Hi, this is Charles Hoskinson broadcasting live from warm, sunny Colorado. Today is April Fool's Day, April 1st, 2024. It's an interesting month. From time to time, I read Twitter threads, and I run into some that are quite interesting. This one is from The Block is Hot. Big congratulations, you're the lucky winner on Charles Answers Your Questions.
He says, "I have been investing in building on Cardano for nearly three years now, but I'm very worried about the chain's future." Oh no. After exploring and interacting with 20-plus blockchains, these are the top five changes Cardano needs now.
Number one: stablecoins. I won't beat the dead horse too much, but Cardano will never succeed without major stablecoins. Past attempts have failed to provide deep, liquid stablecoins, and progress on this front has been severely lacking. This is a top priority. I agree that there definitely needs to be better-supported stablecoins on Cardano. There have been some attempts to do wrapped assets, and there have been some attempts to bring Circle into the fold. There are some homegrown ones, like USDM, for example, that are very exciting and interesting. Obviously, there's the algorithmic stablecoin play with Jed. I don't think one size fits all; there are going to have to be a lot of different efforts. I know for a fact the Foundation is working very diligently at this, as are we, bidding on the Wyoming stablecoin side. We set up an entire company specifically for this. This is a fair point, and there does need to be better depth on the stablecoin side, but the community does need to show up. When something gets created, you generally need a ratio of about one out of four for total value locked (TVL). So, you need about $150 million out of $600 million TVL for your stablecoin to provide enough liquidity for all the DeFi things that you want to do. It's not just about having something show up; you have to have enough of it minted to work. So, definitely a top priority.
Number two: scalability. Currently, the blockchain gets heavily congested even with few active users in ongoing mints. That's not true; there are a lot of active users, and there are definitely mints. But it is true that congestion occurs. What's not true is that the congestion causes a significant issue. You don't have a massive spike in fees, and you don't have tons of things breaking or failing. It just means it takes longer to settle. High mints can sometimes lead to 10 to 30-minute transaction times with only one mint going on. That's not true, but it's definitely true that transaction times increase. Part of this can be solved in user experience, and part of this can be solved with other protocol enhancements. There are hopefully upcoming improvements with the Splash protocol, but this will never slide during a proper bull run when there are so many faster, cheaper alternative chains.
I've done many videos on scalability. There are a lot of things that are coming in terms of scalability, and it's a multi-layered solution. There's Hydra coming, there's all the ZK stuff coming, there's input endorsers being published soon, and there's obviously an ongoing effort to get that implemented. There are also a lot of things that people could do to improve the usage of the blockchain. For example, going from Plutus V1 to Plutus V2 can mean a 10x reduction in transaction size. It's not just about throughput; it's also about how people utilize the blockchain. There's a very nuanced solution in play right now, and I think people are pretty happy overall with the directionality of it. But it does take time to get these things in because they're very complicated protocols.
Top-down support: Many chains will have support from their founders and organizations to help build out their products, raise funds, or promote exposure. This simply does not happen on Cardano, and the current Catalyst system is highly ineffective. $25 million were distributed amongst 300 ventures last Catalyst round. I guess that's ineffective. There already is no incentive to build on Cardano, and without Foundation support, there's even less. What he's really saying is there's not a giant pile of money that exists somewhere in the ether to bribe people to AstroTurf and come to the platform and then leave the minute they get a better deal. This has always been a big area of contention. No one pays anybody to do anything in Bitcoin land, yet somehow they're the biggest. No one paid anybody in the beginning with Ethereum because there was no money to do that, yet somehow they're the largest ecosystem. You don't have to have a top-down Foundation cutting 20, 30, 40, or 50 million checks to founders and organizations to build their products, which is their job, raise funds, which is their job, and promote exposure. If you do these types of things, you look a lot like a centralized chain or a centralized organization.
The point of Catalyst is that you, the community, get to decide what are priorities and how much of a priority they are. With SIP 1694 and the Chang hard fork, the entire treasury system turns on, and there is a billion dollars of ADA floating around for the community to decide what to do with, including an annualized budget. If the community wants to pick winners and losers and help build out particular products and wants to help them along the VC train or give them more exposure, that's a community prerogative. But it has to be done in a decentralized way. Asking for top-down support seems to be missing the entire point of blockchains.
Interoperability: Due to the unique programming language of Cardano, there are additional complexities when adding CNTS to exchanges or other dApps. If the exchanges already support Cardano, which over 200 do, including Coinbase, Kraken, Binance, and others, there are no additional complexities to adding CNTS to exchanges. This is a common misconception that gets repeated again and again that there are some sort of dramatic technological issues in supporting dApps, which is done through SIP3 and the dApp connector. It's quite straightforward. I've never had an exchange come to me and say, "We just don't know how to do this; it's so complicated." The Cardano native asset standard is baked into the design of Cardano. It's very similar to color coins on Bitcoin, but it's at the protocol level. The support for this is built-in, so it's not really that hard for an exchange to do this.
One of the things that we're trying to push through Intersect is forming a coalition of CNTS that want to get listed on exchanges. JJ Siler has already started reaching out to them to approach exchanges as a collective whole and ask, "What are the technical issues?" because we hear this from time to time, and that has to get completely resolved. Compare this to Cosmos IBC or EVM on Ethereum, where the same code liquidity can be stretched and used on many chains versus building products solely for Cardano. If it's an issue solely for Cardano, it's like Coinbase with Rosetta. It should be our ecosystem that pays that one-time integration cost and makes it easy, and we can do that for all the CNTS if there truly is a complex thing to list on exchanges. But currently, it is not the case; there’s not a lot of complexity.
Lack of incentive: Please explain to me why any serious team would want to build on Cardano. Capital raises are significantly less. No top-down support? Well, it's true you won't get pay-to-play volume. Transaction user bases are too low, leading to much less revenue compared to other chains. That's just flat-out false. Notice he's saying a contradiction there: there's too much activity in Cardano, so it takes too long to do stuff, but nobody's using Cardano. For example, whenever they do an issuance on Cardano, they sell out. When they do it on Polygon, they don't. Like Mark Cuban's autobiography, for example, when he issued it on Polygon, it didn't sell out.
Increase coding difficulties in unique language? Well, I don't think he's aware that AEN exists or other standards exist. But, you know, maybe if you can't figure out how to write Rust code, you shouldn't be writing dApps. It's kind of a problem, given that these are financial products. Lack of interoperability with other chains? Yes, there does need to be more cross-chain transactions, and that's the whole reason partner chains exist—to bring that to bear and actually link up Bitcoin, Ethereum, and other things that make it very easy to sell services to other chains.
Lack of VC or exchange interest? It's true we don't have Ponzi-nomics, and it's true that a lot of the projects in Cardano land don't have the tokenomics in a way to give an unfair competitive advantage to VCs to dump on retail investors. So, that's true. Exchange interest is mentioned up here; it is something we as an ecosystem have to resolve. Decentralization: Security has drastically improved on other competitive chains. That's not true at all. In fact, centralization is increasing on Ethereum and on Solana and other systems, and security is decreasing on those chains. We see record high hacks and issues, so this is just a flat-out lie. But that's okay; people sometimes say that.
No upcoming bullish updates on the chain outside the team spending resources building new chains like Midnight instead of improving Cardano itself? This is another lie that I see again and again. I guess on-chain governance means absolutely nothing to him because he's one of those "number go up" transaction volume type dudes. But I guess governance means nothing. The second thing is the entire Resend Detra partner chains is interoperability with other chains. In his mind, that doesn't mean anything. Midnight adds all the ZK stuff not only to Midnight but also backports a lot of this to Cardano. So, he's interested in things like rollups and scalability. Doesn't Midnight do that? Doesn't it add those capabilities?
The community that funds and alienates anything that isn’t speaking positively about Cardano is causing less new people to be interested in the chain, including Charles. This is another contentious point. When people lie and when people spread FUD and mislead, or when people go out of their way to omit Cardano—for example, World Mobile is one of the largest DPN platforms in the entire world, and they’re not even included on a lot of lists in the top 10 or top 15. The Cardano treasury has a billion-plus dollars in it, and it’s left off the treasury list for some reason. Should we not call that out? Should we just roll over and let people lie about the ecosystem? It’s not about speaking positively about Cardano; it’s about speaking honestly about Cardano, which is actually what I’m doing right here.
You see a lot of these types of threads, and I chose to make this video to kind of make a point. They seem reasonable on the surface. Oh yeah, we need some stablecoins, but nothing's being done. No, there’s a lot being done, but there needs to be fair consideration. Oh, we need scalability? Well, yeah, that makes sense, of course. There are multiple things that are being done in parallel about scalability at every level, from the dApp level to the protocol level to layer twos and these types of things.
Top-down support? We need top-down support. In other words, we want a fund to pump your bags and deploy billions of dollars of AstroTurf money to get things out so we can get the token price high and sell it, make a bunch of money. That’s what he’s really saying. He wants interoperability, but then down here, actually the things that are being done to facilitate and promote interoperability, he says they’re bad things and they’re a diversion of resources. Then he lies about things like decentralization and security drastically improving on other chains. It’s a lie; it’s just not happening. It’s moving in the opposite direction.
Also, he lies about stuff like this about alienation. I wouldn’t say it’s alienation; it’s just when you say things about Cardano that aren’t true, we as an ecosystem have every right to correct the record. Whether it be the EDI or our scalability plans as an ecosystem, or how governance works, or the importance of on-chain governance, or these types of things, or when you say that transaction volumes are at an all-time low and there’s less revenue. There’s a great ecosystem and community, and there are a ton of really interesting projects launching. Yes, it’s absolutely true that certain VCs are not super interested in Cardano for historical reasons. That’s probably a good thing because that same set of VCs are the ones that brought you the Solanas and Polygons and others of the world and a lot of the other bad stuff. It’s a philosophical thing, and some people agree with it, and they live in those ecosystems. Some people disagree with it, and they live in our ecosystem.
If you cannot attract new or high-quality teams or investment, then the chain will never make it. That’s an axiomatic statement. Sure, you need to have new and high-quality teams. Maybe new and high-quality teams are interested in governance. Maybe new and high-quality teams are interested in being in the most decentralized ecosystem. Maybe new and high-quality teams like the idea of blockchain-based funding as opposed to being a patron of a top-down agency. They want to be able to make a case to an entire cryptocurrency ecosystem. We would win in those categories.
We also want investment. Investment is going to always flow where the people are, so you have to grow your people. I cannot personally think of a single reason why a team should build on Cardano, and that’s coming from a founder of a Cardano project. So again, it’s your perspective. If you like one of the best communities in the ecosystem, you like the idea of on-chain governance, you like the most decentralized protocol, you like the fact that Cardano has been up for over 2,300 days and never crashed, you like the fact that when you write an application, you write it in a code and techniques where the application works the first time and doesn’t crash on your users, and you like the determinism of transactions and predictable prices, maybe just maybe you like Cardano.
If you like non-deterministic environments, you like hacks, you like Ponzi-nomics, you like the chain restarting itself, you like centralization, you like having no say in on-chain governance, you like centralized curators that have top-down support, and you like being a very small fish in a big tank of the world of EVM, you can certainly go to another chain. In my opinion, if Cardano does not fix these things, this will be the last bull run for Cardano, and the chain will most likely get outside of the top 20 this cycle.
Cardano needs to implement support for large stablecoins such as USDT and USDC. Sure, it’d be nice to bring these types of projects to Cardano, and they need to come, but a process needs to be followed. Prove scalability ASAP through improvements such as input endorsers. That’s been abandoned. You see the FUD here? Oh, well, you know, Cardano is not doing input endorsers. Well, there’s literally a paper coming out, and there’s a whole team to do that. Rework the entire Catalyst process and create a new Foundation that actually supports its builders.
What’s Intersect, guys? Why is Intersect not mentioned here? Intersect MBO—that’s the whole point of Intersect: to be a members-based organization for people in the ecosystem. As for a new Catalyst process, well, you guys have direct access to the budget. Why is this not mentioned anywhere? The Chang hard fork and the fact that these things are being opened up—it’s a live omission. Figure out bridging interoperability improvements like Injective has recently done with their EVM and Solana infrastructure. What’s the point of partner chains? Isn’t the entire business model of Midnight to act as a service layer to sell its services to Cardano, Ethereum, Bitcoin, and other places? So, it creates that bridging mechanism. There’s also Rosen Bridge and a whole bunch of other things, but again, according to this poster, that’s a distraction or a waste.
Encourage more exchanges to add Cardano native token support and help projects with the approval processing. Well, again, that would be something that could be coordinated through Intersect. So, yeah, I agree, and it’s been done. Go Intersect MBL. Yeah, I agree, and it’s called SIP 1694. Yeah, I agree, and the process is underway. Yeah, I agree, and there’s a multi-pronged approach from Wyoming stablecoin, USDM, Jed, a lot of community projects along the way. And then, of course, the Foundation has been talking to USDC for a while, and of course, they’ll make some statement about it.
You see, it says, "I want to be clear, this is not a FUD Cardano thread, but more so recognize what other blockchains are doing that Cardano can heavily improve on." That’s fair, and that’s why I made this video. Cardano will become a completely obsolete dead chain if these improvements are not made. That’s just not true. I hope that this progress will happen, but it’s not just up to the community to make this happen. The top needs to support this chain, and being complacent on the sidelines for the sake of decentralization is an excuse for inaction.
You see, this is what really bothers me. Everybody is carrying their weight in their way. There are hundreds of engineers on the IO side working really hard on the things you’re asking for. We build projects like Midnight, and then you say that that project means nothing. Governance enables the entire community to stand shoulder to shoulder to make it happen. It’s not up to the community to make it happen. If you are begging for a centralized entity to save your chain, it is not a blockchain. It’s not a cryptocurrency; it’s something else. You need the community to make it happen, and everybody needs to be a community member. You need an on-chain governance system that enables such a thing.
The point of Intersect, what you just called up for this new Foundation, is that the point of Intersect is a members-based organization to set agendas and priorities. Spiritually, the things that he’s saying are not necessarily wrong. Yes, the time has come for stablecoins to come, and we need to have a stronger and deeper strategy. Yes, it’s important that we all accelerate our scalability plan as much as possible without compromising security and decentralization. Yes, it’s very important that there be interoperability with other chains. And yes, we absolutely have to look at the incentives program and understand how to better help teams through their entire growth process, from incubation to acceleration.
But the process is wrong. There’s this assumption that some core entities are going to come and save you. The reality is that if you’re a true cryptocurrency, that’s not what happens. We, the community, come together; we set agendas and priorities. The single
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