who has the gold makes the rules.’ So whoever’s paying for it is probably going to have a huge amount of influence over the roadmap – and that’s probably not you. Second, well if we disagree, we run into a Bitcoin-Bitcoin Cash type of deal where suddenly the entire ecosystem forks and now you have two where there was one and you have to pick sides.”
The idea, Hoskinson says, is to create protocols that lay down how a cryptocurrency can be governed in order to reduce breakups and forks, and to generate developments and improvements.
Years later, Hoskinson is now able to compare and contrast Cardano with Bitcoin. He says the Cardano system is truly decentralized and that at launch it can be 50 to 250 times more decentralized than incumbents such as Bitcoin– with four major mining operations – or EOS which has 21 staking pools.
“One of the biggest problems with Bitcoin is it’s blind, deaf and dumb, and that was by design. Because if you’re doing an experiment, if you’re launching something, you don’t want to go do 90 things. ‘I’m going to see if smoking causes cancer and radioactive waste.’ If they get cancer, it just tells you one or the other or both are causing that, or neither. So you want to design an experiment where there’s as few variables as possible in a control group so you can kind of see if what your thesis says is true.
In the case of Bitcoin, it was, can proof-of-stake actually result in a decentralized system and will the token actually achieve value. These were the two core features of the experiment. But it never said, ‘Ok, we’re also going to build a system that is able to replicate the world financial system and also is fully compliant with that system or capable of being compliant. This was not in scope.
Now the FATF and regulators and these other guys are waking up and saying, ‘Look, we like what you’re doing and there’s a lot of merit here but you’ve got to make provisions for everybody else. Like, for example, contingent settlement. That’s where A sends to B if and only if X, Y and Z or whatever have happened. Multisig is an example of that where you can only execute the transaction if Alice and Bob and Jim sign the transaction. But you can have all kinds of contingencies.”
Hoskinson says another potential contingency would be identity and that the ecosystem should address these contingencies and have the necessary conversations with regulators.
“The problem with maximalism is that it basically says that there’s one god, one gospel that is Satoshi, and if there’s any deviation from that vision, then it’s wrong, and everybody else is going to have to change to accommodate us. And it’s a very bad view and it doesn’t cover things. I mean, I can’t even do pull payments with Bitcoin, and that’s like half of commerce. You finally sign up for a subscription and every month Netflix pulls out $9 or YouTube pulls out this much money for YouTube red. That’s the bread and butter of most of our commercial systems and I can’t even do that with this system easily.”
According to the Cardano creator, there are other vital companies in the industry that are moving the dial through innovation and ingenuity. He says Algorand is one of the upcoming players in the space that is trying novel and exciting approaches to creating scalable systems.
“I have a lot of respect for Silvio Micali. We tend to forget this guy has the Nobel Prize of computer science. He has a Turing award. He’s a tenured professor at MIT and he’s kind of dragging the whole club. He got the boys back together. It’s like the Beatles are coming back together and he’s getting them interested in our space. And if he’s successful, that’s going to bring a lot of horsepower on the mind share side into our industry. So they’re very important.”
As for the Bitcoin, he doesn’t rule out its significance.
“Bitcoin, frankly, is the brand of cryptocurrencies. We can’t say, ‘Oh, well I’m going to succeed but Bitcoin will fail.’
If Bitcoin fails, our whole industry is probably in for a really bad time. So we have to be good to Bitcoin and Blockstream has been. They’ve done a lot of cool things.”
You can listen to the full interview here.