Not Cardano

Hi, this is Charles Hoskinson broadcasting live from warm, sunny Colorado. We have a double header today. This video is practical; it's based on the budget, something that keeps coming up again and again. People have questions, comments, and concerns, and I figured I'd clarify this one. I'm also going to make a series of videos on the roadmap proposals that are coming through to help people wrap their minds around certain things happening right now.

Let me share my screen. This is going to be a little whiteboard video. First off, right here it says, "Phil, you make excellent points." I actually think I wrote my thoughts out a bit too hastily. I was reading through the budget items and not liking anything related to partner chains or research for non-Cardano things, like proof of useful work and multi-resource consensus, because I felt it was using the Cardano treasury to pay for things that are not Cardano.

So, let's go ahead and open up the whiteboard and talk about this a little bit. Okay, straight from the horse's mouth. First and foremost, we have this thing called Ouroboros. Ouroboros is a technological tour de force; it was the first provably secure proof-of-stake system. We conceived of it in 2015, and it really took until about 2017 to get the first iteration of it.

It started getting really good around the 2020s. The capstone of the first research generation of Ouroboros is LEOs, which is the last mile in the single-shard Ouroboros that we all know and love. We anticipate this hitting post-2025, so I'll put 2025+. It's hard to know exactly when it will happen; it depends on how many resources we commit to it and what we discover during the prototyping. Basically, this is what's called a one-minus-delta protocol, so it's as fast as it gets for a single-sharded protocol—very, very fast.

So, pretty impressive: ten years of hardcore work. But two big trends have been happening in the cryptocurrency space that are very important to factor in because the cryptocurrency space moves so quickly. One of them is called multi-resource consensus. This idea is that we want to have not just proof of stake, but also different algorithms running in parallel with proof of stake. A few years ago, we created a protocol called Minur, which basically created a generic framework for thinking about how multi-resource consensus would work.

There's a natural question to ask: what happens after LEOs? Where do we go? If we move in this particular direction, we could engineer Cardano to have multiple resources. Those resources could be selected based on how the network is being used and what pools of resources you want to have available. This creates new revenue streams and, more importantly, makes the network more inclusive, meaning more people get to participate in consensus.

It also makes the network more resilient. For example, if proof of stake can be attacked—say, the U.S. government buys all the ADA and 51% attacks us—what about the hash power or something else? When we look at things like proof of useful work and Minur, these types of innovations are building out the art of the possible.

That's typically what you do in an R&D cycle. We started the research on Ouroboros in 2015. Many of the ideas we started with did not make their way into the protocol until late 2019 and 2020. It took more time after that to actually get the good stuff in, and we're just about to get the really good stuff, LEOs. We started earnest research on that in 2020, starting with parallel chains, and it worked its way through.

We had many setbacks, and we were really trying hard to do that. So, part of the budget's innovation is trying to understand how to do things like this. The second part is even more interesting: how we make more money. It's called AVS; it's the latest and greatest McGuffin of the cryptocurrency state space. AVS stands for actively validated services, and there are several of them.

Carrick is one. You have Igen Layer, which is like IG values from that algebra. There’s something like Optimistic, I think that’s from Paradigm H. There are dozens of these services, but the basic idea is that we recognize that the proof of stake of Cardano, or whatever your system is, is pretty secure. The reality is that we could sell some of that security to those who need it to launch their networks because it turns out it's really expensive to generate this level of security.

It’s a $25 billion price tag, with some nuance to it, but you get the idea—it’s expensive. So, why can't we sell it? AVS is that concept, and this is basically what partner chains are about. What you do is create a system with a dual token model: one token lives as a Cardano native asset on Cardano, and there’s a smart contract. The other token lives as a native asset on a separate ledger.

The rewards, the value carriers here, and perhaps even here, are paid to those securing it here. Basically, this research on partner chains is about turning Cardano into a universal AVS layer, like Carrick is. The value proposition of that is in the tens of billions of dollars. To give you a sense of how valuable this could be, let me bring this up for you. The value proposition here—let me find it for you—Carrick blockchain.

We can take a look at all the partners they have, and these partners have incredible connections. When we scroll down, we see Cuda, the Carrick Universal Data Availability, Wormhole, Space and Time, and look at how many investors they have: Coinbase, MuMala, Lightspeed, BVC, Panta, DCG, and the Vraa Cont Jool Lao Proof Group. This is just one of dozens of these networks that are floating around. So, this is Carrick, and there are dozens of these AV systems. We have, in my opinion, the most secure proof-of-stake protocols in the entire ecosystem.

Partner chains research opens us up to sell our security to other people. The stake pool operators get multiple revenue streams as a result; they can convert those tokens back into ADA or keep them in their own right. The Cardano treasury can also benefit if it’s appropriately designed. That’s what this research is about: turning Cardano into an AVS system and giving the next generation, the Omega generation, a view of Cardano as a multi-resource system for more inclusivity and resilience inside the consensus model. We move beyond just the assumptions of proof of stake.

I figured I’d make a quick video to talk to you guys about this because I think there are a lot of misconceptions that people have, and I appreciate what you’re trying to do. I appreciate your efforts to understand why we’re proposing these things. It’s fair for people to take a time out before they immediately judge something and look at the facts on the table. The industry is moving towards AVSs, as evidenced by the amount of investment and growth going into them. We have an untapped resource that we can sell to all blockchains, which is incredibly valuable.

There’s also a path to include Bitcoin and Cardano in that story as an AVS and let people stake Bitcoin and make quite a bit of money from that. That’s a huge competitive advantage that Cardano has. Multi-resource consensus is the future. Being able to layer multiple consensus algorithms together is super cool because not only do you get the most resilient network, which is really hard to shut down, but you can start aggregating many different resources, like useful work for AI or social media. It’s pretty cool when you think about it.

So, the budget includes items to initiate research and protocols to push us in this direction. Now, you may not believe that’s Cardano, and that’s perfectly fine. But then the question is: does Cardano have so much of a network effect like Bitcoin that it can afford to stagnate? Do we not sell what we have? Selling our consensus services means that we’re monetizing an asset we already own.

It’s not hypothetical—should we go buy this or not? We already own it. Should we sell it? The stake pool operators would then make more money, and the ADA holders would make more money because ADA holders get rewards too from the AVS service. That’s the idea.

You may believe that this isn’t a good idea, and that’s alright. But at the end of the day, what do we do with it? Do we just ignore it? It’s the same for multi-resource consensus; it allows more people to participate in securing the network in different ways, including proof of human, which creates different voting systems for Cardano. So, we move beyond one token, one vote, to potentially other things as well.

Balancing it out creates a more resilient system and makes Cardano easier to adopt in certain places. Is that something you want? If not, that’s okay. Are you happy with Ouroboros the way it is? Do you want no changes whatsoever, and do you just want to leave it after Genesis as a fully stable system that could run forever, just like Nakamoto proof of work?

Maybe it is. Do we have the network effect to justify that, or do you want to 10x the network and 100x the network? As you’re thinking through the budget and the roadmap, these are some of the questions you need to ask yourself. You have to take a step back and say, does it make sense to try to do these things, and what are we chasing with that? Throughout this month, I’m going to be talking a lot about the roadmap and some of the things we’ve been thinking about—why these things are inside the roadmap.

Ultimately, the community is going to have to decide if they like this or not, if they think it’s a reasonable idea or not. That’s reflected in the budget priorities. I figured I’d share this with you guys because it’s just food for thought. Anyway, good night, and thank you very much.