Charles Hoskinson: I Have No Control Over Cardano

I don’t have any special powers with Cardano, I don’t have any governance keys, I don’t have any ability to even initiate a hard fork much less a protocol parameter change, I don’t have access to the treasury, I don’t even own the trademark for the name Cardano. All of the funding that was given for growing the ecosystem and governing the ecosystem was given to separate entities and at the all-time high it was billions of dollars, it was not given to me. So how can I exactly influence and grow and solve this problem for you? So you may have seen this video online about Charles talking about Cardano and his lack of control, he can’t control where Cardano is going anymore and I want to bring some context to this so that people outside of the Cardano ecosystem can understand exactly what is happening here.

So let me talk about the video itself. So Charles mentions that there are projects such as tap tools in this video that will see its end at this point in time. You know I said at the beginning of the year we’re going to see a lot of people collapse because the markets are really bad and we need some way to bail out our ecosystem and get them the lifeblood that they need to get to the next level. So I came up with a plan of an index, it did not get executed.

So we’ve lost JPEG store, we have tap tools, I would suspect others are coming very soon. There’s going to be a wave of failures in the ecosystem. We’re seeing the crypto markets crash at the moment, Bitcoin is in freefall and ADA is dropping as well. Along with all of the other cryptocurrencies in the ecosystem we’re seeing just a lot of damage at the moment where people are looking for better returns rather than holding on to these cryptocurrencies.

And that isn’t any fault of the projects and people building within the ecosystems, it’s the economics, the global economics at the moment where bond yields are giving much better returns than speculative crypto assets. But I digress. So let’s have a look at what actually has happened in the Cardano ecosystem that has led to this point. We have gone through a governance era, an evolution of the chain where now the Genesis keys, the original keys that minted all of the ADA were burnt.

And people such as Charles, the founding entities don’t have much control over the chain itself. It’s all in the hands of the community voting on various proposals. Now Charles mentioned that he put out all of these various proposals out there to help bring and push the chain forward. But voting on these is hard.

You need the understanding, you need the technical expertise to actually review these proposals and vote on them. And as a result, a lot of people voted some of these things down. And there’s a lot of comments about back and forth or how it should be done. Should we actually get IOG, Charles’s company, to come back and give a better proposal that’s cheaper and more beneficial?

And there’s a lot of nuances in that, especially around having to let go of entire research departments and teams. These people have been working on Cardano for a very long time and to lose those people and then to try and backfill them later when you actually do need work done such as quantum resistance or anything like that for the chain is going to be extremely tricky. So that’s what Charles is trying to battle here at the moment, trying to retain and keep all of this talent within the Cardano ecosystem. So after the bear markets, after we start to recover globally, we’d be able to build up the chain and put it in a better position.

So that’s a position where we’re at. And the Cardano community is trying to vote in the best direction possible. Do we want to spend all this ADA or do we want to try and retain much of it as possible and try and keep the price? Personally, I don’t think holding on to this ADA will have any effect with the price, especially with the global economic situations that we have at the moment, just controlling and tanking the price of crypto in general.

Now there are some really cool things in regards to governance that Cardano has that no other chain has. It’s the only blockchain where the community can vote at this level and control and steer the direction of the blockchain. It has a constitution, rules on how it’s governed, how people should operate in the ecosystem. There’s no other blockchain out there that has a constitution and set of rules where you have to abide by.

So you can’t just go in and take and bid for all this treasury funding and extract it out. You have to follow the rules and you have to ensure that every governance action, every proposal that’s put on chain is constitutional. So the biggest split that we have at the moment is how the treasury funds should be spent. At one point in time, we had $1.8 billion worth of value in this treasury and we were looking forward to spending this to steer and grow the chain itself, but as market conditions start to dwindle, we saw that this value did drop.

So we did have a lot of money there and we even had initiatives to try and create our own sovereign wealth fund with a mix of BTC, stable coins, yield bearing assets, whatever it might be. This was around when ADA was at 80 cents and that would have had an amazing effect on the Cardano ecosystem right now. Great, you can say that in hindsight, but if we did action that, we would have been in a much better position right now to fund and save a lot of these projects, which are trying really hard to fund themselves at the moment and keep the lights on. Now I also want to give you some context around governance on the Cardano side too.

There wasn’t just an open door and everyone go in and extract the treasury for all its value. We did have something called Project Catalyst, which ran for maybe four or five years before that, which allowed the community to experiment with how on-chain governance could work. We also had a D-Rep layer, a delegate representative layer, to help people vote within the ecosystem. Not everyone out there has the time and energy to invest to look into all these governance actions, these proposals, and get a really good understanding of what they’re voting on.

So instead, you could delegate your ADA to a D-Rep delegate representative and they would do the voting on your behalf. That really did help with the ecosystem a lot. It kind of centralised some power and some of those D-Reps really butt heads with each other in regards to how treasury funding should be spent, but it’s a nice democratic way of trying to put in some guardrails so that the treasury isn’t extracted of all of its value. So we did learn a lot of things from other governance processes, such as Polkadot Open Governance.

That was kind of a disaster, and we can see where Polkadot is now at the moment, and we’re trying our best not to follow suit. But here are some of my opinions where we may have gone wrong, and what we could do to try and improve things to try and turn this ship around. So first off, I think we moved into the governance era probably a little bit too quickly. We set forth and everything seemed okay, but it really hurt in regards to the executive function of being able to steer the ship in a cohesive direction collectively as a community.

Because we are a lot of voices, we’re spread globally, we are essentially fighting each other for the direction of where the ship should go. And we have our own opinions on how the founding entities, such as Cardano Foundation, EMURGO and IOG, should steer the ship. And for me, in regards to steering the ship and steering the direction of Cardano, I think IOG is probably the best ones to lead in that direction in terms of technical and research aspects. So anything around that, I think IOG should really just take the reins of and keep pushing Cardano in that direction.

The other thing that I think is lacking at the moment is the incentive for people to actually vote on these proposals. There are so many of them. There’s I think 99 proposals I read through over the last three or four weeks, and that’s a lot to consume. It’s a lot of technical data.

It’s a lot of people you need to talk to, to try and gain the best information possible so you can make an informed decision. And for a lot of these proposals, I still didn’t have enough information to make a really educated and informed vote. So I had to abstain from a lot of this stuff and not vote at all. So there’s a lot of things that we can try and do there to try and help incentivize users to come on chain and actually vote on these proposals.

Otherwise they just won’t see the light of day and people just vote down no because of the lack of understanding, or even worse, not vote at all, which is also classed as a no vote. At the beginning of the governance era, there was a lot of talk around not paying for people to vote on these various proposals because that would mean it had a more pure form of voting. You weren’t influencing people for any form of money. But now we’re seeing people just not voting because they just can’t be bothered.

It’s just too much. It’s too much work, too much overload. And in the early days, we were generally promised, or the idea was painted that you should only be probably voting and spending maybe two hours a month at the most, very little time. I can’t remember the exact numbers that were quoted, but a very little amount of time to be able to go through these proposals and vote on a direction where that proposal should go.

Should it be approved or not, or just abstain from it. Now with the end of project catalyst, we’re seeing a lot of smaller projects just bid because they need the funding to keep them sustained. A lot of operational tooling, open source stuff, all the things that wouldn’t have any sort of business model around them and depended on treasury funds. And we need to try and support them so the chain can still operate.

There’s a lot of that stuff out there and a lot of people just say, no, it doesn’t sound like we need to support this stuff when really we do. So a lot of that, those types of things is really important to fund, but people just lack the understanding and incentive to actually vote on them, to actually pass them through. Another really big thing that I think we can change around the voting process is having more of a allocated spend on different verticals at different times of the year. There’ll be one point in time we can concentrate on marketing, another point R&D research, another point in time we can concentrate on tooling, open source products and other things like that.

That way we have a spread out voting process over course of a year with different budgets allocated to each one of those verticals. It will make things a lot easier for the voters to go in and vote on these various aspects. There’ll be less proposals and there’ll be more focus on what should be done at that point in time with a capped allocation budget. Another thing that we could also change for certain categories is an RFP or a request for proposal style of bidding for the funds.

This will work very well in the marketing side of things and maybe product and adoption side of things where there could be an allocation of funds for a marketing sprint or campaigns and people can then bid across that and the best ones will win out of that allocation. I think that will help improve the process overall and to make things a lot easier for people too. You need to pick a leader, you need to pick a vision, you need to pick a strategy and fix it. You need to or you cannot let it die.

So where to from here? Can we steer Cardano out of this situation? And I think we can. If we can have some level of executive function and point the chain in a particular direction and say let’s move with that.

That’s our best option at this point in time. Let’s fund this and get things done so we can get through this bear market as it is and come out on top. ADA is far from dead. We have a lot of brilliant engineers here, we have a lot of brilliant researchers and an extremely passionate community that work tirelessly to keep this chain alive.

Yes, we are hurting at the moment, we all are in the crypto space but it is a brilliant space to build in and with more and more tech coming on board making things easier, we’re going to see more and more devs build on this throughout this bear market. If you like this video guys, make sure you give me that thumbs up on the way out. Hit the subscribe notification bell as well. I’ve got YouTube memberships, I’ve got buy me a coffee there as well if you want to support me that way.

And of course, like always guys, I know it’s hard to stay positive at the moment but please stay positive and I’ll see you in the next video.