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Hi, this is Charles Hoskinson broadcasting live from warm, sunny Colorado. Today is December 19th, 2024, and we are six days away from Christmas. So, Merry Christmas and Happy Holidays to all of those who are listening! A good New Year is coming; 2025 is going to be a much better year than 2024.
2024 was an amazing year with an enormous amount of stuff happening. It was so cool to watch governance on paper become governance reality. As many of you know, in the month of December, there have been some very deep and significant governance conversations starting with the Constitutional Convention. There has been some bleed out from the Constitutional Convention to an open debate about the actors in Cardano and the future of Cardano.
Low-value communication platforms like Twitter, for example, don’t really capture the nuance of arguments. People just take positions, bark at each other, and create drama. What’s been happening recently is not a Charles Hoskinson versus Input Output (IOG) versus Cardano Foundation (CF) debate. I know Rick McCracken posted the poll asking if people are tired of this drama between the CF and IOG. There’s no drama on my side here; it’s not a one-sided conversation. It’s an informational conversation.
The fight started in 2021 and was deferred until governance. This is you being informed of something that occurred three years ago. To reiterate, when I say the Swiss government replaced the board of the Cardano Foundation, that is a factually accurate statement. What happened was Michael Parsons, the original founder of the Cardano Foundation, started an entity in Switzerland. When he realized he couldn’t do what he wanted to do and it was too risky, he created a new entity in Switzerland.
Once that entity got funded, he started doing things that made people deeply uncomfortable. Social pressure from the Guardians of Cardano resulted in him leaving. An interim board was appointed, made up of two Swiss people and three members of the community: core entities Mergo and Input Output, Tam Hassen, Nico, and Mani. The majority of the board worked tirelessly to try to put the foundation together because it was in a very rough state. Eventually, they decided that Switzerland was not a jurisdiction fit for purpose due to the stiff structure of the foundation, which was never intended for cryptocurrency foundations.
That’s my fault; it was used this way. The first actor who came up with this was Luca Miller at MME Partners back in 2014 for the Ethereum Foundation. We thought it was a clever legal hack to use a legal structure regulated by an entity called ESMA, which typically deals with art collections. It has a founder and was never intended to be something for a decentralized ecosystem or be member-based, but we thought it could be modified in some way. The government and the law never caught up to that, which is why, for example, Abu Dhabi created the DLT Foundation laws, and the state of Wyoming created its own laws for these things.
It’s not a structure that’s completely fit for purpose; it has some benefits but also some downsides due to its structure. So we said, “You know what? Let’s move the entity and the assets to a different jurisdiction, start over, and make it what it was originally intended to be: a member-based organization.” A conflict occurred between the minority and majority of the board, and the minority tried to liquidate the majority. A lawsuit broke out, and the Federal Court ruled in favor of the majority of the board.
That happened, and ESMA stepped in as the administrator of the foundation and appointed Daniel Lau as an administrator to the board. Daniel told the board, “You know what? It’s time for all of you to go. We have two ways we can do this: appoint your replacements as a compromised board, or I’ll just liquidate everybody and put the foundation into receivership. It’ll be dormant for years, and eventually, this government will pick new people through me.”
As a compromise, in 2021, the new board was appointed with the consent of both the minority and majority of the board. So, I don’t know what type of mental jiu-jitsu you can put in your mind, but to me, that sounds like the Swiss government appointed the board. The intent of the majority, which won in federal court, was to liquidate and move the foundation to a different jurisdiction and restart as a member-based organization.
We’ve already run this experiment; you’ve seen Intersect. For better or worse, that was kind of a prototype for where we could have gone and what we could have done. If you like Intersect, great. If you hate Intersect, that’s fine too. At least it exists, and that wasn’t allowed to happen because an administrator stepped in and said no, and a compromised board was appointed.
Now, why is this a fight today? There are three reasons for that. Number one, it’s a fight today because it served no purpose to be a fight in 2021. There was nothing we could do about it; the governance structure of Cardano was such that there was nothing you could do about it as an ecosystem. Number two, the foundation was completely aligned on the transition to Voltaire and actually was a good party in many conversations. We tried working together for three years, whether it was when they came to Westminster, Colorado, and we talked about a neutral organization to do the development of Cardano.
They led, and we agreed to let them lead. They hired Dirk and worked with the Linux Foundation, and the end result was an organization that didn’t really want to have anything to do with the ADA token and wanted businesses in charge of the development of Cardano. I personally could not participate in it; they wanted me to sign an agreement for that.
So, that didn’t work out so well. Then we took a shot at it with Mergo and spent a year building Intersect. We wanted them to be part of that, but they said in their disclosure that they wanted an eight-figure amount. We asked if they would dollar-match the money we put in, and they said no. So, we paid what the University of Wyoming paid, which was a mid-six-figure amount. It didn’t matter; they didn’t join the board.
They didn’t tell us while they were negotiating with us and asking questions that they were also, at the same time, building Pragma. They set it up and built it. Now, I know all the members of Pragma, and I’m not on bad terms with any of them. We like Blink Labs, we like TX Pipe, we like DC Spark; we work with them.
This was the absurdity of the entire situation. We met with TX Pipe in Argentina and said, “Well, guys, you need to backfill some stuff. If you’re going to go do client diversity, that’s great. Can we set up a working group to talk about some basic principles of interoperability and get the formal specs where they need to be and get a test suite just like the Ethereum ecosystem has?” Santiago is a very reasonable guy and said, “Yeah, that sounds like a great idea.”
There’s no drama there; there’s no adversarial behavior or animosity. But that’s what we did. They announced Pragma, and we found out roughly when they announced it. We said, “Well, can we join Pragma since we actually contribute to a lot of the software they’re involved with, like AEN and even Dolos?” The answer was no. It’s the no-homers club. I get it; I feel you.
I have grievances with how they use their money and how they operate, but at the end of the day, they’re an independent entity, and that’s not the issue here. The issue I have is there’s no oversight; it’s bad governance. There’s no oversight. Input Output is a private company; I own that company. You know me; I’m a pretty public guy. You see what I do, and I keep my own counsel.
The foundation was always intended to be an asset of the community. It’s a different animal altogether. When you have a board, traditionally, you like an escape mechanism where if the board does something egregious or the community doesn’t like, they have the ability to liquidate it and start over. Unfortunately, by the design and structure of the foundation, it’s impossible for you to do that.
If you like the foundation or don’t like the foundation, it’s completely immaterial. They keep their own counsel and are operating basically like a private company. There’s no way for you to elect a board member; there’s no way for you to fire a board member, and they control your money—hundreds and hundreds of millions of dollars.
So, when you complain about Circle not happening or not enough support for liquidity for Cardano assets issued on our chain, or why they’re doing this deal over that deal, guess what? That’s just you complaining because you actually don’t have a say. This is why, in 2021, when we talked to the founders of this stuff, MME Partners, because Luca is a good friend of mine, we realized that it’s good to move out of the jurisdiction into a jurisdiction where the community can take over that function and run it. They stopped us from doing that, and a compromised board was put in.
You get to know about this now because on-chain governance is now here, and the CF has decided to go beyond being a founding entity and be an active participant in governance. They’re participating in Catalyst; they’re going to vote on the Constitution; they’re going to vote on the budget. They have strong opinions, and my lived experience over the last three years has not been pleasant.
I’ve tried really hard, really hard, sitting from the Input Output perspective to find a way to be copasetic. The CF has always been agreeable to my face; Fred has always been nice to me. Then behind the back, strange things happen, like the launch of their own Constitution a week before, as an example, or the rewriting of history when they do their FAQ. I don’t understand why.
It’s quite easy to have difficult conversations; I have them every day, publicly and privately. We had three years of dialogue to have difficult conversations privately, but they never seem to want to have those difficult conversations. Maybe that’s the Swiss style, and I’m just that cowboy American. I’m okay with kicking people in the teeth, but at the end of the day, I don’t really ask anything of them except for the fact of disclosing to the community that now that we’re in the age of Voltaire, you know who has a voice.
I felt it was exceedingly important for Input Output to take a step back because we’ve been here for so long. We’ve said things for so long and focused on the things you care about. I don’t need permission to do adoption partnerships or technological enhancements. I just had a call with the CEO of Flare, and I’ve been talking to all these other chains like crazy. We’re going to get Bitcoin to work with Cardano, and we’ll be there in May 2025 at Bitcoin 2025 with a great demo.
There are a lot of people we’re bringing in; we’re working with wallets and other protocols. I don’t need to call anybody or do a governance action to do these things. It’s good for Cardano. The same goes for Midnight. Midnight will be the single biggest economic event for the Cardano ecosystem in its history. It’s going to air drop to more than 100 million people, build bridges with all the major networks, and bring people together by the nature of the consensus protocol on the Midnight horizon.
Again, I don’t need any permission to do that; I’m just going to go and do that. There are hundreds of engineers who wake up every day for this. Where we do need permission is the on-chain budget. It’s an annual concern, and it doesn’t really impact me whether I win or lose. I’m still a member of this ecosystem. Where it impacts people are those who have been loyal to Cardano for years and haven’t gotten their fair share of venture capital money, grants, or funding from Catalyst.
You know who these people are because a lot of you listening are those people. You show up every day, seven days a week, 80 hours a week. You don’t get paid; you’re not making a lot of transaction volume. You’re trying to grow, trying to help, and you say, “Give me a ladder,” and the CF says, “We don’t give grants,” or they’re not very effective historically. Those are their words, not mine.
Meanwhile, other ecosystems like Avalanche, Solana, and Ethereum seem to have these bastions that open their wallets and spend hundreds of millions, if not billions, of dollars. Our people see that, yet they stay loyal and say, “You know what? We love the principles; we love the ecosystem. We’ll stick with you, but please give us something.”
The budget is coming out, and my biggest concern, outside of the Constitution—which was community-approved—is that the CF tweeted live at the event that they had concerns about it. They were certainly behind the scenes talking to Lloyd and other people, basically saying, “We don’t know if we can support this.” I’m glad they’ve publicly said they will.
I have every reason to believe there’s a very strong possibility they’re going to vote no on a budget that will open up more than $100 million for the builders of Cardano: the TX Pipes, the UTXOs, and all the people who have been loyal and here. Again, this is not an IOG versus CF issue. Whether they vote yes or no has no impact on my business, my plans, my participation in Cardano, or the things that we do, but it has a significant impact on all of you.
If they were subject to community oversight, that would be a different thing because the whole community would come together and say, “Hey, maybe it’s not a good thing to have so much ADA accumulated voting no for absolutely necessary funds for the ecosystem to grow.” But they’re not; they’re like the Supreme Court of the United States. Once appointed, they’re in for life. Unlike the Supreme Court, they actually get to pick their replacements, and there’s no criteria for them to have any material connection to the Cardano ecosystem.
There’s nothing in the bylaws that says they have to have a certain amount of ADA or have built a project on Cardano. They could appoint anybody they want, and we can’t veto it as an ecosystem or community. So, they don’t suffer blowback. I’m trying to depersonalize this because my complaint is not about people; it’s about governance.
At the end of the day, we have two things left for the age of Voltaire before everything is fully operational: we have to get the community-approved Constitution ratified on-chain, and we have to get an annual budget started that’s a fair representation of those who are developing on Cardano and those who have been building ecosystem infrastructure in Cardano. You know, love, and use the libraries, the wallets, the blockchain explorers—all the people building cool and interesting infrastructure, mostly uncompensated or partially subsidized by Catalyst.
You all know that Catalyst is not a replacement for an annual budget. It’s hard, feast or famine, to go every three months and say, “Am I going to get paid next?” You’ve lived this experience for years. The on-chain treasury is sitting there; we shouldn’t be like Smaug sitting on a giant pile of gold. We are in a very competitive industry, and we as an ecosystem have to recognize that we need to spend to grow and thrive.
Now, the CF does good things, and there’s never been a debate about the contributions they’ve made over the last three years or the fact that many of the rank-and-file people in the CF are good people. It doesn’t serve any purpose for anyone in our ecosystem to publicly fight with CF members, whether it be Miti or whoever, over Twitter. These people are building on Cardano, and the people hired at the CF have nothing to do with the governance decisions that the Swiss government chose to inflict upon the Cardano Foundation.
Frankly speaking, I don’t even blame ESMA because they’re a regulator that has never regulated anything like this. They’re used to dealing with fine art collections and were so far outside of their comfort zone dealing with the drama of the cryptocurrency industry. A bunch of Americans, Japanese, and Europeans just showed up and took a structure that has nothing to do with this and used it to create a cryptocurrency foundation. This is again why we tried to get it out of that area and put it into the hands of a regulator that actively wants to be part of that story and has the skills, technical expertise, and ability to enter into a dialogue to change things.
They can accept the idea of token holders actually having a say over governance, but that was stopped. At the end of the day, they have to respond, and they can respond through silence or action. It’s up to them. My job is to inform you. We couldn’t inform you years ago because it served no purpose, and there was nothing we could do about it. But we inform you today, and you as a community decide what you want to do with it.
I’ve already decided what I’m going to do with it: I’m going to keep building on Cardano, keep doing stuff with Bitcoin integration, Midnight, and building up Lace, and bringing lots of people into the Cardano ecosystem. Frankly speaking, Cardano has never been healthier. We are so strong that despite having a dysfunctional foundation for years during the Parsons era and the transition era, we are still in the top 10 and have one of the most loyal communities in the entire cryptocurrency space, with the possible exception of the Bitcoin community itself.
That’s an enormous accomplishment and a testament to the fact that we stand on strong principles as an ecosystem. I’m in a position in this ecosystem where I have the luxury of honesty and the luxury of having inconvenient or hard conversations. It doesn’t do me any favors bringing these things out and talking to people; it makes me look bad. It makes me look adversarial. People say, “Charles can’t work with people,” or “He’s just spreading drama,” or “He didn’t get his way, and he’s throwing a tantrum.”
Absolutely, part of the PR strategy to deal with something like this is to try to inflict that image on me and make this a Charles versus CF thing. But I’m going to return to the same issue and beat the drum again and again because for three years we’ve had these concerns. I do not believe something that calls itself the Cardano Foundation should be structured in a way where its board can never be held accountable by the Cardano community, and its board chooses its own successors.
It’s simply not good governance; it never has been and never will be. No one can ever
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