Charles Hoskinson on Real Vision

IOHK is a cryptocurrency company and research firm devoted to the science of cryptocurrencies.

First got into crypto in 2011 reading Satoshi Nakamoto's Bitcoin white paper, but given a BitTorrent and Napster background doubted it could become a sustainable market.

Bitcoin's resilience through repeated hits and scandals by 2013 changed his mind, leading him to build a free Udemy course, Bitcoin: How I Learned to Stop Worrying and Love Crypto, a Dr. Strangelove spoof that drew over 70,000 students and 5,000 emails he personally answered.

Ethereum grew out of asking what problem Bitcoin actually solves: a peer to peer money system whose ledger is immutable, tamper resistant, and auditable.

The Alice mowing Bob's lawn example shows Bitcoin's ledger cannot encode a contractual relationship, so the 2013 fix was to add a programming language to a blockchain, much like JavaScript in a browser, to enable smart contracts.

The best projects come from frustration: he, Vitalik Buterin, and J.R. Willett each hit the same wall trying to build custom financial products on Bitcoin, with Vitalik working on colored coins, Willett on Mastercoin, and Charles himself on BitShares at Invictus Innovations.

Vitalik Buterin stitched together ideas absorbed from colored coins and Mastercoin into an initial white paper, which then attracted collaborators the way any good open source project does.

In January 2014 the Ethereum founders gathered at a Miami beach house around the North American Bitcoin Conference to hash out both the technology and the philosophy of the project.

At that conference he debated Dan Larimer of BitShares and David Johnston of the Mastercoin Foundation, while Vitalik Buterin's own presentation drew a Beatles style mob of fans.

After Miami the founders voted eight to zero to run Ethereum as a for-profit crypto Google rather than a nonprofit crypto Mozilla modeled on Firefox's maintainer.

Months in Zug, Switzerland went into securing tax rulings for the for-profit venture and its nonprofit foundation, before the group reversed that plan in June 2014 and he left the project along with others.

An ICO is simply a decentralized mechanism for raising capital, and Mastercoin ran the first one in 2013 by posting to a Bitcoin Talk forum thread and collecting half a million dollars in Bitcoin within a month.

The ERC-20 standard turned Mastercoin's bespoke, months long token issuance into something anyone can do in days, democratizing a fundraising mechanism that lets thousands of people raise billions without banks or intermediaries.

ICOs make geography irrelevant to raising money, letting projects rebuilding after a hurricane in Haiti or Puerto Rico, or based out of Barbados and the Cayman Islands, raise capital on par with Silicon Valley or New York.

Many ICOs resemble unregistered securities offerings, and it is unclear how legacy securities law and jurisdiction apply when a raise pulls in ten thousand people across two hundred jurisdictions, including sanctioned ones like North Korea and Iran, with no KYC or AML compliance.

Financial markets are regulated more heavily than speech because of repeated collapses, from 1880s gold deflation and the Knickerbocker crisis through the Great Depression, the S&L crisis, Long Term Capital Management, the dot com bust, and Enron, each producing rules like Glass-Steagall and Sarbanes-Oxley.

Two camps exist on crypto regulation: one wants governments to adapt existing hierarchical rules to cover it, the other argues that money moving at the speed of information makes conventional regulation nearly impossible.

Conventional money service business oversight works because regulators deputize banks and exchanges to file suspicious activity reports, a mechanism cryptocurrency lacks since there is no intermediary left to do the reporting.

Regulating crypto markets the way legacy finance is regulated looks like a Sisyphean effort, but going full Wild West with no rules just invites scams, so the preference is a measured hybrid of targeted legacy rules, self regulatory standards, and smart contracts.

Draconian government crackdowns will not stop crypto any more than prohibition or the war on drugs stopped those black markets, and Hollywood's failed war on file sharing shows overly aggressive rules mostly hurt consumers.

The biggest risk in ICOs is not government intervention but the collapse of the human trust bond between founders and backers once large anonymous crowdsales replace investors who actually know each other.

Framing token sales as donations with no expectation of return lets founders dodge the accountability that any ordinary financing would carry, creating a moral hazard once resale liquidity lets early buyers cash out regardless of whether the project ever delivers.

Fixing this needs segregated custody of raised capital, a real relationship between token buyers and the team, and updated securities law, since community standards like ICO rating agencies only emerge after enough projects fail badly enough to learn from.

Commodity producers in the developing world, like Guinea with nearly a third of the world's bauxite, are often forced into predatory deals with buyers such as China or Rio Tinto, selling resources worth far more than they are paid.

Tokenizing the development of natural resources, surveying a field for oil or ore and issuing tokens against the output, could let smaller jurisdictions get a fair global market price and reinvest the proceeds locally.

Just as Tesla's solar roof and Powerwall push toward a decentralized energy grid, community owned tokenized solar or wind grids could supply cheap power in places like Ghana or Nigeria without a fifty to a hundred million dollar power plant.

Foreign aid could work the same way: rather than handing money to a country's government and hoping it is well used, bodies like the United Nations could buy tokens tied to water or solar projects and earn a return while funding development directly.

The hope is that cryptocurrency fades into the background the way TCP/IP did for the internet, so people stop caring about blockchain and Bitcoin as such and just expect money to work as reliably as a Skype call.

A trip through Ukraine, Greece, Switzerland, and England, where a card auto converted currencies so he never touched a local exchange or worried what currency he was actually spending, is the model for an imagined universal wallet.

In that future a wallet could hold tokenized gold, stock, or airline miles, even a tokenized house treated like a reverse mortgage or pre sold labor, spending whichever asset makes sense while merchants like Starbucks or McDonald's still get paid in dollars behind the scenes.

Once assets move at the speed of email with no siloing between equities, bonds, currencies, and commodities, local currency risk stops mattering, so someone in Argentina can simply rebalance out of a weak peso into dollars or gold.

If this all comes together by 2030, cryptocurrencies will be the greatest innovation of the last five hundred to a thousand years, on par with the invention of banking and the printing press.