hi everyone this is charles hoskinson broadcasting pre-recorded from warm sunny colorado so today we're going to talk about governance yay governance i've been wanting to make this video for a while but you know christmas came up and other such things and i thought it'd be really fun to talk a little bit about what 2021 holds for cardano because actually it's the most exciting year in the history of the project but first this is the ergo knight i just picked up one of these and i'm gonna try it tonight it's got uh four different contacts for your head i guess you put them on that way and actually teaches you how to um produce certain types of brain waves that allow you to go to sleep and give you a more satisfying sleep it takes about three months to go through the entire treatment but it's the latest brain computer interface of the day i buy them all the time it's actually a side passion of mine and one of these days i'll start a bci company after the game company and after the mushrooms and all those other things okay 2015 to 2020 were just incredible years every year we learned a lot every year we grew every year we did a lot of things and we went from just a few people to a gigantic community and what 2021 is about is really harnessing the power of that community that exists and putting them in the driver's seat in every aspect and dimension of the project and so really when you think about this you have to think about well how do we get there so in 2020 we said okay we want to go from a static and federated consensus system to a dynamic and decentralized system we say well we just can't do that we have to have training wheels we have to teach people how to run the network there's a lot of economic parameters that have to be thought about so we did the itn and for about six months we gathered an enormous amount of data and we trained up over a thousand stake pool operators and that allowed us then in july to launch shelley which was the most successful transition to proof of stake in the history of our industry and now we've been growing by leaps and bounds and we've gotten to a point where about 68 of all the blocks are made by the state pool operators and there are 1200 of them registered and by march this will be at 100 percent in fact we could have uh already gotten it to 100 but there was a pre-built plan for how this transition was going to happen and we got there just beautifully and that's in part thanks to the incredible work during the itn of the beta staple operators boy they worked hard the pioneer test nets that we launched and then finally shelly itself getting through all of that it was just a gargantuan amount of work in fact i don't think it's ever been done this way in the history of cryptocurrency industry and it seemed really smooth to the end user but behind the scenes it was a colossal effort five years had to be transformed in a very short period of time okay so what did we learn from that experience we learned that you have to have kind of a training wheel and then you have a gradual handover and this handover includes an education component and that education component is vital because then what happens is people start forming opinions now right now there are many divergent opinions about the economic parameters of ouroboros you know we have k how big should that be uh how what's the not value you know uh you know a whole bunch of these system level parameters that we have people have opinions about they have opinions about the reward function in fact there's cip 007 which is the curve benefit pledge and litany of other things so these didn't come in a vacuum they came as a consequence of months and months and months and months of people thinking and learning to the point where they actually got to running the system and having an opinion how the system should be run long term so when we look to beyond march the reality is many things are going to change parameters going to change reward functions are going to change and so forth moving into the future 2021 2022 2023 and so forth so we have to have training wheels a gradual handover and then this allows uh community opinions to form often divergent uh from our own and that's really the key to good governance is creating facility to do that so we have a program called catalyst and catalyst is basically all about uh those training wheels and teaching people how to participate and vote and how to think about this process now we launched this way back in the beginning of the year i believe it was april that we started formal work on it and now here in december we've gotten to a point where fund two is underway and voting is underway and this is the first time people can vote and it's very kludgy and very beta-esque and so forth and it's not really a perfect experience however when we look to q1 of next year our biggest goal there is to maximize participation so we want as many ada holders as possible to vote participate in catalyst register have an opinion use idea scale create proposals and we're going to make sure that those voting tools get systematically better and more inclusive so a big goal of that is getting it directly into deadlifts itself and having a voting center inside of daedalus and then we've talked to the emergo guys and i believe there is an intent to have a voting center in uroy and we're still going to maintain that cell phone app for voting each iteration each fund fund three fund four fund five it's basically going to focus on getting maximal participation well right now when we look at the amount of people staking i believe the number is around 64 of the 8n circulation if uh last time i checked is staked okay making us the number two cryptocurrency in the world for i'm out-of-state cryptocurrency and i'm gonna go to japan and all these other places and we're gonna push that really hard in 2021 and my goal is to get that number even higher well similarly only a small fragment of people who could participate are participating in fun too and that is to be expected okay so a big growth target is i would like 50 of those eligible to vote vote by the end of march of 2021 okay at that point the network by and large the majority of the network is participating at the level of the u.s elections for the presidential election and if that's good enough to decide leader of my country i think that's good enough to have opinions about cardano okay the point of projects like idea scale companies like idea scale is to start not only focusing this participation but then ask the question what is meaningful participation okay meaningful participation and what does that mean well it means to me a collection of things first uh we're going to have all these complex ideas okay and the problem with the us election system in most democratic systems and republics is that they don't do so well with complex ideas and the general idea of resolving that is through institutions so basically the idea as an institution will do all the hard math they'll think about it and then they'll form an opinion and they'll tell you that opinion okay you can also substitute institutions with thought leaders now thought leaders can be everything from ben shapiro and rush limbaugh to pick your favorite person nom chomsky for example in the left and there's a whole spectrum of opinions in between okay so you could have institutions like the hoover institute or the american enterprise institute of council foreign relations iran corporation you have thought leaders or individuals what they do is they think about these complex ideas they form an opinion and then they kind of try to inject that opinion into the public discourse and then people basically sign on to it and you just basically adopt the wholesale political agenda but the dissection of complex ideas in general for our industry uh is a bit problematic because a we don't have the right institutions yet as an industry they're either biased or non-existent and thought leaders we have some of them have materialized but you want to ask you cult of personality you have to be very careful about that so a litmus test of whether a governance system is working properly or not is first its ability to break down complex ideas dissect them into their element components and kind of brainstorm what are you talking about and why are you doing this okay so the ability to critically think and critically dissect a side effect of this process is the formation of trusted institutions and the formation of experts thought leaders who will assist in that process and a healthy ecosystem has a diverse group of institutions and thought leaders and it also has a systematic process for analysis of complex ideas so for example you've heard of the scientific method that's an example of a systematic process to kind of reason about the world around you many philosophical schools of thought about how to reason about the world around you and the faster and more succinctly and i'd say the easier it is to convey the synthesis of this process is probably the measure of its usefulness and utility so as we leave quarter one and we head into quarter two one of the things that we're going to be paying a lot of attention to or what are the systematic processes to dissect and analyze complex ideas that are being proposed to the government system what institutions can we reinforce to provide semblance of objective information and how do we make sure that a thought leader expert class starts solidifying within the ecosystem so for example this cardonal foundation is an institution as is iohk we have something like the cip process as a systematic process for change management okay so these are the kinds of things we've already started investing in and of course we have partners like idea skill which are frameworks which can aid the systematic process and a section of ideas okay two we would like to see the convergence to decisions so a hallmark of a productive governance system is its ability to decide super important and it's often missed time and time and time and time again okay uh convergence to decisions uh so for example with bitcoin one of the key flaws of bitcoin that has yet to resolve is bitcoin has a hell of a time updating itself they know they need smart contracts they know they need a lot yes the value is going up because institutional investors are buying but it's still blind deaf and dumb and it has massive technological problems from privacy to scalability to interoperability to the long-term sustainability of the system okay but they can't converge every time they try they get a bitcoin cash or sv or something else and breed cults of maximalism and so forth which are the destruction of the ability to analyze complex ideas it's basically a regression cults of personality uh and those cargo cults are of course bad okay so a convergence to decisions means that you can look at a complex and controversial idea and you're able to decide and even if people don't get what they want they still believe the decision has legitimacy so imagine electoral system you may have not voted for a president the president you didn't want one but if you believe in the system and the system has fidelity then you'll accept the outcome of it and say okay well this person is our leader okay so convergence to decisions is a significantly important component of meaningful participation it's not just when you get the things you want but it's when you lose do you still believe the system has legitimacy and then finally you have this idea of return on intention okay so in the investment world we tend to think of return on investment we say okay i put x dollars in and i get y dollars out i'm doing good if y is much bigger than x over a reasonable time frame but you don't really have that when you think about scientific funding or social funding or so forth government agencies deal with this all the time for example you have the nsf national science foundation you have darpa for example you have like cern okay you have all these big organizations those boatloads of money and they're not here to make a profit the point is that they're here to invest in the growth of some technology or growth of some social process or some foundational science and the idea is that by doing this it's an enriches society as a whole so the intention of the investment is a social enrichment that was there that wasn't there previously and so the question is well what is return on intention in a cryptocurrency context so i couldn't care less about value appreciation of the underlying token a because it's a rigged game you can't control that you can't influence that uh and b uh all assets are correlated to macro events and to bitcoin so bitcoin does very well it rises everything up bitcoin collapses everything goes down you can have great numbers you can have great progress and you could be at one tenth of your all-time high just because the macro is not as good as what it looks like so roi in terms of asset appreciation it's a vanity metric and it doesn't make a lot of sense so there must be something embedded within this funding mechanism the treasury of cardano that transcends a vanity metric like that and it has something meaningful so what is the intention there what are the kpis of cryptocurrency it's not here to make you rich it's here to be useful there's a utility component okay and there's a growth and adoption component okay and then there's also a sustainability component and then there's kind of a concept of competitiveness or fitness so we do a lot of evolutionary work you think about fitness dynamics and you say okay well what is the fittest species within this biome and can the c species survive or is the most likely outcome extinction so the point of a return on intention is that people are going to come up with complex ideas we're going to analyze the return that those ideas potentially have against you lenses like this utility growth adoption sustainability the fitness and perhaps other criteria and then eventually we're going to converge the decisions either to change the system so in other words update towards something so that can be a hard fork a soft fork adoption of a standard or a cip something like that or to fund something okay so that could be global where ioh k and a bunch of other entities come together and we say we have a card on 2025 idea here's where we want to go and what it's going to do for the system or it could be a small scale like hey i want to run a podcast or i want to go give out t-shirts at this conference or something like that ideally a decision-making mechanic should be able to sift through all of these things and there's a beautiful interplay once you have thought leadership in institutions why because you have domain expertise to analyze the claims that are made by the adherence of these ideas that flow through the system we are going to claim as a collective whole statements about utility growth adoption sustainability certain market development competitiveness against other cryptocurrencies or legacy financial systems and the fitness of the system in general to survive and what you want is a diverse set of opinions about how that's going to flow through so we thought it was really important to get the right frameworks so we have idea scale as i've mentioned others will come will have the right websites and wallet interfaces and so forth and these types of things will give each and every holder of ada a god's eye view of the state of the entire system every single ada holder is a snowflake in that they're unique each and every one of you have your own background your own stories you speak your own languages you have your own skill sets so in a way you all are experts in your own domains and we've done a really good job if in q2 there is a way for that thought leadership to form for us to solidify a community accepted definition of return on intention as a rubric to compare things to and we are seeing that there is reasonable convergence to decisions okay so the catalyst will continue to evolve we're going to continue adding partners and scaling up the people work on it and work a lot on interfaces in addition to fundamental technology and uh just in time we've updated the treasury design so that we can do large-scale voting go from thousands to tens or hundreds of thousands of participants on a voting ground and we're going to continue heavily investing and optimizing that technology one of the things we're going to work closely with the cardinal foundation with because their leadership comes from the consultancy class is really starting to drill down on this return on intention concept and idea and you know what we might do is we might actually propose it as some sort of uh crcr a request for comment uh for the cip process so basically we can say this is the way that we tend to look on return on intention but it's a very high priority for us to dig into and understand better and there's some precedent from things like the european union horizons project which we've been a recipient of and many others have been and scientific funding agencies who have great track records for example darpa created the internet and siri and many other things bell labs is another organization which had an incredible track record and got a great return on intention okay now let's talk about voting currently there are two voting systems one is off chain and the other one is not activated yet but we're working on it and it's called blockchain system okay so the off chain system is really where the treasury lies that's where we're doing the funds it's based on the rust code base and we have a great team there and we just keep updating and iterating and refining and that's really taking a spiral evolution where we have these funds along the way and every time we have one we increase the scope capabilities and so forth and eventually the amount of users in that system can grow this is a beautiful area for a voting system to exist unchained we developed that with a very different approach and that was the european union uh grant that we got on decentralized software updates and we really intended this specifically for the hard four combinator event so basically upgrading cardano itself through some sort of a cip process now uh what we've done is we've expanded the team working on that from one engineer and a few scientists to three engineers and actually we brought another company in called obsidian and they're a haskell firm and they're very specialized and their job is to kind of build out all of these on-chain mechanics and ledger rules and so forth and they're making good progress with that and of course we have parallel team that's working on the off chain dynamics so my intention is to have all this stuff happen initially here in the off chain network because that's the fastest to evolve and upgrade and every six to eight weeks we can be doing something significant and what i'd like to do is adopt a bicameral model a bicameral model basically means that you have two houses you have two voting pools so for the off chain voting uh we just say that's treasury funding but if you want to do a hard four common air event so you actually want to do something very significant and change the network conduct a hard fork then let's have the general ada holders vote here with a reasonably high threshold and if it passes go on chain and then have some sort of system where the spos vote for the on-chain event now where do they get their voting power from right now if you look at the ledger rules of cardano you have value keys you have staking keys okay and when you delegate to an spo you delegate this the staking rights we're exploring right now expanding this from two to three where we include a voting key line as well and then the idea of the voting keys would be that when you delegate to an spo you can choose to either delegate your stake or your voting keys but not your stake or both okay so that way they're voting but they're voting on behalf of the people who have delegated to them and that's done with a public vote whereas the initial vote would be done with a private vote now what's really elegant about this system is that this allows us to use the design of the on-chain system that we design with the european union privilege project um fairly easily it allows more diversity on the delegation of voting rights and the registration of voting and it allows us to decouple development so that we can pursue both of these in parallel and you can utilize this bicameral model which is successfully utilized in many democracies around the world representative republics around the world to basically take very controversial and deliberative things and slow them down a little bit and you have different constituencies the spos in a way are an institution in an expert class and then every ada holder also has two voting those who've registered the vote actively participate have had a say and those who are delegating have also had to say as well and one of the reasons why we introduced a locking mechanism with allegra the recent hard fork into cardano was that we did not want exchanges to participate in this process exchanges are on demand accounts and while they seem to have found a clever way of delegating and staking that is because there is no lock up of those tokens but with a locking mechanism requiring you to register before you're allowed to vote it means that they go from on demand to no longer on demand so many regulatory uh many environments that's against regulations of exchanges it's why banks for example have cds certificates of deposit they can't just lock your funds for large periods of time without your consent they have to pay you a higher interest rate to do that so that's one of the ways along with exchange addresses that we can limit participation from exchanges voting but you know some will but i think this will ameliorate a lot of those concerns okay so a lot to do you have to create a nice balance of power a balance of privacy to publicity we have to enhance staking mechanics just a little bit we've expanded the team on the on chain we've also expanded the team on the off chain uh and we've added several more rust developers to kind of speed things up and we're making great progress on the latest enhancement to the treasury system to increase its scalability uh and all that's going on in parallel to these more philosophical things about how do we dissect complex ideas or bringing in domain experts to help us with that institutions are forming expert classes are forming and we're also working with partners to try to figure out a good return on intention and we're working to see if the system will converge so fund two is kind of our first experiment of convergence and we'll see how much of the proposals actually how many of the proposals actually get funded okay the good news is that this process like the process of the itn is going to go very quickly all things consider increasing participation it's going to quarter by quarter by quarter i continue to increase and once we reach 50 percent i think we're at a class where we really can start having serious conversations about complex ideas uh the formation of institutions happens organically even if you don't want them to form they form spakra is a great example of that no one asked for it from our side but it formed out of necessity because people felt that they needed better representation and whether it's successful or fails it's an example of an institution that has formed to meet a need and represent a constituency and a viewpoint in the system more will come likely dozens more and we've already seen the emergence of many thought leaders inside the cardinal ecosystem who are independent of the core three entities that bootstrap this so all throughout the first half of next year you're just simply going to see more and more and more and more of that form and then what's going to happen is there are going to be several major decisions that we as a community have to make in 2021 the biggest that's relevant to me is cardano 2025. so basically where do we go after the first generation of cardano is complete smart contracts are coming governance is getting to an evolved point interoperability is coming and side chains are coming obviously or aboris is here we're staking that experience is improving cardano is getting to a 1.0 state where we've satisfied everything that i wanted to do with the first generation of the system and it's useful so cardano 2025 is a big open question mark of well where would we like to go my metric and this is just mine is i'd like to build a system that can sustain one billion users okay system on the scale of facebook google or amazon but decentralized so keep what we've accomplished but allow us to continue to grow and for that we're going to have to go from a collection of core entities to a very diverse group of executing entities and we cumulatively call this concept the dcf it stands for decentralized consortium fund and we actually have several people working full-time on defining and creating this vision rolling it out and it's one of the things that consumes a lot of my day something i think a lot about well once that's been populated the core entities are there proposal is made that's certainly a complex idea and that complex idea has a return on intention i.e if we create this it's going to massively improve the utility of the system it's going to drive a lot of growth and adoption it's obviously going to make the system far more competitive and fit in many different jurisdictions and it's obviously going to make the system sustainable because once you have that many people in it whether it's great or bad it's going to have momentum from that kind of user count there's a stickiness to it okay and of course that has to then be analyzed by the thought leaders and the experts of the system and then you all got to vote on it so that's an example of something we need to do in 2021 it's going to lock down the direction and focus and future of the system for the next five years and really get it some certainty about the roadmap and it also gives a change management system that can be reused again and again and again for cardano 2030 cardone 2035 cardone 20 30 20 40. uh and basically we have a way of broadening the coalition every single time and encouraging lots of competition and along the way we'll create a lot of institutions along the way a lot of experts will be created and the system will continue to evolve with complexity and utility so that's one major thing that i'd like to do and i it's going to consume a big part of our participation once we've finished all the 1.0 stuff next year and i think that there's a very good shot that the community will go along with the ideas we have but what's really fun is there's some stochasticism in that we actually don't know and the negotiation and the conversation is what really matters and uh we'll uh we'll push really hard for it and we'll see where this goes if we succeed it creates a model for the entire cryptocurrency space and that model can be reused time and again over and over again to continue to upgrade and update things in a very decentralized way with good sustainable transparent governance behind it much like a lot of these government funding programs like the nsf or darpa or the other things they generally have a lot of transparency about where things went long term and a lot of social good that they create there's a great return on the intention behind it so there's a lot to do governance is a very complex topic and in many ways it's the most complex topic and this is something totally ignored by ethereum totally ignored by xrp totally ignored by bitcoin and many of the other largest projects in the space and i think it's one of the hidden gems and key differentiators of cardano from most of the other through third generation we think not only about this in terms of mechanics we think about this in terms of social dynamics and we think what will allow us long term to operate a system like this in a way that is maximally good for as many people as possible there's going to be a lot of disagreements along the way a lot of problems along the way a lot of ups and downs it's very very very hard this is one pillar of many pillars we have another pillar of smart contracts that's the island the pond and the ocean and we have a whole bunch of people working there and of course we have to clean up a lot of staking stuff and we have to clean up some of the other components and this is why over 100 people from my company wake up every day doing nothing but this and why more than a dozen companies around the world work on cardano doing their various different things and we keep adding because there's so much to do the good news is that i do believe we can make significant progress next year to the extent that cardano will truly be self-governing and completely decentralized uh and at that point be far more self-governing and far more decentralized than all cryptocurrencies combined because we really know the root of the problem and we have a really good approach to solving that and pushing us in that direction and that's really the point i've accomplished nothing if i've built a system that requires me to be constantly vigilant perfect and there every single day i have accomplished the work of a lifetime if i've built a system that does not require me to be there for the system to function we've already reached the point in my view that the system is independent of its founders but that doesn't guarantee that the that because that's there that this system will be useful and competitive and continue growing and be able to take on markets now is the time to utilize that independence that has been achieved to execute to the next level and get us to a point where we can get to a billion users and get massive adoption and bring in thousands of companies and so forth it's a hard goal it's a stretch goal but you know what all the scientific research we did all the code we wrote all the building we've done over the last five years was also very hard in many ways harder because we started from nothing and we had to get somewhere and here we're starting from something on the backs of hundreds of thousands of people so i think this is existential for our industry as a whole there is a regulatory wave that's coming and that regulatory wave seeks to control and dominate and to fit these concepts into boxes that they were never designed for they like the idea of leaders and faces and custodial companies they're easy to regulate they're easy to handle it's much harder when you have a self-governing self-sovereign ecosystem with millions of people and no one in charge like what bitcoin has achieved on its scale because at that point there is no face there is no one to control it or run it and so you have to come up with completely new ways to regulate in completely new ways to utilize a system like that the point of a good governance system is that everybody can have a seat at the table and we can all have a reasonable adult conversation about where do we need to go and how do we get there okay so this can mean the creation of legal dsls uh specifically so that regulations can be encoded this could mean a blockchain based identity like what we've done with prism for example and many other tools exist in this bag smart contracts are another tool that exists in this tool bag and the point is that we can extract the intent of regulation why is it there well it's consumer protection geopolitical reasons the fact that people need to be kept honest to resolve information asymmetries and so forth good governance should be able to account those intents and then encode into the dna of the system resolutions of that but yet still make the system useful and competitive for as many people as possible this is the conversation we as a community are getting prepared to have in 2021 as we work our way through and if we exit the year properly 2021 this upcoming year we will have clarity on where we're going for the next five years but more importantly we will be the best governed cryptocurrency in the world which will give us the strongest competitive advantage to be here the next 10 years next 20 years next 30 years and it will create the largest amount of growth because it's not just about holding a token and being in an ecosystem and posting on reddit everybody who's in here has a seat at the table has an opinion has the ability to participate and because of that many will and because they do they add their richness to the system that's my dream and i think we can get there and i think this is how we build a pan-african currency this is how we build a global regulatory system and this is how we preserve personal liberty and ensure that you're still in the driver's seat and your rights are guaranteed and protected regardless if they're inconvenient to certain power brokers in the world or corporations in the world and if we go there together and we're working together i am just one of many people in that road so i'm not relevant or important for the success of the system which means the system will succeed so let's do this together it's going to be a long year a lot of work but i think we can get it done thanks for listening everyone until next time have a nice day
