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’We’ve innovated to the point where’ the climate impact can be lessened in crypto: Charles Hoskinson

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Charles Hoskinson, Cardano Founder as well as Ethereum Co-Founder, sat down with Yahoo Finance’s Akiko Fujita and Zack Guzman to talk about all things cryptocurrency: from Elon Musk’s recent tweets to how Cardano stands out in the crypto space, and the climate impact of cryptocurrencies moving forward.

Video Transcript

- Charles, it's good to talk to you. Thanks so much for your time today. You've made some headlines lately, partly on the back of Elon Musk's tweet. So let's sort of talk about this ride that we've seen, the volatility we've seen in cryptocurrency. Elon Musk, of course, wiping out about $300 billion in the crypto market value in just hours when he came out and said that Tesla was pivoting away from Bitcoin because of environmental concerns.

You then tweeted out, are we finally going to be having this Cardano discussion? You saw a surge in your token as well? Walk me through your claim here, your outreach to Elon, and if you've heard from him?

CHARLES HOSKINSON: No, I haven't heard from Elon. But that's to be expected. I mean, in general, this is an old dispute that we've had in the cryptocurrency space. It's been going on since 2011, the whole proof of stake versus proof of work dispute. And it revolves around engine efficiency.

So basically, all cryptocurrencies, they have a consensus algorithm. And that's what runs them and that's what allows you to process smart contracts and transactions, and engines. Some of them are very low power and some of the very high power. And so the kinds of engines we build with our company and many other people in the space, the third generation crypto currencies, are very efficient.

You can run a global scale system that has equivalent or better throughput to Bitcoin, or Dogecoin, for gigawatts of power, if not less. And then Bitcoin is the kind of system that uses terawatts of power, many, many terawatts, to the point where it uses more energy than nation states.

And so it was always curious to me why a company that professes to be very ecologically friendly, you know, renewable vehicles, alternative energy, batteries, would embrace the least ecologically friendly of all cryptocurrencies, especially when there's really no security reason for doing so. And so we tried to say, hey, there's-- there's more to the story. And we're happy to have a dialogue and discussion. And there's a lot of great products and market that could potentially be a better fit for Tesla's goals.

- To your point, the sustainability question, environmental costs around Bitcoin mining has been a concern for some time. How do you view the risk? When you look at the broader market right now, the issue of sustainability, and the potential for these costs to continue to rise as more and more people get into the space?

CHARLES HOSKINSON: Yeah, I look at it like technology back in the 19th century with the Industrial Revolution. They had, originally, wood powering steam engines and they were clear cutting all the forests of Europe. So if that trend continued, it would have been an ecological disaster. But then they found better fuel sources, like coal, and oil, and so forth.

And they were able to mitigate that. And so similarly, innovation get you out of these situations. The goal of Bitcoin was really saying, hey, we want a decentralized settlement system, and we can teleport this digital gold anywhere in the world instantly. And that was revolutionary for 2009. Remember, now we're in a different place. We have millions of people floating around, thousands of academic papers, millions of lines of code.

And an enormous amount of technological investment, and we've just simply moved on. You know, we've innervated to a point where you don't need to clear cut those forests anymore. And unfortunately, the people in the Bitcoin space, some of them feel that there's only one truth, the wood-powered steam engine.

But what's nice is that there's a big pivot. And if you look at Bitcoin dominance, I think it's about 47%, 46%. So all coins at this point are worth more collectively Bitcoin is. And there's a lot of institutional money that's leaving proof of work coins, and it's going into greener alternatives. Not just because they're more energy efficient, but because a lot of them do more.

They support contracts. They have identity. They have metadata, and these are the bread and butter if you actually want to do real financial applications that are regulated, and actually mobile.

- Yeah, and Charles, when it comes to how Cardano fits into that mix, right, we've talked a lot about it being an Ethereum killer, so-called it Ethereum killer, for a while, when we talk about the technology-- the technology that it offers, I know you also chatted with Mark Cuban about potentially being the platform that he could look to. I mean, what is it that sets Cardano apart that you've been stressing to some bigger names like him?

CHARLES HOSKINSON: Yeah, well it's interesting about Mark Cuban in particular. We both didn't know that we were already talking to each other. So he has this NFT marketplace that he's been building, and our people were talking to his people about an MOU for integration. And I had no idea that they were talking. He had no idea. So after we had a Twitter spat going back and forth about Cardano, he actually got personally involved in those negotiations. But I think we came to terms on something.

But in general, everybody's just trying to understand this. I mean, you have waves of adoption. And I've been in the space for a really long time, and kind of a weird guy, which is why I have the Samurai armor and so forth. But you know, now mainstream, real people are coming to the space. And they're trying to figure out, well, what can I do with this? So how do I do lending?

How do I do insurance? How do I do payments? And why are these things better than the conventional legacy systems? And usually, it breaks down to saying, you have fast finality, you have global settlement, you have significantly lower cost structures. It's easier to scale things down.

So for example, micro-IPOs. You can IPO small scale firms, not just $100 million, $200 million deals, and so forth. And the reason we built Cardano was that we wanted to build a collection of protocols that could do all of these things specifically for the developing world. Because we saw Africa growing at 10%, 15% per year.

And Southeast Asia growing at similar paces, and do that for some of the poorest people around, who over the next 30 to 50 years will build up wealth. And they could be at a completely alternative system that has built into it everything. It has governance built. It has compliance and so forth.

And these are the kinds of conversations we have. And we've seen not only us, tremendous growth, but we've seen the industry as a whole have tremendous growth. And actually government adoption is pretty remarkable.

- In the short term, I mean, when you point to projects being built on Cardano now, or those-- I think the protocol as you laid out kind of a February timeline for smart contracts to be built on. I mean, what's the what's the update there, in terms of building on top of Cardano relative to some of these other projects out there, too, that also claim to be Ethereum killers?

CHARLES HOSKINSON: Well you know, first off, it's important to say, Ethereum is killing itself. They're replacing Ethereum with Ethereum 2. So Ethereum 2 will kill Ethereum 1. So I think that's the Ethereum killer. You know, we try to do more holistic things.

It's not just, can you process smart contracts? It also can you do that with identity and compliance? Can you do that with metadata? Can you do that with automated regulation, these types of things? There are a lot of missing pieces.

And can you do that at a scale from billions of people? And can you do that with some notion of governance that doesn't require a custodial entity to always be around take care of it? We're used to custodial entities. You have Microsoft to Windows, you have Apple to the iPhone, and so forth. And you always say, OK, they're the guys that are going to get the next version out.

But when you strip away that centralized curator, who's going to make it quantum resistant? Who's going to do the next big innovation? Who's going to make sure it's interoperable with some big legacy payment system, or the BIS or something for CBDCs and so forth. So Cardano was really built to be holistic in that respect.

For smart contracts, we're almost through that entire rollout. We started in December with metadata, and that allowed us to bring identity to the block. And we've already started deploying those systems in Georgia, the country of Georgia, and in Ethiopia for 5 million students. The next major milestone was ability to issue assets on the platform.

We're seeing the largest adoption there with NFTs. And there's a lot of NFTs platforms coming in. And the final rollout will be programmability, so that's smart contracts. That's imminent in the platform. The next 90 days, we should see a lot of beta testing, and that it's just a question of what's the best time to do that for all the people who use it.

Because these are big ecosystems. Now there's over 100 exchanges that have listed, and lots of wallets and so forth. So you can't really move unilaterally. You have to kind of move in the giant swarm of people. And it takes some time to do that.

- Charles, you recently posted a clip that was sort of directed at Elon Musk on how Dogecoin can be fixed, essentially improving its transaction speed so it can make it more like Bitcoin. I know I'm oversimplifying that. But what do you see as the future use of Doge?

CHARLES HOSKINSON: It has no use or utility right now. That's my great umbrage with this whole affair. I mean, it's one thing to pick winners and losers. There's plenty of great coins out there, like the ICTs, and Polka Dots, and [? Holograms, ?] and Cardano, and we all believe our own ships. Obviously, I think Cardano is the best, right?

I created it. But it's reasonable people can disagree. The issue is Dogecoin is it's a copy of a copy. So it's a copy of Litecoin, which is in turn a copy of Bitcoin. And there's really no innovation there. So it's as if you just stop protocol development 2011, 2012. And now you have this very prominent person who's a real engineer, with one of the wealthiest people in the world, with giant engineering companies, , coming in and advocating that retail investors en masse come in and buy this token that as unlimited inflation and has no real use, utility, or consumption.

And no proper custodianship. There's really not a strong development team there, and there's no real roadmap there. And if he wants to come in and rewrite the whole thing-- what I was trying to prove in that video was this is not a simple matter. It's a major overhaul.

It's like those old shows where you refurbish a tractor, or a car, or something. And they take you through the whole process and sandblast it, and have to repaint it. Well, that's what they have to do for Dogecoin. I outlined 11 different papers and techniques that they would have to bring in to make it just comparable with what the third generation cryptocurrencies are bringing in this year and next year. And not innovating, just bring it up to speed with what Ethereum 2 is promising, and Cardano is promising, and so forth.

So saying, why are you actually doing this? Are you really committed for this? And do you understand that when the song stops, all these retail investors are going to be left holding the ball, and the price is going to collapse. The other danger is 90 plus percent the distribution of Doge is in less than 1% of the wallets.

So there's a very high concentration of wealth in the hands of very few. And they had that wealth when Doge was very cheap. So they can sell at $1, they can sell at $0.50, they can sell at $0.10, and so forth, and still make windfall profits. A lot of these retail investors are buying at a very high price point, like above 50% or so forth. So that's a very unhealthy mechanic.

It's at any time, a small people can crash the entire market and cause catastrophic, cascading harm. And it just makes no sense why he would advocate such a thing.

- Just to return to your point Don on the Eth killer kind of clarification there. It is interesting because as they shift to proof of stake, it's-- I mean you can make the argument that it could be a Cardano killer. That was the sustainability, and that aspect of it was kind of how you guys differentiated. And obviously, if it takes longer for smart contracts are supposed to come out-- if you say the next 90 days--

CHARLES HOSKINSON: I don't look at it that way. I mean, we were always with the mantra of scalability, interoperability, and sustainability. And so yeah, sure, proof of stake is great. And we're leading that fight. We were first to market with this takeover of Ethereum, and they're still having trouble.

But that's only one part of the agenda. That's just saying we have a better engine. Engine doesn't make a BMW a BMW. It's a part of it, but you need the whole ecosystem. You need the whole collection of things. And one of the big things that F2 has bowed out on is governance.

It's not clear how do you evolve and update the system after the founders retire or lose prominence. And the bigger these systems get, the slower they evolve. Look at Bitcoin. You have these Bitcoin core developers who desperately want to evolve the system, and add smart contracts, and side chains, and new cryptographic [? protos ?] primitives like [? Snorsix. ?]

They just can't get it done. Even though they all agree it's a good idea, and they need to do it for the marketplace to stay competitive, it's just such a big boat. It's like a cruise ship. You move the whole wheel, it doesn't move for a long time. And so theory is suffering from that problem.

And they don't have an obvious unchained governance system. And that's not in the roadmap for F2, whereas it's a core part of our roadmap. The second part is interoperability. So protocols like Cosmos and Polka Dot, and Cardano, and others, we make special provisions for side chains.

Ethereum really doesn't do this as well in its current instantiation in a cost-effective way. F2, they kind of have an idea with it, but it's still not clear how that model is going to work, especially we have interplay with permissioned and permissionless systems. So they're very different, actually, when you look under the hood. Even if they are the same, there's different user bases.

We're bringing millions of people in Africa that simply Ethereum doesn't seem to care about, because we never run into their guys, or consensus or other people, outside of South Africa and a few well-developed places in Africa. So we have different technologies. We have different philosophies.

We have different user bases, and different time horizons and so forth. And also very different accounting models. [? UTXO ?] is a significantly more scalable model because it's got local state instead of global state, compared to what Ethereum is proposing. And that's another reason they're having so much difficulty sharding themselves.

Whereas it's built in by design for our system. So I think will be a leader for micro payments. We'll be a leader from what we actually have to shard. And we can scale at much higher levels. But we also have governance, they just simply don't.

So I feel-- I feel better about that. But again, you know, everybody is free to disagree. And that's what makes it fun, right?

- Charles Hoskinson. We can go on this for another hour, but we're out of time. It's great to talk to you today.

CHARLES HOSKINSON: Thank you two for having me on. I really appreciate it.