How will Crypto impact the Financial Equality? - Charles Hoskinson | ATC #511

In this in-depth interview, host Stephen Sargeant talks to Charles Hoskinson, CEO & Founder of Input Output Global. Charles is a Colorado-based technology entrepreneur and mathematician. His professional experience includes founding three cryptocurrency-related start-ups and his current projects focus on educating people about cryptocurrency, being an evangelist for decentralization, and making cryptographic tools easier to use for the mainstream. This includes leading the research, design and development of Cardano, a third-generation cryptocurrency that launched in September 2017.

Host: Stephen Sargeant

Guest: Charles Hoskinson

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Episode Transcript

Stephen: Hey everyone, this interview is with none other than Charles Hoskinson, Co-founder of Ethereum, you know, creator of Cardano, CEO running Input Output Global that has, you know, Midnight Protocol and many others. He's just a complete genius if I had to be, if I had to use a word.

But this great conversation wasn't just about blockchain. I wanted to discuss with him more so on investing, what he looks to invest in. And he's investing in things like bringing back the woolly mammoth, you know, he has a bison ranch, a construction company. And we really dissect how he approaches all these different businesses and how blockchain and Cardano can actually help some of these use cases and his thoughts about what's keeping blockchain back from banking the under banked and underserved and unbanked. This conversation goes really deep into the mind of Charles Hoskinson. I suggest you get a coffee, get out your pen and paper, and get ready to take some notes.

Because I think this is one of the unique conversations with Charles. That's not just about Cardano. That's not just about blockchain and cryptocurrency. It goes deep into his mind about all the different aspects of his business and his career. Listen to this one and let me know what you think.

Stephen: This is your host, Stephen Sargeant, and this is a special episode of Around The Coin. We get to meet Charles Hoskinson. This is not his first time on the podcast, but first time I get to interview him. Charles, it's great to meet you. I'd love to kind of hear, give little people a little bit of your summary if they haven't already heard about you, the godfather of crypto and blockchain.

Charles: Well, Steven, thank you so much for having me on. I'm a cryptocurrency entrepreneur and I've been in the industry for about 12 years off and on, and created a lot of interesting projects that people have used. I was a co-founder of Ethereum. I created Carano and also I work on a lot of other interesting things like Atala Prism which is a self-sovereign identity framework.

We got midnight, which is a computational privacy system. that has all kinds of cool stuff under the hood. Serial entrepreneur. I've founded a boatload of companies, too many to mention. And running around the world doing cool stuff in crypto.

Stephen: I'm curious, before we jump into all the crypto stuff, you talked about being a serial entrepreneur.

What do you look for when you're investing in these companies? Because I think a lot of the people listening to this episode, they're entrepreneurs, they're building, they're trying to get funding. What are the things that you're looking for? Cause it sounds like you're not just investing in crypto related projects.

I could be wrong, but I'm curious. A couple of projects maybe that you've invested in. And what were the things that made it a no brainer for you?

Charles: Well, I have three categories for my investment thesis for my family office. One is lifestyle. So if it's connected to something I'm interested in and I have fun with and I enjoy, then I try to create a reality where I make more than I spend.

So my you know, I own a jet and my jet, the way I've structured it, I actually make a profit on it. So while I have this amazing, Private aircraft, it's actually a profit center instead of a cost center. Same for the real estate portfolio and also my ranch up in Wyoming. It's 11, 000 acres but I have 600 bison on it.

I run a bison hunting operation and that offsets the cost of ownership for the ranch. And so lifestyle is one category and that's basically to preserve and protect what I have and to enable the things that I'd like to do and make sure that they're at the lowest possible cost. The second category that I look at is, you know, do I want to be the guy who runs it or do I just want to have money in it?

If I just want to have money in it, then what I look for there is, is, is that something that I know a lot about? It's, it's kind of my industry and you know, I, I'm very passionate about these types of things. And do I have a high degree of trust in the team, its strategy, its agility, and its ability to execute?

And so, you know, you look for things like, The age of the team, the experience set, the credentials, the, the, what they've already created, their ability to talk to customers, the temperament, the culture, you know, everything is on a case by case basis. So for example, I, I co founded a company called Ghostfire.

With Ben Lamb. And Ben is a proven entrepreneur. He, he's claimed the famous Colossal. It's a company that's resurrecting the woolly mammoth at the moment that I also invested in. That's how I met Ben. And they they're at a billion plus dollar valuation and they're de extincting animals and, you know, before the end of the decade we're gonna have herds of these things running around.

So I loved working with Ben and I said, you know, let's He co founded a company together and and he's very good at navigating the synthetic biology world. He got the deal with George Church who's like a legendary synthetic biologist at Harvard. He, he's really good at building solid research teams and motivating those teams and doing a lot of complex work very shortly.

So I kind of come in and provide a lot of high level strategy and advice about how we should navigate the channel partners and the markets and intellectual property and these types of things. And he does the execution side of it. So, where I take a passive role is where I, I, I sit at the board level and give advice or I or I help sculpt the, the big arc strategy, the, you know, the big S and then they take the CEO role.

And the third category is where I'm directly involved, meaning I own a super majority of it. In so many cases, I'm kind of the de facto CEO or the CEO's reporting directly to me and we're both doing execution together in our own way. We kind of split things up. But the long term intention for both of us Those two categories is to have those categories completely autonomous at some point, meaning they have their own governance structure and CEOs and these things.

And I kind of fade back after we've accomplished some sort of major milestone that I'm significantly interested in. And every venture has a different set of milestones.

Stephen: How do you step back in ones that you're not too hands on, but you obviously know how to operate a business as well? Do you let the people that are hands on kind of learn as they go?

Do you try to like see, you know, let them, you know, fail on their own and learn, or is, is that difficult for you to like kind of give someone the reins, even though you're like, Hey, we could guide it a little bit better over here, but Hey, maybe they might come up with something a lot more interesting or a new way of doing things.

Charles: So you really, you have to set your goalpost of what is the definition of success and you never step back until you've had your success, but you change your roles as the project evolves. So Cardano is a great example of that. In the beginning, it's a small thing and it requires, just like a little kid you know, a lot of hard work to raise the kid.

But then at some point, you know, the kid's fully grown up, it's in college and you have a very different relationship. But the directionality is always the same. You want kids to grow, thrive, and be happy. Well, analogously with Cardano, it's now fully decentralized and it has all this amazing use case and utility.

So my role is, outside of the fact that I was a founder, is more, what problems can I solve and what utilities can I build in this ecosystem? So with respect to problems, a lot of people say, is there a way you can contribute significantly to scalability? Inside the system. And is there a way also that we can make the system more useful to the entire cryptocurrency industry?

So the partner chains in Ouroboros Laios are two low hanging fruits where input output is uniquely suited for that type of role inside the ecosystem. We kind of think we've solved the blockchain trilemma. And we're going to, you know, put up or shut up. You have to kind of showcase the, that solution.

And then there's a question of how do we get it done? And then Partner Chains creates the the service layer that allows you to sell Cardano services across the entire cryptocurrency industry. Ethereum, Bitcoin, and other things. So that requires them to migrate their network effect. So, both of these can create, Gargantuan amounts of use cases and value for Cardano as an ecosystem, so that this is where I'd like to spend a chunk of my time in addition to all the governance concerns that Cardano has, which is now decentralized thanks to Chang.

So, you know, the mission is we want it to be happy, healthy, decentralized, thriving, Useful ecosystem. And every year you have to reevaluate and say, okay, how do we change the role? The same for any of the things I invest in as an entrepreneur or I get involved in, I say, okay, am I there in the C suite? Am I there on the board?

Am I there just, you know, as a strategic advisor and they call me up and ask for some advice? These types of things. I add you know, whatever that role is, the point is that it should contribute to the mission and vision of the organization and where we want to go and how we want to get there. You know, so, you have to go into a specific venture.

Now there is also a fourth silent category you know, venture I, I invest in, and usually this is a capability that I build to reduce cost and something else I do. For example, I own a construction company. I'm never really going to pursue an outside investment and a construction company, you know, you can, you can have.

Lofty Mission, like, hey, we're going to sustainable construction, or whatever, this new technology, or whatever. But I built it because I got tired of paying 600 bucks a square foot for stuff, and I want to pay 150, because I build a lot of stuff. And so suddenly I had to learn about the concrete business. I went to World of Concrete.

25, 000 people at that conference, huge conference in Vegas. And I had to learn all about you know, how contracting and subcontracting works and how to build commercial structures and warehouses and order steel kits and, you know, insulation and all these things. I've learned an enormous amount of construction and I have a really good CEO for that company.

But at the end of the day, that company serves the needs of the broader portfolio and when we're not using those needs, like the jet. You know, I, I, other people contract it and it actually pays for the assets, so you get a free construction company and it, and it subsidizes the cost of construction for large scale things.

Like my clinic, for example. It's at 10, 000 square feet. It's growing to 70, 000 square feet. Wow. You know, massive facility, hyperbarics and pharmacy. And it's, it's got you know, primary care and surgeries coming. And you know, it's got a full big lab that does all kinds of really advanced lab tests and these types of things.

And you can do physical therapy inside of it and audiology. It's, it's a huge medical campus that we constructed because I built it for medical research so I could do anti aging regenerative medicine research. I also built it for business model testing so I could test direct primary care and concierge care there to change the way that primary care is delivered.

But if you just go and try to build something like that, it's a horrendously expensive proposition. So actually it was cheaper to build an entire construction company and then go and build the clinic than go and hire a construction company and do that, which is just absurd, but it shows you how messed up that industry is.

Stephen: And it's so funny that you think like that, because I think most people would go in, you know, I'll hire the best people, I'll spend the most amount of money, where you're just like, hey, we can still get the best product, but we can, you know, reverse engineer, what does that final product look like, and what's the cheapest way I can get it done?

And for you, that was building, you know, creating a construction company on your own. How do you get into all these different industries? You've named off about five industries, none of them seem connected. You have blockchain, health, construction bringing back Wooly Mammoth. I'm assuming you get a lot of opportunity, like, how do you have the time, like, how does someone come to you with a new opportunity?

You're like, yeah, I have time to sit down and discuss this and flesh this out. Or does it happen as you're building the building, you're like, hey, we need to create something that makes this a lot cheaper. Let's start our own construction company. I'm curious how these final ideas and innovations get to you.

Charles: You can always have blockchain get involved if you want to in a legacy business. For example, in the synthetic biology side, we do bioluminescent plants. I would like to have those plants, when you purchase them, have QR codes and you register them as

and they sequester carbon and you can measure that.

I think there's a very strong blockchain play there and Cardano would be uniquely suited to do that very well and also there's a practical reason to do it. Because these are transgenetic organisms, you probably should know how they're being used, where they're at, how they interact with the environment as a whole.

USDA is interested in that and other people because, you know, these, these have never existed before. And now, now they're in the ambient environment. And you know, what, what does that actually mean for all the legacy plants? So we have to understand and see. blockchain is an example of this. We always say supply chain is like the big thing in blockchain.

So that's an example of it. Healthcare, it's actually intimately connected as well because you have medical records. And any, anything to do with the mining of medical records, the privacy, the access control systems, tightly coupled with self sovereign identity and blockchain systems, especially when you want to federate them and connect them.

So, medical record portability. How do you own your medical records, move them around, and extract value from them without compromising your privacy as a consumer? So, by having a clinic, we already have 7, 000 patients. Our anticipation is to grow to about 12, 000. And that's about the market, Gillette. And so once we get to that scale, then I can imagine building an open source EMR.

And then actually showing how to build that around Graph Database and DIDS and, you know, other things and then add a blockchain layer to it and then show how to connect these systems to each other. So that would be an example where you blockchain it. It's not the primary purpose, but it's an augmentation of the business model that gives you something.

Maybe more patient safety or record portability, or a format that allows you to analyze all those records for artificial intelligence. For example I'm very interested in using large language models to help in the care of patients. My concern is I don't feel super comfortable handing Sasha and Adela or, Sam Altman or Google, Gemini, your personal medical data.

I just don't feel comfortable doing that. I, I think that would be a violation of the trust the patients have given us, given the track records of these companies, regardless of what they say. So I would actually like to run a local large language model to do all these types of things. But computationally speaking, that might be difficult.

So maybe it makes sense to build a decentralized large language model. And bring it into the Cardano network, and then combine it with technology like Midnight, where you can analyze records, but you do it privately. And you get a cryptographic guarantee that they can't be unblinded other than the intended recipients.

Maybe that's a good compromise, you know, for the, for these types of things. So we're exploring these types of things and they have huge impacts on patient care because I can do real time continuous auditing of the patient's charts and verify that they're receiving the standard of care. You know, also we can look at use them to build differential diagnoses.

We can look at the formulary and see what drugs the patients are on and, and revise that against best practices. You also can use it for a lot of things like AI upscaling of images. Anomaly detection, pattern detection, you know, for example, when we do MRIs and CAT scans and other things at the facility we actually have a system from Siemens which uses a gargantuan amount of compute and petabytes of storage that actually upscales the MRI images and the CAT scan images and other things to higher resolution automatically and can annotate them.

So I could take a low Tesla MRI and upscale it to like a 1. 5 Tesla or a 3 Tesla depending upon the modality and also put little red circles around, you know, areas of concern for the radiologist. So they can do a dual read. They can read it naked and then take a look at the AI suggestion to double check, almost like in a math, you know, you solve your homework problems and you look at the back of the book for the answer.

You can, you can do the same thing. That catches an enormous amount of mistakes. In in healthcare. Enormous amount. It's, we call it the 445 on a Friday radiology problem. It's the last film of the day for the radiologist to read. It's 4. 45. He's just about to get done and he's going to go have dinner with the wife.

And you know, they say, Oh, I got the stat read for you. Oh yeah, it looks pretty good. Yeah, everything's fine there. Yeah. I'll just type up that report real quick. Okay.

Stephen: Well, I'm going to take multiple cases where there has been like breast cancer or other things that they're standing for and overlay that over what they're seeing and then make their own suggestions based on what they're seeing, which would just enhance the that really all is his job because now they're able to focus on the key areas based on, you know, all this historical data.

Charles: Yeah, whether it be a human brain or a computer, there's this phenomena that it's typically extremely easy to verify something, much harder to know it's there in the first place. You're looking at some picture and you're looking for Waldo. It might take you a while to find him, but once I point to you that that's Waldo, you're like, yeah, that's Waldo because you know what he looks like.

So analogously, when you're looking at on the radiology side, you know, if there's a tumor or something, you might miss it, especially if it's subtle. But once I point it to you, you're like, oh yeah, that is a tumor. Look at that. And then you really zero in and you can understand all the things. So just by having AI involved in the process, it acts as a as a check.

And it almost always removes all those stupid mistakes that people make. Yeah, it, it, it, but even if it's an anomaly, like, for example, the AI has misclassified something, by really looking at it, you can say, oh, no, that, that's actually not that. We don't have to worry too much about it. And that's why you, you know, Send a radiologist to residency and, you know, they go through all this advanced training.

They have the ability to differentiate these things. They just have to know it's there. And sometimes they have trouble seeing it or for whatever reason because of the time or circumstances or exhaustion or whatever, they miss it. And just having that check and balance makes it so much better.

But this example, what we do at the clinic is we try to think about integrative care and layering next generation technologies like whether it be LLMs for.

The whole pipeline of patient care to merging different fields of medicine, you know, network and functional medicine as well as lifestyle medicine combined with the traditional osteopathic and allopathic approaches. When you put these things together, you can end up having a much more balanced patient care.

You know, a great example would be sleep apnea. So if you go to a standard physician, you say, ah, man, I'm so tired. They say, oh, we'll do a sleep study. So you go and do a sleep study and they say, oh, you got sleep apnea. Here's your score. I would say, what do I do? Oh, CPAP mask. Here you go. For the rest of your life.

Okay. And I got to travel with it and do all this stuff. And millions of Americans, that's their story. Well, There's all kinds of other interventions you can do. Night Lays is one that's FDA approved the Exide OSA actually electrocutes your tongue and changes your muscle fibers inside the tongue and it's FDA approved and even, even gets covered in certain insurance cases.

And you do the treatment, strengthens the tongue or it's Night Lays actually is the soft palate, actually hardens a little bit, and in many cases it improves sleep apnea. There's another thing you can use the homeoblock appliance or the ALF appliance that actually grows bones and, and widens the mouth.

And so, you have more room for your tongue and airway. And that was tongue training actually can substantially reduce or eliminate. Many cases of sleep apnea for people. Now, those are all available. You go to a normal physician, they know nothing about it. They don't even talk about it. They're like, what the hell is ALF?

I know ALF. That was like an alien in the eighties that ate cat.

Stephen: One of the best shows back in the days.

Charles: Yeah. And, and, and so that's the problem is most practitioners either not incentivized or just simply don't know because they're over specialized, a more holistic view of care. take a look at diet or exercise or alternative treatments, which many cases have actually been reviewed and studied with double blind placebo controlled studies.

Photobiomodulation is another example of that's just red light therapy. We're actually looking at it right now for traumatic brain injuries. We're looking at it right now for all kinds of neurological treatments for people. Cause you know, we're in Wyoming. We've got a lot of rodeo stars that come to us that they fell off the horse too many times, the bull too many times, they got all these concussions.

And if you look at the risk factors for Developing Alzheimer's or Parkinson's or dementia significantly higher because of all the traumatic brain injuries. So what do you tell the patient who's 40 years old and say, hey, when you get to your 50s and 60s, you're going to have memory problems and you're going to be like one of those football players that got hit in the head too many times and you might, You're almost certainly going to probably descend into a neurodegenerative condition.

Like, wow, that's really shitty to hear that in 10, 20 years that's going to be a problem. Well, it turns out you can intervene and hyperbarics and photobiomodulation may actually be able to substantially blunt that or prevent it. And again, you know, most physicians don't think this way, but then you look at thousands of studies and in some cases it's already FDA approved.

Transcranial magnetic stimulation is another example. That is FDA approved as a second line therapy for depression. And in about a third of the time it improves it. It's actually better than SSRIs, which is the first line therapy that people use. And how would it work

Stephen: for your clinic? Because I know, I'm in Canada, so we technically have free healthcare.

You get, you know, Kind of what you pay for up here though. But in the States it's extremely expensive. So are you able, because you're building these facilities, you're bringing in the research and development in house, does this make it less expensive? Does this make it quicker that they can actually find treatment?

Because a lot of people that do have plans, I feel they take a long time to, to get to things like MRIs. Or, I could be wrong, in Canada, it's a huge weight to get an MRI, I'm not sure the same

Charles: day, but, you know, thank God, bless America. So, compensation is always a tricky one. So we do accept insurance, and we accept the major providers you know, at Hoskinson Health.

Like Cigna and Blue Cross and these things but then also we're pioneering direct primary care model where you just pay a subscription every month and then there's a whole menu of services that are provided and we're still working through the economics on how to do that, but it's usually substantially cheaper and the reason being is that when I bill an insurance company, about 40 to 45 percent of the time they actually pay me.

That's just national standard. So let's say they owe you 10, 000, maybe you get 4, 500 if you get it. That's fucked up, but that's how it works in the United States. And oh my god, they do all kinds of crazy games. In the state of Wyoming, for example, when we get a new physician, it usually takes 90 days to get insurance credential for that physician.

So, we're basically told either tell them not to practice medicine, but stay on the payroll for three months, or All the stuff you bill, we're not going to reimburse because they're not credentialed yet, even though they're actually a physician and everything, it's just the insurance company processing paperwork.

So in practice, what we do is we just have them practice medicine and don't get reimbursed for three months. When that physician comes in. So I lose a third, a fourth of the year just because the insurance company is dragging its feet to credential a physician who probably is already credentialed in their insurance network in a different state.

You know, it's so, it's so out there now. We, this is by design, companies worked with the

to create these incestuous laws. We try to change them where and when we can. So that's why we like stepping outside of the insurance side if it's possible. Direct Primer Care allows you to do that. And the reason I built an all inclusive clinic is I wanted to do some business model innovation, but also work with the state of Wyoming to change the laws.

We, you know, in the crypto space, we worked with them and the crypto space got about 31 laws passed in the state of Wyoming that created a whole regulatory framework for cryptocurrencies. We want to change the regulatory framework in the state for the insurance side and the healthcare side because that would allow Wyoming to be one of the best states in the union for receiving healthcare.

And it just takes some moderate changes that really improve the state of affairs with providers, especially for pre approvals and pre existing conditions. All just thousands of these edge cases that are really problematic in the practice of medicine. If you become a doctor, one of the problems in America is you seldom practice medicine.

You do medicine, you spend actually more time doing non medicine. Right. Either it be paperwork, or dealing with bureaucracy, or all this other stuff. And that's why so many physicians burn out and leave. By the time you get to 50, you're like, don't go into medicine. And you either, you're staying in medicine because you can't afford to leave, or you leave medicine, or you change the relationship, you go to part time, or something like that.

So there's a bunch of brain death in the industry right now, where providers are just basically burnt out, and they just don't want to do it anymore, because they're not compensated for quality of care. A great example of the You mentioned ID

Stephen: a couple of times. Sorry to interrupt you. You mentioned ID a couple of times.

I took a little mental note about that because many people are saying, you know, the fact of ID is why we're not seeing Bitcoin reduce the amount of underbanked and unbanked. Even in the US, I think 5 percent of Americans are either underbanked or unbanked. Do you think that is the key to finally giving access to banking to everyone around the world?

Or is there other factors that are keeping things like blockchains and cryptocurrencies from reducing the amount of unbanked and underbanked individuals?

Charles: Well, yeah, so the

is a phenomenon of the cost of compliance more often than not, . So if you went to a bank and said, anybody can open an account and you don't have to collect any information, 100% of America would be bank.

No harm, no foul. It's just because, you know, it's easy. You just, and there's banks everywhere. You just walk in your bank, you say, I want to cash, sure, here you go. But if you say you have, know your customer, know your business, you have anti money laundering, you have suitability guidelines, SAR requirements, there is a certain threshold of customer value you have to get to, to justify the cost of onboarding and maintenance of that account.

So if that customer doesn't have that value to you, then you're just not going to bank them. Because you lose money on that customer. So when you look at your unbanked level, that's telling you where those thresholds exist for that economy. So when you go to Africa, to Southeast Asia, you go to LATAM, you know, in some cases a third or more of the population is underbanked.

And that's because the cost of banking them is actually higher than the value per person. So why we look at crypto as a potential option is that the cost of onboarding a crypto person is de minimis. They download some software, they do some stuff, and there is no KYCML to start with. So you don't have to have a national ID, you don't have to have a pre existing bank account, you don't have to have some representation there.

Then you get into the details of, well, what exactly can you do with it? Can you create bridges where they go from crypto to a stable coin to actually transact with it and actually have a cash like experience but make it very digital? And the answer is I think we're getting there as an industry and we're almost at that threshold.

Now, this is causing governments to panic because you're creating a digital cash economy. that is not built with the same compliance and oversight guardrails that they're used to. So, you'll see the Elizabeth Warrens of the others of the world coming in and saying we have to reinstall those guardrails in and they say that's the only way we can do it, but it's not going to hurt people like me.

I'm hyper complianced, okay? I have filled out so much paperwork you wouldn't believe it. No, it, it hurts. Minorities and and underrepresented communities, you know, it hurts all the people who normally can't go through that process for whatever situation or reason they have. Undocumented immigrants are another example of that.

You know, if they live in a cash economy and they're not going to go through that process. Those are the people you exclude. When you put these tough compliance regimes on top, but somehow that political party seems to not care even though they say they do. I don't understand that. So, it is a quagmire at the moment and it's not a technology problem.

It's a regulatory problem at the moment and a business model problem. And we're getting very close to closing the gap with the business model and get to friction free digital commerce. I think within three to five years, the rails will be so mature that that's going to be instant. Now, the last mile is the identity side of it and how compliance is going to work.

So we'd have a company called Atala Prism, it's led by Dave Harding, and it, it built a framework that's now a hyperledger project and Prism is a framework specifically to create digital identities. in the cryptocurrency space that potentially could be upgraded to be compliant identities. And we've been trying to figure out how do we do that at a cost of less than a dollar per person to get through all their stuff.

And if that's the case, then your cost of compliance is low enough that you can onboard the vast majority of people in the entire world. I mean, it's, you know, one time cost everybody in Congo, a hundred million dollars. It's not, it's not a bad deal if you think about it from a World Bank perspective or an IMF perspective or these things to, to do that.

Then what's nice is they're self sovereign identities. So what that translates to is you own your identity, not the government. And so you're able to then prove properties of yourself through things like a non creds without revealing them. And the example I like giving is like the bar you go to go drink.

You say, hey, I want a beer. They say, oh, show me your ID. Now that, they don't, they don't want to know your name. They don't want to know if you're an organ donor. They don't want to know your address. What they're really looking for is a very specific thing. Are you at or over the age of 21? That's a binary question, yes or no.

So if you use a non creds, you can prove that attribute in your identity without revealing anything else. They'll say Stephen is, you know, at or over the age of 21. Yes. They don't even know if you're 21. They just know you're at or over the age, so you're suitable to serve. Compliance should work this way.

Settlement should be compliance.

So if you send money, the transaction clears if you pass the compliance regime, but the person who's on the other side of it shouldn't be collecting your personal data. They should just be asking suitability questions that are yes or no. And once you've answered enough of them through a zero knowledge proofs, then they get to a certain threshold where they say, we're comfortable with this.

And then you move on, you know, and and then you always are in compliance.

The current system is so fucked up. You take the money and then after the fact, you're like, Oh, I guess, maybe maybe I shouldn't have had that money. I got to file a suspicious activity report and freeze your account. And, Now I have frozen customer funds and what do I do with them and all this?

That's why it's so expensive to run a bank or these things because none of that actually produces any value for your business. You don't make any money from it. It's a liability and it's a cost of doing business and every time you get it wrong you get big fines. That's what put CZ in jail was not him stealing customer money or anything.

It was compliance issues at the end of the day, at the end of the rainbow.

Stephen: It's funny that you mention drinking, you know, and here in Canada, you know, during the pandemic, you know, you had to show your medical records to a 15 year old that can't drink, but she's the one analyzing your medical records to see if you've had a vaccine or not, to let you in, you know, to an arena to see your son play hockey or something of that sort. So, so interesting.

How do we balance this privacy and then regulatory requirements? Where, cause you know, you talk about decentralization. Where's that medium? Is there a median? Is there a part that you believe regulators should have access to and should come in with the KYC in compliance? And then, hey, if we want to go use a decentralized protocol, we're able to without having KYC and AML guardrails?

Because I think that's the biggest argument back and forth between government.

We have decided that, you know, values, privacy, And I'm in Canada, so we saw during the Freedom Convoy, when Justin Trudeau all of a sudden started knocking down every cryptocurrency exchange's door, asking to who donated to the Freedom Convoy, and now that's being proven as maybe he, he over, you know, used some of the emergency act.

How do we balance all of this? Because I think this is, if we can answer this, we're closer and closer to the truth.

Charles: Yeah, I'm a libertarian at heart and anytime I'm told that I have to show documents to go to the coffee shop, I think you're living in a dictatorship. You're not living in a free society.

And I think it's perfectly reasonable to talk around suitability guidelines for the safety of doing business with people, whether that be transport or financial relationships.

We do this all the time. Credit scores are a great example of that. If you say, hey, should I give Charles money or not? Well, at some point, you need some metric to look at it and subjectively make the assessment if I'm credible and gonna pay you back or not.

It's not a guarantee, but you have to measure risk. Insurance is the same situation. Private enterprise does this very, very well.

It's problematic when a government comes in and then it mandates, we're gonna create underclasses of society unless you politically agree with us. So if you say the wrong things, you do the wrong things, you are disenfranchised.

We have this issue in America with felons so our criminal code is voluminous and a whole bunch of people, especially underrepresented groups they get tangled up in the law for whatever reason, they become felons. The minute you're a felon, you're there forever. Really hard to get out of that group.

And basically you're a sub, sub citizen. You have second class citizen rights. And you're limited from participation in society. There's no real path to redemption there. So they create a statutory underclass, and then they ask the question, oh, there's all this recidivism. We just don't understand.

Why, why are people committing crimes more? Well, they can't get a job. They can't participate in society and the, and they, you just send them to criminal college prison. So they, they learned how to be a better criminal. So you're, you're, you're suddenly surprised that you've created this outcome. Ah, you know, we should do form another committee and we'll talk about it.

So I don't like societies that create underclasses and societies that institutionalize these things. And then you create checks, basically decide whether you can go to the coffee shop or not. This is, this Terribly dystopian.

And I think this is why DIDS exists and this is why crypto exists, because it allows you to create a different economy and a different way of talking to each other, improving things to each other, without any government institution involved in that, in that process.

You don't need the government to regulate it, you don't need a government to handle the payment rails, you don't need a government to be involved in the transaction, because the blockchain acts as the regulatory function. If you want consumer protections, you put those into the smart contract. Right. If you want the ability to assess risk, you put that into the cryptography and the design of the system.

And then you can build marketplaces. If this customer doesn't do what you think they do, somebody else can actually sell you an insurance policy to cover those failure points. Like just recently, you know, you had the ship crash into a bridge. In Maryland. There's an insurance policy there. So they didn't do the right thing.

You know, at some point, somebody somewhere along the way is going to pay, and the company that had the ship probably bought a policy, and that policy is probably going to pay a big chunk of that and clean up the, the whole situation. Well, that's how the private market works. You don't necessarily need the government to get involved in a lot of these different things.

You need to get involved where there's a safety issue there's an issue with respect to life and death or a national security issue. You know, these are the types of things. And then you have to really say, okay, is it well defined? Is it finite? And is it objective? And were the people included in that decision?

So in America, we have this concept of due process, Some jurisdictions don't have it but with our due process, if we accuse you of something, it's not good enough just to accuse you of that thing. You have to have a trial of your peers, and then they make a decision whether you're actually guilty beyond a reasonable doubt.

And then once, and only then, can we start punishing you for that thing. And what's happened is every time stuff has fallen apart, it's been a direct consequence of a violation of that principle. Like all the cryptocurrency You have regulatory bodies that come in and they just say stuff. And no courts really had to decide any, there's no trial or this, oh you are this thing, okay.

Stephen: Are you talking about, just so I can understand, are you talking about maybe sanctions Sanctions, Security's Law, you

Charles: know, any of these things, like Tornado Cash, or Security's Law, or these types of things that just come in and say, we have this belief, no courts weighed in on it, no juries decided it, no lawmakers had anything to say about it, but because we believe this, we now can influence the market.

Who gets liquidity? Who doesn't get liquidity? What you can buy, what you can't buy. Is that really a fair? And did you vote for that person? Is there any democratic consent in the decision? No, there are unelected people that make these, these particular decisions. So this happens all, all the time. And that's usually where you have a significant governance problem.

And, you know, I, I say, Hey, I can't change the government's very hard in the federal sense. So I'm going to opt out and create a private system. And we're just going to go play with our friends in that private system. And then when they found out enough people are doing that, now they're trying to go and invite themselves into that private system and then say that we have to accept the very system that we left.

Which is absurd. It's absolutely absurd. It's like banning somebody from your club and then being told that you can't do that. It's like, we don't want the vampire here because the vampires cause so much harm. We're not happy with the legacy system. It's racist at its core. The legacy system is blatantly unfair.

It's rigged against poor people. There's a huge amount of wealth disparity inside of it. And at the end of the day, it finances large multinational companies at its core. It doesn't serve any normal person's interests or goals.

And so we said, let's go build a better system. And we go and do that. And then they say, well, that better system has to go and be like the old system or else we'll ban it.

Stephen: Do regulations impact now the way like Cardano developers build and what, you know, maybe products they do, because, you know, there is that kind of overarching like, Hey, the developer of Tenodo cash didn't say, Hey, let's, you know, create a smart contract where, you know, potentially North Korean hackers could send funds through but that's what they're getting punished for.

Does that play in the mind at all? When you, you know, you're building blockchains.

Charles: No, it doesn't for me. You know, what I do is I build capabilities because the thing is that there's a lot of jurisdictions out there. U. S. is important, but there's also MECA in Europe. There's also the Middle East and the ADGM with Abu Dhabi.

The Riyadh has its own regulatory. China has its own regulatory standard. The Monetary Authority of Singapore has its own regulatory standard. It would be absurd to say you pick a winner and everybody else is subservient and a slave to that, especially in a multipolar world. So what you do is you build a generic framework as a protocol.

You build libraries of capabilities, and then you let the individual DApp developers, DAOs, and companies adhere to the laws of their requisite user bases and jurisdictions. That's why we created Midnight, because you have a selective disclosure regime, and you have other things, but that's not at the protocol level, that's at the application level, where it should be.

Because if you did it the other way, that would be like saying, if you found a business in my town here in Longmont, Colorado you have to get a bank license. You're like, but I'm a coffee shop. Yeah, but every business built here has to be a bank. You can serve coffee, but you have to get a bank license even if you don't use it.

That's literally when you build regulation of the protocol. You're saying that for every single thing, regardless of its use case, what the regulatory regime has to be. It doesn't make any sense. Instead, what you do is you say, okay, it's land. You build a business and then you put a framework on top of that based upon the nature of the business.

And there's going to be a different regulatory framework if you're processing toxic chemicals versus if you're selling coffee versus if you're a bank versus if you're a hospital. Each and every one of those, of course, has. And that makes common sense. Yet, when you talk to these older regulators, they're like, Oh, well, no, everything is a bank, and all of these are licensed, and you need to put it in the protocol itself, and say okay, Boomer, whatever.

Stephen: They're so worried to call it, that they don't let anyone call themselves a bank, right? They want everyone to be banks, but they hate when, you know, companies that aren't exactly banks call themselves banks. Right.

You mentioned consumer protection quite a few times. We saw, I think it was 2023 or 2022, there was like these DeFi hacks out of control.

I think Chainalysis said over 800 million. You know, most of that was probably the Ronin hack and other bridges. You know, what are some of the solutions here? Like, how do you think about it when you're building on Cardano? Like, what are some of the things that people can do to implement better consumer protection when they're building these decentralized smart contracts?

Charles: Well, you know, it's always helpful to have a use case and really drill into a use case because then you can kind of reason around what a consumer protection regime would look like. So NFTs are a great example of that. So in the NFT space, you got rug pulls. They happen all the time. You know, some people go, we're going to issue all these collectibles and then the founders disappear and take the money.

What if instead of founding, what you do is you have this concept of rug pull insurance, and it's actually built into the, how the assets are issued and how the treasury of the system is governed. And then what that does is if the founders leave, for example, the, the, that regulation contract basically says the project automatically gets turned over to the NFT holders and they get access to the project financing, the treasury of it, and they actually can decide on and they can elect a new management team.

So, does it then matter if the management team leaves or not? Well, if the NFT holders are in charge and there's a large community, those NFT holders have the ability then to replace that management, just like a board of directors or shareholders effectively would. So, you can put governance structures in place at the protocol level that basically conserves and protects things.

And what's cool is those consumer protections are templateable. Once you've designed it once, It's reusable as a standard that people can apply again and again. And then with the wallet people, the exchanges, all these things, they can show green check marks if people are adhering to standards of quality.

This has been audited, like Certik is a great example, you know, they have their little checkmark that they have. Wallet, you know, this, this adheres to rug pull insurance according to this standard, these types of things. And then you as a consumer, if people deviate from the standard, you start saying, hang on a second here I'm not so sure about this.

Why am I buying this if, if you guys don't have rug insurance? Oh, well, we're, we don't need that. We're above all of that. Oh, okay. Well, what have you put into place that's equivalent to it? Maybe you disagree with the standard for these reasons. That's fine. But I need to see the alternative. Oh, we don't have that alternative.

So in other words, you want the freedom to steal my money. I see it. So the problem is if you don't have that artifact, you don't have that basis upon which to have the conversation with. So in the 19th century, there was no regulation about being a physician in the United States. So people just call themselves doctor, they go around, sell you mercury and cocaine all mixed up, and you know, maybe a little heroin on the side.

You know, it was a pretty crazy time. So then they started creating state medical licenses, and the minute that they had a state medical license, if you saw a doctor, you'd say, are you a licensed doctor according to state? They could show you a piece of paper. Now, if they're not. You're like, hang on a second here, I need to know a little bit more because now there's a standard that we have that adheres that somebody's checked you out.

So I think that's how you achieve consumer protections is through licensing, through standards, through templates and external auditing. And then it's just a matter of consumer education then that these are the standards of doing business. And then usually you get 95 percent of your consumer protection taken care of through that process.

There's going to be this 5 percent sliver, we call those black swan events, where they just happen and they create catastrophic harm and they're hard to predict. And you can always refine your system after they occur to close that gap that exists. But generally you've got to do the broad brush strokes, you know, just kind of like Bob Ross when he's making the painting, he does the mountains first, and then he does the lake structure.

And, then he starts filling in the trees, and then he beats the devil out of the brush, and then he starts, you know, cutting and putting those leaves in, and then he gets those fine details. So we don't even have the mountains painted right now in the cryptocurrency space, and that's what you got to do.

You got to paint those mountains, and then you got to paint that lake, then once you have that, then you can start talking about, you know, that, that, that fine detail stuff that really takes care of of the consumer and for the most part works out. Is it perfect? No. It's not. However, once you have that there, law enforcement, regulators, and other people, they have very strong grounds to stand upon.

Because when they're pursuing a case, criminal or civil, they usually are pursuing that because you've deviated from an industry best practice.

Stephen: Practice, yep.

Charles: You know, and they say, why didn't you follow this? And then a jury looks at that and they're like, fuck yeah, why didn't they follow that? Those guys, they're evil guys.

You know, and, and so that, that helps the regulator and that helps law enforcement and you're now partnered with them because they also can write the standards with you. You know, you can talk with them and say, what, what, what would make you guys more comfortable? We need this and this and this. And then you kind of work your way through it and then, you know, it gets where it needs to go.

Stephen: You've mentioned Alf and Bob Ross in the same podcast. I feel like we grew up in the same household, Charles. All, all my favorite shows to watch.

You did this TED Talk in, I think it was Bermuda. Gotta be about, it was before Cardano, so maybe 8, 8 to 10 years ago. It was 2014. It was 20, yeah, 10 years ago, perfect.

Do you have some of the same thoughts then? Like, you were talking a lot about, you know, access to documentation. Some of the things that we've been talking about today leads to a happier life. But we're seeing, you know, especially North America, you know, maybe our children, our friends, our family.

They have access to almost too much. It doesn't seem like they're living a happier life. And I think when you did that talk, social media wasn't as, you know, as impactful as it was now. What are your thoughts, then, taking back from that talk? Are people more happier with access to the documents, access to capital, and those things?

Charles: Oh, we're getting there, man. And we have a whole venture in Kenya called RealFi that John O'Connor leads. And we took all of our Africa operations, we aggregated them together after spending more than half a decade on continent, going through the whole ringer, civil wars, change of government you know, all this stuff that you can imagine that comes up.

In in developing countries, we put it all together, we created actually a whole microfinance stack and I put five million dollars of my own money into that microfinance stack and now it's now it's actually being lent out and we're gathering an enormous amount of data and we're going to create blockchain based credit scoring and peer to peer ways of lending and the long term goal is to integrate that into wallets.

So, just like Kiva, where you can go, you see people, you click the lend, we can have that there as an open standard, and then regardless of your wallet interface, you can just integrate the marketplace, and the people can lend out money to people abroad, and they pay a much lower interest rate. The default rate goes way down.

Normally, the NPL for loans, so underperforming at default, is 40 percent in microfinance. Ours are 2%. They're 20 times better. And the top end of microfinance in Kenya is 85 percent interest. Ours is sitting at about the teens, about 15, 18 percent depending upon where the loan was originated. So, you know, 85 down to 15 and 40 down to two, that's not bad.

And competition makes that number go even lower. You know what that means is that the poorest people in the world pay the same interest rates then as us. So that's what crypto can do, it changes the world and you own your own identity which means you own your credit score, not Equifax, not these big credit agents.

So it's a very powerful concept and you can use stable coins for the whole thing and you don't have to use banks for it and also it helps you with sovereign volatility. Like, if your local currency has got a 100 percent inflation rate, you know, it can be pegged to something that's immune to inflation, you know, so it's a very different way of looking at things.

So, we've made huge progress. You know, when I did the TED Talk, it was a hypothetical concept. Ethereum didn't exist. None of these things existed. It didn't have those capabilities. And now in 2024, not only does it exist, we're, we built it and we're testing it and millions of dollars have been deployed to human beings in Kenya.

And then we're going to expand Pan Africa and then expand Southeast Asia and LATAM market and make it a global marketplace. So in just 10 years time to go from a concept That's some overweight guy in a red shirt that's talking about to to today actually a real life thing with real human beings is extraordinary.

And for all that technology to be open source, for all that technology to be global first, and to be owned collectively by the commons as opposed to controlled by a single company, that's an extremely powerful thing as well. Because it means that people can build on top of that and carry the torch themselves.

Stephen: Are you able to go 15 minutes over? I don't want to bother you if you can't.

Charles: I got about five more minutes.

Stephen: Five more minutes? Okay. Do you ever look, do you ever watch your old content? Do you ever go back and watch those videos and say like, hey, what was my thought process then? Or hey, I said we were going to do something back then.

Let's try and pursue it now. It's 10 years later. We have We have the blockchains to do it, we have the decentralization.

Charles: Well, I mean, if you look at the old you know, the old content I, I, there's a guy, Hosksed. com and he takes all the old stuff that I did, and actually transcribed all of it, made it searchable.

And so you could actually see what I had to say in 2018 on the topic and these things. And a lot of people come and say, wow, you know, you know, for that sociopathic, pathological liar that these guys in Ethereum say, you're a remarkably consistent guy. I say, well, I have a bad memory. So you just basically say the same thing again and again.

You just tell people what you think. And, you know, it's become more nuanced and I've changed approaches. You know, I originally wanted to do a government. company model for Africa contracting. And if we're getting screwed for six years, we said, let's just go straight retail and go directly to the people.

So you change your strategy and approach, but you don't change the philosophy and the mission. The goal has always been bank the unbanked and the goal has always been create a fair and equal system for everybody in the world. We've never deviated from the peer review process. We've now written 209 papers and they always go through peer review if we can get them through.

And we've never deviated from high assurance software development. We, we feel that these are moral imperatives for systems that work. And everything's Apache 2, everything's Creative Commons, and so all the stuff we produce is for everybody, not just for us. So, we've never deviated, you know, on the big ticket items.

We deviate on the strategy and the execution paths because facts and circumstances change, regulations change, marketplaces change. When I started, Bitcoin was like a buck, man. It was a small space where nobody cared and Mt. Gox was the big exchange and that was just getting started. Gives you a sense of how long ago that was.

Now today here in 2024 it's a radically different world and you know and what's so cool is that it's exciting because new people come all the time. And they come with new ideas, they come with new perspectives, and it keeps you young because you, you can see what they have to say and you can take that, internalize it, you know, push it forward and and get it done.

And overall, we're pretty happy. Cardano has never been stronger. It's a great, vibrant ecosystem. And the research stands on its own legs and we have a certain degree of resilience and confidence. That we didn't have in 2014. You know, today it's truly a movement and there's an inevitability behind getting these missions done.

Might take a lot longer than we think. But where are we? What else are we going to do? Where else are we going to go?

Stephen: I love it. And I really appreciate you, you know, I know we could have talked about Cardano for the whole episode, and you know, all the episodes I've watched of you on podcasts, you really dive deep into technical.

I really just wanted to hear about Charles and what you're excited about because, you know, this, I love this conversation, just hearing the things you're excited about, hearing your knowledge, you know, I knew you had a breadth of knowledge, but how deep it is on things that you're passionate about, you know.

In the last two minutes, tell me about what's, what's Charles looking like for 2024 and beyond. What are you excited about? What projects are you like, Hey, I might just, I might just do this if I have some free time this weekend or for the next 16 weekends.

Charles: Well, you know, I'm super excited about the realization of governance on Cardano.

You know, we're, we're, we've made more progress there than I think most. And To activate that community is going to be the privilege of a lifetime because you're showing how to do a government at scale with millions of people in a completely decentralized way. It's pretty crazy if you think about it.

It's like building a nation state. So, it's a lot of work, but it's an incredibly exciting thing. You know, I'm also very excited that we're really starting to make serious progress with the synthetic biology and healthcare portfolio. Like the anti aging stuff, we think we have ideas to reverse aging by five to ten years.

That's a remarkable achievement if we can pull it off. So the fact that I can do placebo controlled clinical trials and work with the FDA and, you know, get that through, that's exciting. And especially given that it's using off the shelf techniques that we've known for a long time in medicine. They just haven't been combined in this particular way.

So that's super cool because you change and transform people's lives. You make them happier and healthier and you give them more time. to spend with their loved ones because people die too quickly and we get old too quickly. So I'm very excited there. The synthetic biology said glow in the dark plants.

I mean, that's insane, man. The fact that you can take something, engineer it, and then it's just sitting in the corner and it's just glowing 24 hours a day with this beautiful green glow or what have you that's going to change the world. Organic lighting, golf courses trees, all kinds of stuff. It's Avatar, man.

And we were able to bring that to the world. But once you have a platform for genetic engineering plants to modify the environment around them, it's gonna solve climate change, it's gonna help remediate superfund sites you can do thousands of things with that capability and that capability only grows over time.

And the fact that all of that can be brought into the blockchain space and we can do really cool and interesting things, it's gonna really help the ESG movement along to be anchored in a, in a productive, not destructive way. I'm deeply concerned that a lot of these capabilities can be co opted to gain power for the few.

Every single thing we do, the unifying thread, is push power to the edges and restore power to the people. So whenever we see a business model or market where it relies on a choke point, we say, well, how do I go kill that? You know, it's like Roto Rooter. Let's go clean up the pipes. You know, let's get the crap out of it.

Cause cause unfortunately most of society is built around choke points and they control and mandate to you how you should live your life, how you should do your business, how you should make your money. And ultimately whether your life is productive and successful or fun, or if it's a dystopian, you'll own nothing and be happy, hell.

So, you know, the whole point of our labors is to get you back in charge of your life, regardless of The approach that we take.

Stephen: Charles, this has been such a fascinating conversation. I really appreciate your time. Where can people get ahold of you? Do you, do you respond on Twitter? Do you like, do people can send you messages on LinkedIn?

When people are fascinated with this episode, how should they keep in touch with you?

Charles: Oh, yeah, Twitter is probably the easiest way. If you're in the Cardano ecosystem, IntersectMBO is is the way to go because that's the aggregation hub of the entire community. But, you know, it's it, it, it it's not just me.

It's just Input Output Group and you know, all of our people there. And, and then also just the broader ecosystem as a whole. There's so many amazing people there. So I encourage you to just look at Cardano and you know, start there. And there's so many wonderful things in that ecosystem to, To find people to partner with and do things with.

Stephen: And you have your conference, I believe, coming up at the end of the, in the fall?

Charles: Yep, October, the Cardano Foundation Summit's there. There's a big community conference called Rare Evo, which is in Las Vegas in August. I'll be at both and you know, you can see me in person there. And of course, I, I join Twitter spaces from time to time and it's always fun. So, you know, I try to be as accessible as I can.

Stephen: We truly, truly appreciate it. Thank you so much, Charles. Enjoy the rest of your day.

Charles: Cheers. Thank you so much.