Developing world to bring 100M users to DeFi in three years? | Interview with Charles Hoskinson

Who's actually going to do peer-to-peer loans? He's actually going to do peer-to-peer insurance. He's actually going to do peer-to-peer payments. Look. I got a news for he's. Not a guy living in new york in the western world defy makes no sense to me because it's, going to be regulated out of existence.

Charles hoskinson is the founder of cardano, a blockchain protocol that aims to challenge ethereum's dominance in the d5 space. According to cardano's, vision, africa and the developing world are the most fertile ground for the growth of decentralized finance.

It's. The people who live in ghana, it's. The people who live in ethiopia. People live in uganda. They're, looking actively for new currencies and new financial systems, but is the developing world ready to embrace decentralized finance and how is cardano planning to lead the defy revolution to find out join our latest interview with charles hoskinson and coin telegraph.

Tech editor. Andrei shevchenko, actually, the reason why i'm taking this interview is just because we've, been hearing about cardano, d5 and smart contracts coming up soon, so i was actually really curious.

So what is happening right now and what kind of progresses you guys made? This has definitely been the busiest year of my life um. You know we spent five years in deep r d and development and we kept building and building and building and building and everybody ignored us and they're like oh, you're, just a wallet uh.

You know you're, you know whatever, and this is here we launched staking and we actually fully decentralized the entire system and um. We now have 1200 stakeholder operators, hundreds of thousands of wallets around there, and we have all this amazing infrastructure.

We built from this new accounting system called extended, utxo to a completely different way of doing networking to a completely different way of doing smart contracts, and so now that we're kind of clearing shelley the mission accomplished there and we have the best.

In class staking mechanism - and we're fully running on proof of stake, and we'll, be fully decentralized. By march, we're about 68 percent decentralized. Every few days. It goes down a little bit. Sorry.

What does that mean exactly at 68 percent centralized? We're running a hybrid system so currently, at the moment, 32 percent of the blocks are made by a federation of actors similar to how ripple manages its consensus and those are controlled by mergo, ihk and cf, and 68 of blocks are made by The actual stake pools through warhorse prowess or our consensus, algorithm and uh that that was originally zero.

100 of the blocks were made in july, and so every five days, every epic it decays a little bit and so more blocks get made by the community and we uh we make less blocks. So it's kind of like training wheels because we had to figure out.

How do you transition from a static and federated system to a dynamic and decentralized system? And how do you guarantee quality of service and actually that the network is stable? And so forth, because you know you can't just switch from one to the other and hope that the network will uh be where it needs to be.

You need some evidence of that, and so at the rate of decay of decentralization, we should actually have the system 100 of the blocks made by the community uh by march, which is exactly what we intended.

So it's been actually one of the smoothest ways of transitioning from a static and federated system to dynamic system, and it'd, be almost like ripple. Did this or you know, ethereum is trying to do this with f2.

It is not easy in practice to change the wheels of a car while it's driving. But what's nice is we actually have a measure? You know you just look at the total amount of blocks per epic and you see how many are made by the community and how many are made by the bft nodes and now, in 68 32.

The big milestone was last month when we broke 50 50.. So the majority of the blocks are now made by the community and that's. Just such an exciting thing, we've, actually covered a couple of articles of projects with our d5 going to gargano or pledging to go to cardinals and uh.

I'm curious, of course, like what do you think of this sector? It's kind of came a little bit out of nowhere in 2020, and it was obviously on top of a lot of work from previous years. But do you think that cardano should attract d5? Well? D5 is a product without a customer.

At the moment - and so you have to create a customer base for it, we're. Actually, i think the only mainstream project in the top 10 that has a real strategy for how to get real customers for defy, and that's.

A unique advantage we have when people have defy and they want to deploy or use us. They say well, who's actually going to do peer-to-peer loans? He's, actually going to do peer-to-peer insurance. He's, actually going to do peer-to-peer payments or you know, use a stable coin or you know a dex or these things look.

I got news for it's, not a guy living in new york. You know they already have systems. Those systems are highly regulated, they're, quite efficient, they have low transaction fees, so it's. The people who live in ghana, it's.

The people who live in ethiopia, it's. People live in uganda. Seventy percent of these populations are at or under the age of 30, they're internet, enabled they're digitized. They're westernized. They understand how the world works.

They just have broken systems, capital controls and markets that are junk, so they're, not just not going to accept it and say: oh well, we'll, just be poor. No, if people don't do. That necessity. Is the mother of invention, so they're, looking actively for new currencies and new financial systems and new lending systems and to be their own bank and to be in control of their own money.

So the defy revolution where it's going to get its customer base from is africa and eastern europe and southeast asia, and these other places we're one of the best position projects in the world for that we spent three years In ethiopia, we have tremendous momentum there we're just about to do an africa special episode here in a bit where we actually talk about our 2021 africa strategy, and we talk about some of the deals where we're imminently, closing Which are quite large and they portend a rapid growth and adoption of cardano as a platform and bring millions, if not tens, of billions of customers into cardano.

So then we go and have the d5 conversation. You say guys. This is your customer base. These are the people that matter and let's. Think about the numbers. So i'll. Just give you a great example, so the agricultural transformation agency in ethiopia, they they deal with smallholder farmers.

Now there's about 15 million of them in ethiopia, so every year they have programs like fertilizer vouchers, where you know farmers will get vouchers to buy fertilizer. They have to repay them now if they don't repay them.

Usually there's, a sovereign guarantee, so if they default, someone else will cover it, but the repayment rate's over 90 and the interest rate can be 10 to 15. On that, so you have a sovereign back debt instrument for millions of people with a 15 return and a 90 repayment rate that does not exist in the western world.

So the problem is they're small. They're. Only a few hundred dollars of value each, but what, if you could tokenize them and aggregate them and turn them into multi-million or billion dollar investment pools and securitize that and sell it as security tokens in the western markets.

So this is an example of where defy enables liquidity for the western world with new financial products and innovation, and you can build incredible products that no one's ever seen before that have much better returns, and there also is a great social benefit To the existence of these products, because they create liquidity for the poorest people in the world and allow them to build wealth and protect the wealth that they've acquired.

So the point that that we've been trying to convey, is look. We know how to do business here. It takes three to seven years to close deals and get momentum and there's, an enormous amount of upfront effort, but we built cardone for this purpose.

You know so the next 10 years or 20 years. I'd, like to get a billion users in cardinal, and i'd, like those billion users to be mostly in the developing world. So you know they have no standards right.

Now there's, no jpmorgan chase there's. No big massive legacy financial system that dominates and controls in the western world defy makes no sense to me because it's, going to be regulated out of existence.

A great example would be libra, you know, facebook does this, they put a coalition together, they think they're clever. Not only do they get slapped down now, 48 states are suing them for antitrust, you know, and they're.

They're, probably going to get broken up, so it's. A vicious brutal reminder of don't rock the boat, so that's. Why amazon's not going to get in and microsoft's not going to get in google's not going to get in had they been able to get in, they could have released financial products with billions of customers, Because of their network effects with a much better user experience and more decentralization than anything that chase has or any of these other guys have, but by punishing facebook it's.

A message: don't. Do that don't get involved, so this these markets protect themselves and they're anti-competitive and it's very nepotistic and incestual and uh corrupt. Whereas you look to africa these places, the regulator is aligned with you.

They actually want to make the regulations work, they want to create jobs, they want to grow the nation up and they they work very hard to to attract people and to make the deals work. So it's, just a completely different way of doing business, and this is the point of cryptocurrencies to create one global market that everybody can use, that's fair for everybody regardless.

If they're bill gates - or there are some guy in senegal, they have access to the same system. Absolutely that's. There is a few very interesting points. Actually i guess the first follow-up question i would have is um.

So you mentioned about the nepotism and so on so a d5. You know fan on a game or something like that will tell you. Okay, we need to bring down the system, we need to kill it uh. We need to feel the separatism and so on.

Um, do you think they have a chance, perhaps no, not in the western world, because it's? The wrong approach? You don't, go and say: hey. We'll, bring the system down by getting a bunch of cypherpunks together, and somehow this group of people with no say or political power will change the world.

No, what you do is you get a billion people into a system and you make them wealthier than the legacy system. When you talk about changing the world financial system, what you do is you create a market that is 100 times more efficient and a hundred times uh better in many dimensions, and has much more velocity of money, much more liquidity, much more innovation, financial product development.

Much more attractive investments, these types of things and you make that system have principles at the core powers. Push to the edges there's, no centralized control. You have privacy built in you own, your own identity, you own your own data and these types of things and that's, a feature that can't be changed.

So then, when that system gets too big, the problem the western world will have is to be interoperable with it. They then actually have to adopt the same principles: that's. How you change america in europe, you make it less profitable to be american.

In europe you make it more profitable to be africa and you get people who are actually willing to jump on board and leapfrog and so forth. Globalization is forcing change when starbucks says hey. We're only going to buy fair trade, coffee or sustainably produce coffee.

That is a nice thing in the western world that's existential in ethiopia. If they can & # 39, t prove those things they lose market access to colombia and indonesia and people start to death. So it's, not like we'll change the system next year it's like we have to change the system.

Yesterday, okay, and that's, that's. Your invitation to put a blockchain system in and then once you've done that you have a property system, an identity system, a payment system, and then you grow with the economy.

That's. The way to do it so that's, actually a very interesting point. Yeah i used to work at a company like an ico that did uh also focus in africa. I always used to think about it, like azure, with your example with china right like they started a bit later, so they were able to refresh their payments from you know: cash whatever they leapfrog the credit cards entirely, and now they have a pay weekend, and you Know in china it's actually easier to you.

Pay with digital cash in here like, for example, in restaurants, but do yeah. So i was always thinking about africa would be similar, but with crypto and at the same time i worked at that company and uh.

You know the results. Weren't so good. I mean there were obviously a lot of reasons, but i also felt that the people weren't quite ready for it. So well you have to do public private partnerships. You also have to have realistic time horizons, and you also have to understand that africa is a very relationship-based type of business culture.

You don't quite have everything there, but if you're, the first mover and you really get that infrastructure there as they start connecting those dots and those pieces, you rise rapidly with them and then you grow up and you wake Up, you have half a billion customers or 700 million customers, and you're, the dominant force in this gargantuan economic power, and then all these western companies will come in and no one will buy from them.

You know they'll, be like sorry guys. You had your chance. You ignored us. We're just either going to do it with locally built companies, the the microsoft of africa or vendors, who were there all along and built those relationships.

All along you guys are kind of long on african sense. You know i talk a lot about africa because i that's. What gets me up in the morning? I say why do we do what we do, and i say if i could retire and say i directly contributed to a billion people getting economic identity and getting wealth and their standard of living massively improved.

That would be like a dream: an accomplishment of a lifetime. Well, i guess i have this more of a technical question, because [ Music ], i'm, actually also very interested in finally having the file that is not just like cryptocurrency trading, but a little bit different right.

That's. Ultimately, what it is so far and uh in many ways the issue is technical, so it's, difficult to kind of port it over to the real world. So what do you think about this? How soon can we actually see b5? That's, you know if it's, really decentralized finance and i just traded.

I think the next three years we'll, see broad scale adoption and we & # 39. Ll have a hundred million users in the next three years across the entire africa sector, all blockchains all defy all things hard to say what cardano will take there, but i think we & # 39.

Ll get the lion's, share of it, but i feel very comfortable with about 100 million. You know just just because kenya, nigeria and ethiopia are well suited for this. Those three countries alone - 400 million people - 70 of them - are under the age of 30, with strong preferences towards cryptocurrencies.

Nigeria is actually one of the fastest growing ict hubs, with a huge open source development community and a lot of outsourced. Programmers they're, like poland of the 1990s and so uh, and so they're doing quite well, and that gives them the people, the need and the competency required to be major players there.

The big thing is: will these be ventures by africans or ventures by western companies that came in to sell to africans? My hope is that it's by africans and actually they create their own, and then they globalize these things you'll, see significantly better adoption in that sense, and it's still great investment.

You know because, at the end of the day i'm, a capitalist, and so it doesn't matter. If bob or kwame creates the token it doesn't matter to me, uh, what matters is it exists? It has utility and it's valuable.

So we're. We're, certainly diversifying our bets there and we have great partners to help incubate that uh. For example, one of our strongest partners in africa is an entity called ice addis and their accelerator in more than 25 countries in africa, and so icesatis basically brings in entrepreneurs at the very low end, like five thousand dollars funding ten thousand dollars, which you go.

A very long way in most african countries and they get them really started and incubated and they're following like uh, you know 500 startups, techstars type of a model, uh just obviously localized, to the needs of of africa.

So the fact that we can cooperate with them and incubate hundreds of ventures at a very low, very competitive cost, like you could do 10 or 20 for the cost of one in silicon valley. So you can. You can do many, many many many more bets, and so just a game of numbers and a game of need and innovation and the human capital is definitely there.

You know the biggest issue 10 years ago was that there wasn't enough human capital to be able to service these competitive business models. But now because everybody's digitized and they're on coursera and udemy and udacity and edx, and they can read free content and watch youtube lectures.

They've bridged the human capital gap very quickly, and they can piece together the skills that they need to build things very quickly, and the delta in education is mostly closed. So you have very young, very passionate people where you can do 10 to 20 bets for every one bet you can do in the western world and they they have the ability to actually solve significant problems and blockchain is certainly a part of that cointelegraph like subscribe And hodl you