Charles Hoskinson’s Brief Thoughts and Opinion on the Old and New Economic and Financial Systems - 9/3/2020
(Written by @Eric_Czuleger)
Charles Hoskinson recently returned from the PwC workshop in London. He sat down to share some thoughts on the importance of Cardano in the midst of difficult times for politics and the market.
Quick Summary:
Charles believes that there is a potential for a global depression oncoming.
The previous economic infrastructure of the world was put in place through global conflict and these systems are beginning to fail us due to the increased speed with which information travels.
Blockchain technology is about building fundamental values for a global financial and social operating system which is free of the constraints and corruption of the past.
We assume that if users are given the choice between legacy systems and a decentralized system of wealth, information, and identity, the vast majority of people will choose the latter.
These are difficult times for the legacy financial world, but the cryptocurrency space is used to dramatic market fluctuations.
Potential for depression
We are now looking at the prospect of a global depression. It is important to dissect what this could mean for the blockchain industry as a whole. It is easy when there is panic for that panic to spread to an individual level. This is particularly salient when we believe that we are looking at the unraveling of the economic order of the 20th century.
The reality is that we built the global economy through a series of treaties, agreements, wars as well as winners, and losers. All of these had certain assumptions about how power and money should work. This also includes information flow. This economy was stable when information was not instantaneous and when it was totally acceptable to have empires.
This means that one or two nation states could be supreme and establish rules and regulations. This economy had no ability to deal with rapid social change or rapid technological change. What has happened is that every time we have seen these kinds of changes, the banking system of the 20th century says ‘We will solve the problem with cheap credit, and by printing lots of money. We will keep this unlimited credit culture and increasing debt.’
Rising debt and unstable economies
At the turn of the 21th century the US national debt was about 4.5 Trillion dollars. At the beginning of 2020 is well beyond 20 trillion dollars. A 5 fold increase just on the US side. Everyone has been living for something to save them economically speaking. In Japan, this might look like the Olympics or some other economic influx.
However, when we see some global scale event like a pandemic occur, the boom is replaced by a bust. Japan will then continue looking at their debt to GDP ratio getting worse and their economy stagnating. The same is true for China and South Korea. Meanwhile in Italy, 16 million people might be in quarantine. We believe that this has the potential to inspire the rise of a populist government. This could lead to an Italian version of Brexit. Can the EU survive if Italy leaves?
In the world order we are seeing a lack of fundamental integrity. People do not have faith that the institutions that we have can protect us and allow us to deal with the problems of the 21st century. We are aware that the power of strong AI can end humanity, nothing is being done about it. For years, epidemiologists have been saying that a global pandemic could kill millions and tank the global economy. Meanwhile, we can’t agree on simple things like tests and coordinating relief efforts.
Lack of institutional trust
There is a global skepticism that the institutions we have will succeed in the 21st century. So what is the point of our industry in the face of this? The cryptocurrency industry has nothing to do with fast returns, dealing with volatility, or the price of bitcoin. It is about a global conversation around changing the way we do things.
This is not just about institutions. It is about removing the need for central authority. We don’t need presidents, kings, CEOs and leaders to get things done. This is about trust, consent, and immutable rules which don’t care about the daily news. They don’t care if there is plague or war. They behave the same way like the laws of physics. This is much safer for us to build things on.
The point is that these distributed systems are Darwinian and effective when they are put under pressure. Just like is happening today. There will be many winners and losers in our space with over 3000 cryptocurrencies. But we all know one thing: over the next five years, whichever wins will be a more competitive product that does more for everyone than all the others that lose. This is not the case with the monetary and social systems of the 21st century.
The traditional systems are suboptimal, predatory, and they have a built-in lack of inclusiveness. The winners in a centralized system are due largely to random chance and luck. Our industry is the opposite. Every innovation that we make is accessible to everyone. But there are concepts that we all must mutually adopt.
Building on blockchain
These concepts are; private computation, useful proof-of-work, inclusive accountability, and high throughput proof-of-stake. All these innovations are open source. In five years these systems will be available to billions of people built into consumer products like cell phones and operating systems and browsers. The cryptocurrency-enabled Brave browser is currently the fastest growing web browser. The fastest growing social systems are on the cryptocurrency side.
This is where users come in. Users own their own bank. If a global pandemic upends the financial system we don’t think that it is likely that people will want to live in a financial system where their bank accounts can be shut down at any time or restricted in the amount of money that they can take out or send to others. We believe that users will prefer to maintain their value, identity and privacy.
Political infighting
Our institutions continue to fail us. This market correction is another example of the market saying that. In the United States, the response could have been a simple bipartisan solution. The president and opposition parties could set their rivalries aside. Instead, it has been treated like a game of political football. A recession is bad for the incumbent leader, therefore it is encouraged by the opposition.
Meanwhile, the other side refuses to realize that we are entering a pandemic, so millions of people could die because simply politicians don’t want to see markets collapse. This is a fundamental lack of integrity. The end result is not one side winning or the other side winning. It will be that it must be replaced with another system.
Don’t panic
Our plea is to calm down and relax. Do not succumb to fear. We as an industry are collectively working on the same problem. This problem is how we build a society without kings, presidents or leaders. We are trying to get rid of the middle men which is as fair for the least amongst us as for the most amongst us. This is the reason that we are all here.
The markets are panicking, but we in the crypto space have seen collapses of 90 percent. We still show up for work and we still fight hard every single day. We still remember who we are and why we signed up. Today, we are just as passionate as when bitcoin was worthless. We will find a way to win.
We are entering hard times. The economy is looking perilous. There is, however, a light at the end of the tunnel. We will reach a point when things change. The nature of identity and property, how wealth is held and transformed, the rewards you get from the merits you have and the people you have relationships with will all be changed. This includes trust and the movement of medical data. Everything will evolve to a new form which will be more fair for everyone. This is why IOHK and Cardano exist. It is also why EOS, Tezos, Bitcoin and other cryptos exist.
We disagree about protocols, process, and structure. But we are all philosophically aligned by taking out middlemen and building a better world for everybody. We encourage everyone to rise above fear and panic. The fundamentals of our industry are more sound than the fundamentals of the legacy systems. As bad as things are, they could be much worse. We could emerge from this no wiser and no more capable, but still chained to the sins of the past.