Cardano founder on crypto industry: 'Bear markets are actually quite comfortable'

Cardano Founder Charles Hoskinson joins Yahoo Finance Live to discuss how market uncertainty is affecting cryptocurrencies, scalability, and the outlook for cryptocurrency exchanges.

Video Transcript

BRAD SMITH: Cryptocurrencies are holding steady this morning, even as stablecoins continue to face scrutiny. Altcoin Cardano seeing gains after the company announced some new developments surrounding its platform. Joining us now, we've got Cardano founder Charles Hoskinson, along with Yahoo Finance's David Hollerith.

Charles, great to have you here, and thanks for taking the time. First and foremost, when we think about the phases that you've been able to roll out in order to scale up the network, talk to us about this fourth phase. I mean, this is out of five, we should note for our viewers as well, and how well this is coming along right now.

CHARLES HOSKINSON: Well, first, thank you so much for having me on. I'm down here in Austin, Texas for Consensus. It's kind of the biggest event in our industry. So it's nice to see the tens of thousands of people running around. But it's been a long road. We started working on Cardano back in 2015, and the initial launch was in 2017. And we've been steadily, as an ecosystem, doing updates. And we've gone from a static and federated system to a dynamic and decentralized system. And the latest updates are all about scalability.

So that's basically how do you get a network where, as you add users, you have predictable costs and predictable performance. And that's what we're down here in Consensus talking about. And it's pretty remarkable to see growth gone from just a few users to over 3 million. There's over 5 billion assets issued on the ecosystem and thousands of apps under construction. So we definitely need the new tech to scale to those demands.

DAVID HOLLERITH: Hey, Charles. David Hollerith here. Thanks for coming on the show. I was just thinking a little bit more broadly. The first thing I sort of noticed with Cardano compared to other blockchain layer one projects is that it doesn't really take the move fast and break things approach.

And instead, the changes made to its software are pretty rigorously peer reviewed. In the past, I've seen also that that's sort of led to slower rollouts of technological upgrades. So just sort of really opening it up here, I was just wondering, could you characterize Cardano's use today and its purpose, and sort of where you see it fitting into the future of finance?

CHARLES HOSKINSON: Sure. So part of the legacy of Cardano has always been evidence-based software development. So you have to have evidence that your software actually works. And if you're using protocols, that has to come from a peer reviewed process. So the project's written over 140 academic papers. They're all public, open source, and free, and many of which have gone through peer review at major venues in crypto-- like in cryptography, like Eurocrypt, Crypto CCS. And then on the software side, we apply formal methods to create specifications and demonstrate that the software actually works.

Now the intent is for the software to become a financial operating system across the world, but one area of passion I particularly have is in the developing world. So the idea is economic identity and agency for those who don't have it. There's about 3 billion people who don't have reliable access to banks. They pay high prices for remittances, for credit, for insurance, and other financial services if they can even get them.

So a lot of our company's rollout has been in Ethiopia, Kenya, and other places, either directly or indirectly through partners, places like Zanzibar, for example. World Global is constructing an ISP, so they're actually going to roll out internet across the entire country and build a blockchain-based system. In Ethiopia, we're doing an academic credentials project. And it's about 5 million students that are being gradually onboarded, so all their grades and credentials can be checked using the Cardano blockchain system. In Kenya, we have microfinance pilots.

And so those are just some personal things my company does, but it's a big ecosystem. And there's many companies working across the globe. So we also see a lot of traditional use cases in traditional crypto, but, you know, obviously, new stuff like DeFi. So, decentralized exchanges, Oracle, stablecoins, these types of things. So there's great companies like COTI and WingRiders and SundaeSwap, Held, and others, who are building on the Cardano blockchain. And in each case, they're trying to do something.

A more surprising area of growth on Cardano is in the NFT space. About 40% of all the applications that are being deployed are NFT related. There were three, about $270 billion a month in NFT volume. It's over $3 billion a year. And there's tons of incredible work of Metaverse space, Cornucopia, and others. And it's really impressive to see how fast it's grown in just the last year.

BRAD SMITH: So with all that work that's taking place, what makes this crypto winter different in order for setting up that next kind of leg of growth for the broader space?

CHARLES HOSKINSON: Yeah, so it's a-- bull markets are really frustrating because nobody wants to cooperate. You have a lot of poaching, unrealistic wages, and unrealistic expectations. Bear markets are actually quite comfortable. Those are the building parts, kind of like Build a Bear. So you spend all day, and you're able to talk to people. You're able to work with people. And, you know, it's cyclic. So I've personally been through, I think, about six bear markets now.

And every time, we've seen major advancements. That's where smart contract revolution came from. That's where a lot of the DeFi revolution came from. This particular one, many people are focused on their operability improvements. So how do we integrate things like ISO 222 on the Open Banking Initiative with cryptocurrency space? How do we improve the scalability of protocols? How do we improve the portability and get them to work on mobile devices, improve consumer experience?

And then finally, how do we improve the governance side of things? We tend to think of products in terms of custodians, like Windows to Microsoft or the iPhone to Apple. It doesn't really work that way in the cryptocurrency space. You don't have a custodial company that's in charge of everything. So how do you govern that when there's no one in charge if there's billions, eventually tens of millions of users?

So bear markets are the perfect time for that to happen, because everybody is much more focused on work. And they tend to be much more cooperative. And that's what we've been doing. We'll continue to write papers. And there's a ton of code, at least right now. And releases are coming out like clockwork.

DAVID HOLLERITH: Charles, Cardano has a upgrade coming later this month. And just sort of at a high level, before we go, just, what's the point of the upgrade? What's the purpose?

CHARLES HOSKINSON: Well, it's a basket of improvements related to the scalability side and also development experience. So when you release a language, a programming language, you have to have developers use it for a while. And then they come back and they say, hey, this is what we like, and this is what we don't like. So the stuff that they didn't like is getting changed. And so there's a bunch of improvements for that.

And then the other side, that you have to improve performance, be able to handle increased demand. If you take a look at the transaction volume on Cardano, we're growing exponentially right now. And so, if you needed to, you can bring some upgrades in to make sure that we can handle that [INAUDIBLE] ecosystem.

So there's an upgrade that's called Pipeline that's coming, so a little bit of performance and a lot of [INAUDIBLE] experience. And this should enable and allow for the second half of the year strong growth in the DApp volume on the ecosystem. It's also some plumbing and infrastructure for much larger upgrades that will be coming throughout this year and next year that relate to more scalability and interoperability governance.

BRAD SMITH: All right--

CHARLES HOSKINSON: So we're quite boring. You know, it's business as usual, just better, faster, cheaper, and bring more people into the tent. And that's how you get it done. You have to grow a little bit every day. And over time, it becomes really great.