Charles Hoskinson - The Fourth Generation of Cryptocurrencies - TOKEN2049 Singapore 2024

Summary

The speaker reflects on the evolution of cryptocurrencies, from Bitcoin's inception to the current focus on scalability, interoperability, and governance. He discusses the challenges of integrating real-world assets into blockchain technology, emphasizing the need for privacy and identity. Introducing 'Midnight,' a new blockchain platform designed to address these issues with private smart contracts and a hybrid application model, aiming to unify the crypto space and facilitate the mainstream adoption of blockchain technology.

Takeaways

• 🌐 Cardano has undergone significant upgrades, embracing on-chain governance and representation.
• 🌍 The ecosystem is global, with workshops in various countries aiming to create an online government for decentralized decision-making.
• 📱 The talk emphasizes the evolution of cryptocurrencies, starting from Bitcoin's decentralization to smart contracts and now focusing on scalability, interoperability, and governance.
• 🔄 The third generation of blockchain is characterized by the need for better scalability, interoperability, and governance.
• 🏦 The fourth generation's focus is on privacy, identity, and real-world asset integration, which are crucial for mainstream blockchain adoption.
• 🔒 Privacy is a complex issue in blockchain, requiring solutions that balance public and private aspects of transactions.
• 🆔 Identity on the blockchain is a challenge that needs to be addressed to bring real-world applications to the crypto space.
• 💡 The speaker discusses the problem of blockchain fragmentation and the need for interoperability to build a cohesive ecosystem.
• 🌌 The project 'Midnight' aims to solve these challenges by offering a private smart contract stack and a hybrid application model.
• 🚀 Midnight's approach includes a fair distribution model called 'glacier drop' and a new consensus protocol called 'Minotaur' for multi-resource consensus.
• 🌟 The vision for the future of blockchain is one of collaboration, with the potential to bring trillions of dollars in real-world assets into the cryptocurrency space.

Q & A

What major upgrade did Cardano recently embrace?

Cardano recently embraced on-chain governance and representation, which involves the ecosystem in making decisions about budgets, roadmaps, and upgrades.

What is the purpose of the workshops and conventions mentioned in the script?

The workshops and conventions are for people from around the world to collaborate on building an online government for decentralized systems, focusing on creating constitutions and improving governance.

How does the speaker categorize the generations of cryptocurrencies?

The speaker categorizes cryptocurrencies into generations based on their capabilities: the first generation focused on decentralization, the second on smart contracts and programmability, the third on scalability, interoperability, and governance, and the fourth on privacy and identity.

What challenges does the third generation of blockchain technology face according to the script?

The third generation of blockchain technology faces challenges such as scalability, interoperability, and governance, which are crucial for evolving the system and making it more efficient and inclusive.

What are the two main pillars necessary for the fourth generation of blockchain technology?

The two main pillars for the fourth generation of blockchain technology are privacy, including private smart contracts, and identity, which are essential for merging the legacy and web 3 worlds and bringing in billions of consumers.

Why is privacy considered a challenge in blockchain technology?

Privacy is considered a challenge because blockchains are good at handling public information but struggle with private information, which is necessary for real-world applications. Balancing privacy with the need for transparency and security is complex.

What is the significance of the 'Midnight' project mentioned in the script?

The 'Midnight' project is significant because it aims to solve the challenges of the fourth generation of blockchain technology by offering privacy, identity, and a hybrid application model that can work with existing blockchains.

How does the 'Midnight' project plan to distribute its tokens?

The 'Midnight' project plans to distribute its tokens through a 'glacier drop', air-dropping them to 135 million accounts across all major cryptocurrencies, allowing for a fair distribution where everyone who holds major cryptocurrencies already owns a part of it.

What is the 'Minotaur' protocol and how does it relate to the 'Midnight' project?

The 'Minotaur' protocol is a multi-resource consensus mechanism that allows maintaining a blockchain with multiple consensus protocols simultaneously. It is integral to the 'Midnight' project as it enables the network to borrow security and consensus from other systems and incentivize collaboration.

How does the speaker envision the future of blockchain technology post the fourth generation?

The speaker envisions the future of blockchain technology post the fourth generation as an era where everything is about iteration and collaboration, with real-world assets and businesses fully integrated into the cryptocurrency space, driven by the principles of privacy, identity, and interoperability.

Outlines

00:00

🌐 Cardano's Evolution and Governance

The speaker reflects on Cardano's major upgrade, embracing governance and on-chain representation. They discuss the ecosystem's collaborative efforts in workshops across dozens of countries to establish an online government capable of making decisions on budgets, roadmaps, and upgrades. The narrative contrasts centralized companies like Microsoft and Apple with decentralized protocols that rely on community support. The speaker highlights the challenge of decentralized control and the quest for on-chain governance, including writing a constitution through a convention in Argentina. The paragraph also delves into the history of cryptocurrencies, starting with Bitcoin's focus on decentralization and disintermediation, followed by the second generation's introduction of smart contracts and programmability. The speaker emphasizes the need for scalability, interoperability, and governance in the third generation, which Cardano is currently addressing.

05:00

🚀 The Future of Cryptocurrency: Scalability, Interoperability, and Governance

The speaker discusses the future of cryptocurrencies, focusing on the third generation's emphasis on scalability, interoperability, and governance. They mention various projects like Squeeze, Aptose, and Cardano, all striving to improve these aspects. The speaker then transitions to the potential of the fourth generation, which is expected to integrate real-world assets and businesses onto the blockchain. They highlight the current limitations, such as the lack of privacy and identity management in blockchain applications, which are critical for real-world adoption. The paragraph concludes with the idea that the fourth generation must address privacy, identity, and the challenges of integrating public and private aspects of business and assets onto the blockchain.

10:02

🔒 Privacy and Identity: The Cornerstones of the Fourth Generation

The speaker emphasizes the importance of privacy and identity in the fourth generation of blockchain technology. They argue that while blockchains excel at public and transparent transactions, they fall short in handling private data, which is essential for real-world applications. The paragraph discusses the need for private smart contracts and identity management on the blockchain. The speaker also addresses the challenge of creating a standard for identity, as evidenced by the development of decentralized identifiers (DIDs) and the formation of the Digital Identity Foundation. They highlight the complexity of quantifying subjective attributes like reputation and the need for a privacy model that can cater to varying levels of disclosure and security.

15:03

🌌 Midnight: A New Frontier in Blockchain Technology

The speaker introduces Midnight, a project developed by Input Output, which aims to solve the challenges of privacy, identity, and interoperability in blockchain technology. They describe Kina, a private smart contract stack, and a hybrid application model that allows developers to build applications using Ethereum, Solana, Binance Smart Chain, Bitcoin, or Cardano, while leveraging Midnight for privacy and identity functionalities. The paragraph also discusses the冰川滴（glacier drop） distribution model, which aims to provide a fair and widespread distribution of the network's tokens. Furthermore, the speaker introduces Minotaur, a multi-resource consensus protocol that supports multiple consensus mechanisms simultaneously, fostering collaboration among different blockchain communities. The paragraph concludes with the vision of Midnight as a unifying force in the blockchain industry, enabling the integration of trillions of dollars in real-world assets and driving the next wave of blockchain adoption.

Keywords

💡Cardano

Cardano is a decentralized blockchain platform that aims to provide a more balanced and sustainable ecosystem for the development and execution of decentralized applications (DApps). In the script, Cardano is highlighted for its major upgrade, embracing governance and on-chain representation, which are key components in the evolution of blockchain technology towards a more democratic and community-driven approach.

💡Governance

Governance in the context of blockchain refers to the process by which decisions about the network's development and management are made. The script discusses Cardano's adoption of on-chain governance, which allows the community to make decisions about budgets, roadmaps, and upgrades, thereby democratizing control and aligning with the decentralized ethos of blockchain technology.

💡Decentralization

Decentralization is the concept of distributing power and authority away from a central node or entity. In the script, decentralization is a foundational aspect of blockchain technology, with the speaker reflecting on the evolution from the first generation of cryptocurrencies like Bitcoin, which focused on decentralization and disintermediation, to subsequent generations that build upon these principles.

💡Smart Contracts

Smart contracts are self-executing contracts with the terms of the agreement directly written into code. The script mentions the second generation of blockchain technology, which introduced smart contracts and programmability, allowing for more complex interactions and the creation of decentralized applications (DApps).

💡Interoperability

Interoperability refers to the ability of different systems or components to work together. In the context of the script, interoperability is a key feature of the third generation of blockchain, where different blockchains and networks can communicate and interact with each other, enabling a more connected and efficient ecosystem.

💡Scalability

Scalability is the capability of a system to handle a growing amount of work or its potential to be enlarged to accommodate that growth. The script discusses scalability as a critical issue for blockchain networks, where the ability to scale is necessary to support a larger number of transactions and users efficiently.

💡Privacy

Privacy in the context of blockchain refers to the ability to keep transactions and data secure and undisclosed to unauthorized parties. The script emphasizes the importance of privacy as a key component of the fourth generation of blockchain technology, where the ability to maintain privacy in both public and private transactions is essential for real-world adoption.

💡Identity

Identity in blockchain technology pertains to the ability to establish and verify the identity of users or entities within the network. The script discusses the need for a digital identity that can coexist with privacy, allowing for the verification of identity without compromising personal information, which is crucial for the integration of real-world assets and businesses onto the blockchain.

💡Hybrid Applications

Hybrid applications are those that combine the features of both public and private blockchains. The script introduces the concept of a hybrid application model where developers can leverage the public aspects of blockchains like Ethereum or Cardano for their applications while utilizing the private and identity features of the Midnight blockchain for more sensitive operations.

💡Minur

Minur, or multi-resource consensus, is a protocol that allows a blockchain to operate with multiple consensus mechanisms simultaneously. The script describes Minur as a protocol that enables the Midnight network to maintain a blockchain with different consensus protocols, allowing for a more flexible and inclusive approach to blockchain governance and security.

💡Midnight

Midnight is a new blockchain network introduced in the script, designed to address the challenges of privacy and identity in blockchain technology. It aims to provide a platform for the fourth generation of blockchain applications, combining scalability, interoperability, and privacy with a focus on fair distribution and collaborative development.

Highlights

Cardano has embraced on-chain governance and representation.

The ecosystem has been working closely together in workshops across dozens of countries.

The challenge of decentralized control and who's in charge in protocols without companies.

The first generation of cryptocurrencies was about decentralization and disintermediation.

The second generation introduced smart contracts and programmability.

The current third generation focuses on scalability, interoperability, and governance.

The future fourth generation will need to address real-world assets and business on the blockchain.

Privacy is a critical component missing for real-world application of blockchain.

The need for identity on the blockchain to bring real-world assets into crypto space.

The challenge of creating a standard for decentralized identity.

The importance of selective disclosure in identity management.

The problem of too many blockchains and the need for collaboration.

The concept of Midnight, a new blockchain aiming to solve privacy and identity issues.

Kina, a private smart contract stack created by Midnight.

Hybrid application model allowing developers to use their preferred blockchain with Midnight's privacy features.

Minur, a new protocol for multi-resource consensus to bring different blockchain communities together.

The冰川 drop distribution method ensuring a fair launch for Midnight.

Recursive SNARKs for advanced privacy features in Midnight.

The vision for the next 10 years of crypto, focusing on collaboration and solving real-world problems.

Transcripts

you know I've been very reflective in

the last decade because cardano just

went through a major upgrade we embraced

governance we embraced onchain

representation for the last two years

the ecosystem has been working very

closely together workshops and dozens of

countries people from all around the

world trying to figure out how do you

build an online government that allows

you as an ecosystem to make decisions

about budgets and road maps upgrades

when you look at Windows you got

Microsoft when you look at the iPhone

you got Apple you have companies Behind

these big complicated things but

protocols don't have companies they have

supporters they have people that work

with them people connected to them but

at the end of the day if we say we're

decentralized who's in control who's in

charge

so we've been trying to solve that

problem onchain government the consent

of the government the institutions

writing a constitution I was down in

Argentina we're having a constitutional

convention there boy that's going to be

fun delegates from 50 countries 63

different workshops to vote on a

constitution and as fun and exciting as

that is that's not what I'm here to talk

about today talked about the

future see I think about

cryptocurrencies in terms of generations

I've been in this space for so long I

was actually in the middle of the very

first generation Bitcoin so in 2010 2011

nobody was in it for the money I know

that because there was no money we had

to buy our own coffee nobody knew what

Bitcoin was they thought it was a cult

probably still is and what was fun about

it and exciting about it is that we had

these broad aspirations and goals of

where we wanted to go and what we wanted

to do it was the cipher Punk movement

that came from the

1980s information moves instantaneously

so money should email for money let's do

that then Bitcoin started catching on

first generation was about

decentralization disintermediation this

idea of being your own bank mission

accomplished well what's the first thing

you do when something is successful you

criticize it we love the iPhone but we

love windows but we love Android but so

we love Bitcoin but we don't have

programmability so the second generation

came and the second generation was about

smart contracts programmability Eureka

at the time everybody thought we were

crazy it was but in hindsight it was

like when JavaScript came to the web

browser you had these static websites

they could be pretty but you couldn't do

much with them JavaScript comes and you

have Amazon and you have Facebook and

you have Google you have all these

amazing

things Eureka

awesome and when we have programmability

what do we do we say well that's all

fine and dandy but damn it's expensive

apparently building a virtual machine a

shared State amongst millions of people

a finite resource doesn't scale very

well does it second how do you get it to

work with everything where's your

interoperability

and yes what cardano is dealing with

right now how do you build a government

because you're not dealing with a simple

utility digital gold teleporting Bitcoin

around you're talking about a

programmable system so you have to

upgrade that system you have to evolve

that system you have to make that system

better okay so the third generation

comes in and there's tons of booths all

around you see them and they talk about

scalability and interoperability and

governance you have your squeeze

congratulations on Circle missing

anyone you have your aptose you have all

of these people alaran salana and yes

cardano and we're all fighting and we're

in the middle part of the third

generation and it's exciting and it's

fun because every time you have a

generation you get a whole new scale of

capabilities when you have scalability

it means it's cheap to use the systems

for millions of people when you have

interoperability it means your systems

talk to each other you can truly build

an internet of money you can build an

internet of Finance it's awesome and

when you have governance it means you

harness the wisdom and the capabilities

of millions of people throughout the

world the wisdom of the crowds suddenly

the people building on your system are

your product managers the engineers

building daps and defi are the ones

talking about how to improve the

protocol and grow the protocol the

collective wisdom of this is worth

billions of dollars of Labor

and we get to harness all of that we

couldn't with the second generation and

we couldn't even possibly tackle the

problems we're tackling in this industry

from defi to intellectual property and

other things with Bitcoin it's why

everybody's trying to upgrade

it so what is the fourth

generation do we need

one what do we care about well you'll

hear lots of terms like real world

assets okay security tokens Dows

business on the blockchain all these

things why don't we have them it's like

the flying car it's like Fusion it's

always 5 years away don't worry

trillions of dollars are waiting they'll

come into our

industry why can't we get there because

here's the problem blockchains are super

awesome at public

stuff they're auditable timestamp

transparent

mutable good great you put it there like

a domain name service you put something

there like a financial transaction

everybody in the world can see it

believe it it has an Integrity awesome

but what about the private stuff what do

we do with that do you like running a

business where all your HR is public

like running a business where all the

money in the cash registers is public

how many people want all their Google

searches to be public show hands nobody

what about Amazon purchases

what about your political preferences

what about who you voted for in the

election turns out that privacy is kind

of part of the deal and every real world

application asset business transnational

agreement always has two sides a public

side and a private side the public side

we do well and we're starting to master

the art of programming it and scaling it

and getting it done but the private side

is still something that's not clear and

in practice how we're solving it is the

same way we've always solved it you pick

somebody you trust you give them the

information and you hope to God they

don't lie steal cheat manipulate so if

you have a blockchain application with a

private and a public side and the

private side is offchain and centralized

do you have a decentralized

application no that's the first

challenge the Second Challenge is in the

the Legacy Financial world and frankly

the real world you don't have this idea

of transactions without identity you

don't have this idea of businesses and

no identity assets and no identity when

you see a plot of land what's the first

question you ask who owns that when you

see a business who owns that who

something happened who were the people

involved what's the story behind that so

where is this in crypto we have accounts

we have utxo we have transactions and we

have metadata but where's the identity

primitive of these types of things the

Legacy world has spent centuries

regulating and optimizing and figuring

out how to answer the question who how

to adjudicate the question of who the

dispute resolution systems and the

property rights systems and the

transnational agreements the

cryptocurrency space doesn't so how do I

bring real world assets how do I build

real world businesses in a space that

lacks a who I have to invent one a

digital who Horton heard the who I need

to have Identity On The

Chain so you have to have identity with

privacy because the minute you have who

you have to decide who gets to know who

gets to see who gets to decide you have

to have this concept of selective disc

closure so the fourth generation the

generation that's going to merge the

Legacy and the web 3 world and bring

billions of consumers in really the two

big pillars of this is in addition to

being scalable and interoperable and

having good governance and

programmability and

decentralization must have privacy

private smart contracts and must have

some concept of

identity the challenge is unlike

scalability unlike interoperability

unlike decentralization where there

seems to be an obvious path of where to

go and how to do that more is better

cheaper transactions faster transactions

and tradeoffs privacy is kind of a

nebulous thing what exactly does that

mean how exactly does that work and also

the same for identity took us as an

industry 10 years of discussions and

work to figure out how to create a

standard just to represent identity it's

called the did the decentralized

identifier at the

w3c we worked on it a lot of other

people did in fact formed a foundation

the digital identity Foundation 35

members all these people came together

built Frameworks great is that the game

no we're not over yet we have all kinds

of things like well now you have a

representation well how do you prove

properties of it oh we had to create a

non-eds as a standard what about your

creditworthiness or your reputation man

management that's a subjective not an

objective thing objective is when were

you born subjective is are you a good

person well it depends on who you

ask some people in this room like me

some people do not they're getting up

and

leaving so subjectivity of reputation so

how do you quantify that how do you

build marketplaces for that this is the

challenge of identity the same for

privacy when you look at privacy what

are we actually talking about like to

whom what guarantees do you get what's

the portability of that how do you

disclose that how much overhead is

required is it private forever to the

end of time is it private for a little

while is it private within a certain

security model so this is the next

Generation as we talk about these things

but then there's also a meta problem in

the blockchain space we've gone from too

few to too many there's more than 40,000

blockchains there's millions of assets

all around we all have perverse

incentives to hate each other not pay

attention to each other dislike each

other why because we have tokens you

have token a and token B and token C and

token D and you put your names in and

you go and talk to these people and if

the person owns the token it is virtuous

and good and if it's competing against

another token that token is evil and bad

bag holding that's the world we live in

and guess what you can never build an

economy where people's Financial

incentives are at risk people no matter

what their politics and beliefs are will

always default to their incentives it's

a reality of human nature so then how

can we build a space that has

interoperability and everybody's working

together and collaborating and it's good

for the consumer if the system by its

very design promotes incentivizes and

rewards

fragmentation it's a problem so that's

the fourth generation in a nutshell is

there a way to have computational

privacy is there a way to have identity

is there a way to get around the

incentives problem and actually get

everybody to work

together nope all right well anyway it's

been

great actually it turns out last six

years we've been thinking about this

we've been working on this input output

is a magical company in addition to

being a great engineering firm most

noted for building cardano we also have

Labs all around the world at Stanford

and CMU and University of Edinburgh and

Tokyo Institute of Technology 168

scientists that work with us we've

published 223 papers over 10,000

citations rigorous academic papers where

we asked these questions in a very

foundational way a very fundamental way

we're thinking about it and what we did

with these papers is we tried to figure

out a light blend of these types of

things and I said you know what would be

really cool is I've been in the space

for so long and I've gotten to a point

where I just like solving

problems and I don't like working with

the VCS and I don't like the normal

economics of this space it would be

really cool just to build something and

give it to everybody that actually

solves a real

problem so six years of hard work we

created something called Midnight

October 1st of this year it's reaching

the test net it's been in the dev net

for a little while and if you go to

midnight. network you can build on it

and the first thing we figured out on

how to do with midnight is we created a

private smart contract stack called Kina

and you can write smart contracts and

typescript anybody can do that it's

pretty simple language second thing we

figured out is we're building what's

called a hybrid application model so if

you're an ethereum salana BNB Bas

Bitcoin or cardano developer over time

you're going to be able just to

basically query midnight and do the

private and identity stuff for your

application and you can pay your

transaction fees with the underlying

currency ether or Soul or Bitcoin or

what have you so you don't really care

too much about tokens now do you call

these hybrid applications they're good

ideas now it turns out it's really hard

under the hood to do this but that's

what we do we do the science part and

then there's a question of incentives

and

distribution ordinarily because I've

been in space so long I kind of know all

the dirty tricks what you do is you go

to a VC they give you a bunch of money

they get founder tokens and then they

dump on retail when the network launches

you know who you

are you do and they make great money and

then the ecosystem collapses and the

next thing goes the next thing goes the

next thing goes that's not how we get

ahead so instead here's what we do just

do something called a glacier drop so

you take 135 million accounts across all

the major

cryptocurrencies it just air drop to

them and if people want it they mine it

in the process of mining it they launch

the

network so that's how you get a fair

distribution right everybody gets it

everybody has

it and here's the other beautiful part

about that in the process of doing this

we invented a new protocol called minur

we wrote it with Shere who went on to

create igen lay with the technology and

we created midnight with it and it's

called Minotaur and it's multi-resource

consensus what's so m iCal and special

about multi-resource consensus is it

allows you to maintain a blockchain with

multiple consensus protocols at the same

time you go talk to the Bitcoin Maxis

and they say proof of work you go talk

to us in the third generation we say

proof of stake but you know what you got

to get your peanut butter and jelly

together so why can't we hybridize

things and bring all the consensus

protocols together and guess what if you

have the validators maintaining the

state of the system together you can pay

block rewards to them so you start

looking like a lay or two to

everybody doesn't that bring everybody

together if every system is working

together so that's midnight it solves

real problems if you hold any of the

major cryptocurrencies you already own

it congratulations you're welcome Papa

Charlie took care of you you got hybrid

applications you pay in the currency

that you know and love you don't have to

actually do anything you don't have to

leave the network effect of your network

and you can borrow security and

consensus from all the other systems and

because you're doing that your consensus

layer is directly observing all of the

major cryptocurrencies which means

you're also the single best Oracle chain

and Bridge system around and because you

have all the Privacy Tech what do you

have you have recursive snarks which by

the way are also upgradeable because we

care about these things with love I'm

Italian you have to make things with

love and because of that cre ability and

because of that recursion it also means

that you can use it as a data

availability layer all kinds of magical

things so that's the fourth generation

it's the generation that brings us

together it's the generation that gives

us identity it's a generation that gives

us our privacy and for the first time

ever allows blockchains to keep us

secret and it's the generation that

opens up the floodgates and allows us to

finally have the trillions of dollars of

real world assets that are waiting on

the sidelines that require these things

to come into the cryptocurrency

space that is the last generation we

need because at that point everything is

just iteration at that point everything

is just is it the right asset or is it

the right partner but this is what's

going to bring the medical records in

this is what's going to bring esgn with

Supply chains and measure the carbon of

every business in the world this is

what's going to bring the financial

markets in because you don't have to

reveal your trading strategies to trade

on chain this is what's going to allow

you to have Dows that live 100% on chain

because the Dows for the first time ever

can keep a secret and thus a real

business can be on chain and you know

what by giving it away to everybody like

Satoshi did with

Bitcoin just mine it if you want it it

means the whole industry for the first

time ever has one thing that they can

care about together and agree about

I have 30 seconds left and I'll spend

them this way great things in life come

as a result of working together and

cooperating with each other the Apollo

Mission had a million people work on it

and those people are proud because the

end result was that they got to go to

the Moon we want to go to the moon and

Beyond in crypto we have to start

working with each other and we do that

by giving each other incentives to do so

so thanks for spending 20 minutes with

me and learning about the generations

I really appreciate it and I can't wait

to see what you build on midnight and I

can't wait to see the next 10 years of

crypto it's been a wild ride and it's

going to be even more wild cheers