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Identity is the key to our vision for Africa

Decentralization and using blockchain to address real-world issues will help deliver a new future for the continent

28 April 2021 Charles Hoskinson 7 mins read

Identity is the key to our vision for Africa

Yesterday, in the #CardanoAfrica show, we laid out our bold vision for the continent – and how we’re delivering on it. Here’s how we introduced this very special event

I started Input Output in February of 2015 with a dream – to deliver economic identity to the billions of people around the world who do not have any control over their own lives. 

The reality is that people live in two different configurations; one for developed countries and one for the developing. For most people like me in the developed world, there are many things we take for granted. The fact is that it's easy for us to have an identity, passports, driving licenses. It's easy for us to travel. It's easy for us to prove our credit worthiness and get credentials. It's easy for us to borrow money, get insurance, and to process payments. For example, if someone does a service for you, you can send them something in seconds using a banking app or a mobile payment service such as Venmo. You can send them a PayPal transaction. We take this for granted and, for the most part, it's part of our daily lives.

But when you live in the developing world, things are very different. It's very difficult to globalize. It's difficult to prove claims, whether you're producing something with fair trade or in a sustainable way. It's difficult for people to receive money and send money. Remittance transactions carry a fee amounting to between 8% and 15% of the value of the transfer. When a person wants to borrow money, if it's even possible, micro-finance transactions can have interest rates as high as 85%, according to the World Bank.

The reason for these high fees is not avarice, or racism, or some evil in the global order. Rather, it's because of systems. Some countries enjoy financial infrastructure that is superior to other systems. The problem is that the legacy systems we have are fundamentally incompatible with total globalization, without admitting total centralization behind one standard, such as the American way or the Chinese way.

The world can move beyond that. This is the 21st century, a century with the iPhone, a century with the internet and the World Wide Web, a century where information can move almost instantaneously. As a consequence, we have the potential to create a better way of governing. We no longer need central entities. We no longer need central governments. Just like the internet, the things that process our payments, establish our contractual relationships, hoist up our identity, prove our property ownership, and permit the gears of commerce to work, can be done through the very same decentralized technology that has enabled innovations such as Bitcoin, Ethereum, and Cardano.

We started Input Output based on first principles. We started with science. We built research labs around the world, hiring dozens of PhDs and we have since written more than a hundred papers, many of which have been tested through the wonderful crucible of academic peer review. Citation after citation later, conference after conference later, journal after journal later, we've built a corpus of scientific knowledge that has allowed us to understand how to build systems that can scale not just to millions, but to billions of users. These systems can preserve a fundamental truth, that we are all equal and we all deserve access to the same marketplaces.

Whether you're a tech billionaire or a shepherd from Senegal, you should receive equal treatment and consideration. You should be given equal access to markets and merit should be the differentiator, not geography or genetics.

We have built great protocols like Cardano. It's not just about promises any more, this technology is now about delivery.

For four years, our people have lived in Ethiopia and have traveled across Africa to Rwanda, Uganda, Tanzania, Nigeria, Kenya, and South Africa. No matter where the winds would take them, the promises and commitments and dreams were the same. We wanted to spread our vision of changing the way the world works by pushing power to the edges and allowing people to be their own bank, allowing people to have their own identity.

The first fruit of our labors is the deal with Ethiopia’s Ministry of Education. This will involve five million students using Atala Prism technology integrated with the Cardano blockchain. Every one of these students will have a digital identity – a DID. That DID carries with it information – metadata – that will travel with them throughout their academic life, and follow them into the economic world. When these millions of students graduate, as they go into the economy, eventually this infrastructure can be used for buying property, for payments, for voting and all other matters of their economic life.

What's beautiful about this deal is, is that it's extensible. Our priorities and goals are aligned with the vision, priorities and goals of the Ethiopian government. Last year, the government set out its National Digital Transformation Strategy – Ethiopia 2025. This is a bold vision to digitize the country, including a national identity system. It is our belief that the work we have done here with Prism and Cardano for these five million students will inevitably grow to be an inspiration, and perhaps the system, for 107 million Ethiopians, allowing them for the first time to globalize on equal terms with the United States, the European Union, China and other powerful economies.

In addition, this system has the potential to go far beyond identity. We believe it can help people find jobs, because it can verify their credentials, helping them prove their skills. The system can be used for a litany of activities, establishing people as credible actors who have earned the right to have a job.

That's just Ethiopia. We also have partners in Tanzania, World Mobile, and partners across the continent. Every one of them has hopes and dreams about how to apply this technology. The magic of Cardano is that, like Bitcoin, it's permissionless. It does not require someone to register or license something. It does not require someone to ask to use it. Rather, it's an open platform.

And while these projects have been spearheaded by Input Output Global and our partners, they serve as an inspiration for countless entrepreneurs in Africa. They can realize their dreams, their businesses. Whether it’s a decentralized Uber, or securitizing a small company, or a new way of representing resources in trade and commerce, the result would be a piece of infrastructure accessible to all, open for everyone on the continent, to help others achieve their dreams.

Our industry has created a lot of really cool innovations. NFTs, DeFi, security token offerings, and ICOs, and most of these things have been based upon promises of a new world. I believe that over the next five years, as this technology rolls out across all of Africa and many other parts of the world, such as Southeast Asia, Central Asia, and Eastern Europe, that these promises can be transformed into new business models.

Thousands of innovations are possible with blockchain infrastructure. Whether you use it to vote, to find the capital that you need as an entrepreneur to thrive, to take care of those you love, or for estate planning so that your desires and your beliefs can transcend even your own death. All of these things are possible with the technology we've constructed, built with formal methods and advanced programming languages like Haskell, and validated by peer review.

Getting here has been hard, and it’s only been possible with the help of thousands of people. So let’s celebrate them too as we mark this first step in fulfilling the dream of giving people in Africa control over their own lives. 

For more on our work on the continent, visit our new Cardano Africa website

Blockchain Africa 2021: Charles Hoskinson's keynote speech

The following is a lightly edited transcript from Charles Hoskinson’s speech on March 18th, 2021 at Blockchain Africa 2021 outlining IOHK’s vision for Africa.

22 March 2021 Charles Hoskinson 13 mins read

Africa and the topic of banking and the unbanked, the topic of economic identity, is something that's near and dear to my heart. More than 10 years ago, I was using Kiva, a microfinance lending platform, and it awoke a long journey of mine to read books like Muhammad Yunus’ Banker for the Poor and start having a discussion about the question: why does the world have fractured financial systems? And why is it the case that people for no fault of their own, if they lose the geographic lottery, are born into systems that will keep them perpetually poor, regardless of how hard they work or the quality of their character?

This led me to the cryptocurrency space. I didn't really care too much for arguments about proof-of-work or proof-of-stake or how Bitcoin transactions worked or any of these details. What mattered to me was the utility of the system for bringing economic identity to the billions who don't have it. And I knew that this concept of decentralization, this concept of having a blockchain that serves as a place to timestamp things, to audit things, a place to broker trust amongst people who don't trust each other, was truly something revolutionary and magical. But it was a great invention that came without a user manual, and without batteries included. In the 10 years since I joined the cryptocurrency space, it's been my life mission to build systems that have the capacity to act as a backbone for utilities and social structures that will enable a great merging of the markets of the world.

The aim is that those who are the poorest amongst us will enjoy the same financial systems as those who are the richest. It's a simple idea, but in practice, almost impossible to achieve with legacy systems. And the crown jewel of our labors has been the Cardano protocol. We started in 2015 building the Cardano protocol specifically to figure out how to accommodate this concept of economic identity, how to build applications that would be equally useful  to someone in a basement in the US as they are to a shepherd in Senegal.

Building capacity 

We also realized that in addition to doing great science and great engineering, it would take quite a bit of time for us to actually figure out how to deploy these systems within the developing world. That meant we physically had to move to those countries. And thus in 2017, after we were a bit more mature as a company, we opened up offices in Addis Ababa, Ethiopia. We built extensions into Rwanda and Uganda, and we found great partners. We also started exploring places like Mongolia, Georgia, and South American nations as well. We were all unified with a common cause and purpose. How do we enable a system to operate from the bottom up instead of the top down? How do we figure out how to give people self-sovereign identity and put them in control of their own money, control of their own future, and give them a platform to build upon? 

How could we allow them to secure credit and retain property? Then to protect and secure that through insurance and other products. Now, that four-year journey, since establishing that office in Ethiopia, has yielded some amazing fruit. First off, we've had the incredible opportunity to meet many world leaders who are aligned with many NGOs and charities that are directly aligned with our goal. We've also been able to train local talent and hire local people. They have made this their tireless life mission. In many cases they did this with few resources and, in many cases, exposed to uncaring bureaucracies or corruption, waste, fraud, and abuse, and just plain old-fashioned setbacks. 

Transforming lives

We've seen our own setbacks. Some of the countries we've chosen to be in have had unrest. Some of the countries we've chosen to work with have had regimes change. As a consequence, things that we thought would be happening sooner took a little bit longer. With that said, we are on the cusp of deals and initiatives, this year, which will bring millions of users through public private partnerships into the Cardano ecosystem. And what does that mean? Really? What does that mean? 

It means that a large group of people, for the first time in their lives, will have a digital identity that can be linked to a digital wallet. That also can be linked to payment systems, which also can be linked to property. These can then enjoy rich metadata and other such things. And this is the highest goal, because if we can achieve these things, then it means functionally a new economy built on the great liquification of trillions of dollars of wealth. You see, the reality is that Africa is not a poor continent and African nations collectively are not poor.

They are, rather, in a situation where they have tremendous potential and real wealth, but that wealth is inaccessible because of bad systems and a difficulty in globalizing the continent’s nation states. This is a tremendous opportunity. The reality is when you look to the future, you don't want to go to where the ball is now, you want to go to where the ball will be. In other words, you want to go where the economies are going to grow the fastest and see the greatest opportunity. 

China to Africa

We saw this in the 1980s with the surging of China. It was a common notion then, amongst people in Wall Street and London and Japan and other places, that China was a very poor nation with many systemic problems. But amongst the very specialized actors who truly understood where things were going, they realized that changes in those systems had built up to a position where China in just a few decades would become one of the richest and most powerful nations in the world.

Similarly, when you look at the demographics of Africa, you look at the generation that will take custodianship of the continent. You see that 70% of Ethiopians are at, or under, the age of 30. Many of these people are growing up with a cell phone in their hand, with access to the internet. They have access to education, thanks to MOOCs, thanks to YouTube and other free platforms. And so the bridge of human capital has occurred. And you have a group of people who are tremendously ambitious and impatient, and will not tolerate the bureaucracy of the past and will not tolerate the sins of the past. Whatever systems stand in the way of progress will soon come collapsing down. And in that wake, that vacuum is a marketplace for new systems.

A new generation

My country has trillions of dollars’ worth of social infrastructure. In the United States, for our financial markets, for our legal system, for every single thing, from how our healthcare works, to how we die, there's a law or regulation or some bureaucracy that stands in the way. In many cases, these things hold and stabilize our society, but they make us less resilient, less adaptable, and also they slow down progress. And they hinder the ability to chase the future when there is a potential for completely new systems, which in many cases are orders of magnitude more efficient at a much lower cost. That is going to result in a huge competitive advantage for the nations that adopt the new systems first. The first countries that hold national elections online that are credible, free, fair, and auditable are likely to be African nations. They will be first countries to have an end-to-end digital identity and economy.

This offers great potential for African nations – not Germany, not France, not Britain, not the United States, not China, not Japan. This is an all-you-can-eat buffet of innovation, progress and new systems, and my industry, the blockchain industry, is interconnected with this. ‘New’ is what we do. We find ways to build trust amongst people who don't trust each other. We find ways to change everything, from monetary policy to the concept of identity, to the concept of property. 

So we built infrastructure in Ethiopia, amongst other places on the continent. We did that knowing the infrastructure would be used to service large government deals. We adopted the push model, where we push these things to the citizens of countries, and began a systemic campaign of innovation across the continent. The other magic of Cardano is that it comes with a funding system called Catalyst. Today, right now at the current price of ada, over a quarter billion dollars, $250 million, is available for grants. For those who wish to build infrastructure, applications, and services and products in the Cardano ecosystem. 

Africa leading the way

It is our belief and hope that over the next five years, a meaningful percentage of the entrepreneurs who deploy infrastructure will come with a pan-African view. It could be a peer-to-peer lending system; it could be a remittance system; an ATM network; basic internet access; a micro ISP. It could be power generation. And this is not only a goal – it's something we're investing heavily in, with partners like ICE Addis, which gives us access to entrepreneurs. And in more than 25 countries in Africa over the next five years, our staff on the ground will likely scale from the dozens to the hundreds, if not the thousands. And, instead of having one headquarters, it's likely we'll have four or five headquarters covering the continent.

For example, we've started a campaign to build up resources and access and personnel in Ghana. I will also try to do the same in places such as Rwanda. And what we have found in every place we go is a welcoming attitude, and a lot of grace and intelligence. For example, the Prime Minister of Ethiopia is a cryptographer. My country is ruled by a president in his late seventies. Ethiopia is ruled by a person who can actually read the academic papers. This is a stark contrast in both age and outlook. The potential for Ethiopia reminds me of the early days of Singapore as an independent country and the wisdom and judgment that was going into the growth and management of that country. And I think the exact same thing can be done with a helping hand here and there in a way that benefits as many people as possible.

New frontiers

So, we're super excited and we've been investing in everything, like identity. The PRISM team is our entry point into identity and has over a dozen people. That team has expanded by 30 people and to our ability to tender and bid for contracts. We wanted to seal some flagship contracts first, and those are coming to a close, which will bring millions of people into Cardano. And then those will stabilize as a foundation from which we can do business with dozens of entities and countries, both public and private. And the people responsible for that are scaling up very rapidly to train far more developers, to train far more entrepreneurs, and then give those entrepreneurs access to marketplaces and capital so that they can liquify the wealth of Africa and benefit from it. You see, many people tend to look at this as a charity problem. I think that's both the wrong way and also fundamentally dehumanizing.

I look at this as ultimately a new market, a new frontier where we can find new partners to work with. It is not our goal to save people or to give anything away. It's our goal to build partners, collaborate and create wealth, and share that with our partners. I cannot imagine what it means to be born in Zambia or Zimbabwe or South Africa. It's not my life and it's not my experience, but there are millions who have that life and experience. What I can imagine, though, is how to build a great business with people born in those places and for us to build wealth together. That's the point of blockchain technology. It's a great unifier. It's a great engine of trust. It's a great engine of economic progress and creation. As blockchain entrepreneurs, without permission, government aid or centralized coordination, we have built an ecosystem worth $1 trillion, looking at the market capitalization of cryptocurrencies like Bitcoin and Ethereum and Cardano and others, and that's just 10 years into this game. 

Increasing opportunities

We've also spurred a movement with tens of millions of people all across the planet, from nomads and Mongolia to shepherds in Senegal. Each and every one of them can run their entire life from a cell phone without relying upon a central agency. And over the next 10 years, we could see growth of another order of magnitude and the totality of our ecosystem could be $10 trillion, $15 trillion, $20 trillion. And the majority of that could be owned by those in developing nations, such as Ethiopia, such as Uganda, such as Chile, That could be the greatest achievement of systems in the past century, bettering the lives of all and reducing the problems of all. So, it's very exciting to be here. It's great to be part of these events and to see the rollout in a very short period of time.

We're going to announce an Africa focus in our company, and we'll be able to show everybody all the different programs and pilots and projects and partners, and the vision of what we're going to invest in over the next three to five years. It is the privilege of a lifetime as an entrepreneur to be able to participate in these markets in this way. I literally get to wake up every single day and talk to the most ambitious, honest, and hardworking people I've ever met in my life and find ways to build systems with them that not only make their lives better, but produce wealth for all of us. And if I'm right in my hypothesis, I believe that Africa will make the Chinese miracle that we witnessed over the past three decades become the African miracle, which will dwarf anything China has accomplished and perhaps make Africa one of the most valuable continents in human history.

A seat at the table

It happened before with the great Mansa Musa, and I think it definitely can happen again, if we build the right systems. It would be a travesty if those systems allowed that wealth to aggregate only in one place. In my view, it is incredibly important that we remember the first principle of the cryptocurrency space, that we are all truly equal and there is no centralized power.

The magic of the systems that we build and engineer is that everybody has a say, no matter where they come from or who they are. And everybody has a seat at the table in being able to decide the trajectory of their life and to keep the fruits of their labors. So thank you so much for coming, and I hope you enjoy this conference as much as I do, and I hope you choose to invest in Africa as much as I have. I think it's the best investment any business can make. And I also believe it's the most rewarding work any person can do.

Reflections on a decade of blockchain, and predictions for the next

We've had bitcoin for over a decade. Now, we're heading into the decade of Cardano

9 January 2020 Charles Hoskinson 9 mins read

Reflections on a decade of blockchain, and predictions for the next

It's January 2020 and that means not only a new decade, but the 11th birthday of bitcoin. The world's first virtual asset was made available to the general public on January 3rd of 2009. It's been one hell of a decade since then, and I'm excited about the next 10 years: a decade that will bring a lot of interesting things to the world.

The rapid growth of blockchain technology

Bitcoin will always be very special to me. It was my introduction to all sorts of wonderful problems to think about in the world, like remittances and microfinance. It is incredible to think that the small, ragtag group who brought bitcoin to the public changed not only my life but the lives of individuals around the world, sparking a global movement. Now, millions of people wake up every day thinking about cryptocurrencies and blockchain technology. Hundreds, if not thousands of academic papers have been written on the topic. The influence has been profound and it is only just beginning.

The G20 and the G7 have begun talking about it. We are now seeing global regulations begin to change. Every central bank in the world is aware of virtual assets and some are even taking positions on them. This is astounding because there has never been a time in human history where one piece of technology has attained such enormous global relevance without a centrally coordinated effort through marketing, development, and control. No one controls bitcoin. That was true 11 years ago, it is true now, and the revolution is just getting started.

What we can expect over the next decade

So, happy birthday to bitcoin. And welcome to the new decade. I am looking forward to the next 10 years to see where the technology takes us. 2010 to 2019 was crazy and I believe that 2020 to 2029 will be very interesting. In the next decade, we will see the first brain/computer interfaces for consumer devices to be implanted into people; for example, neural lace. We will also see the rise of private space travel. Within the next ten years, virtual reality and augmented reality will enter the mainstream rather than just being fun things.

Telecommunications, energy, and transportation will also go through a cycle of major innovation. Cell phone technology will likely go through several more doublings. Given that Tesla has proven its model, we will now see the proliferation of electric vehicles. This means that battery technology will only get better. It's likely that battery density will double or quadruple in the next ten years. This means that we will see cars that can go between 600 and 1,200 miles on a single charge. Meanwhile, the capacity for solar and wind energy will double, if not quadruple.

The study of physics is advancing rapidly and we believe that the next decade will see mainstream quantum computers. I read recently that quantum teleportation happened between two chips. Meanwhile, 5G will spread around the world, and technologies such as WiFi and Bluetooth can only get better. This will pave the road for self-driving cars and intelligent infrastructure. The consequences of this technology will touch governments, services, and democracy itself.

A decade of change – and opportunity

During this decade, we will probably see another economic collapse similar to 2008 and with it, an opening for cryptocurrencies to take over the global economy. We also anticipate that one or more African nations will achieve the same economic prominence as countries like Brazil and South Korea. It could be Kenya, Ethiopia, or Nigeria. This means that we will likely see innovations in the movement of people and the development of new passport and identity systems. This might be the decade that we see self-sovereign identity gain prominence. We believe that, soon, data will be treated as the commodity that it is. New rules and regulations around the use of data will begin to materialize. It is our hope that this will curtail the data surveillance and capitalism economy that has developed over the last twenty years. This might happen through global regulation. Regardless of what happens between 2020 and 2030, it has been the privilege of a lifetime to be alive right now to see how the world changes. Whether in the biotechnology spectrum, the nanotechnology spectrum, the ICT world, or otherwise, it is a privilege to see these technologies work their way into the mainstream.

In my view, this is the last decade of traditional organized media. In the future, we will see less CNN, Fox News, Bloomberg, and The Wall Street Journal. Instead, we will see more Joe Rogans. This will be especially true as we enter 2025 and beyond. The crypto space, in particular, will fundamentally change the incentives governing journalism. We'll move to a different way of paying for and curating content. The age of popular long-form journalism has begun. It is very exciting to see that occur.

It is also exciting to see the continued adoption of open ideas, open technology, and idea flow. All the world's top companies have a dense portfolio of open source technology. This was not the case in 2000. It was only a little bit more the case in 2010. Now that we are entering 2020 and heading to 2030, it is exciting to see how quickly people are collaborating and how products are being built from common DNA across industries. It's good for you, it's good for the consumer, and it's good for all of us.

Cardano's role

So, where does Cardano fit in all of this? This is hopefully our decade. Bitcoin owned the last one and I hope, by the end of the 2020s, Cardano will be the predominant force in the cryptocurrency space. I believe that it will become a true social operating system. My hope is that we could see thousands of meta tokens living on our platform, from securities to commodities to stablecoins, and all other kinds of representations of value, and that we'll see billions of transactions every single day from over a billion users. It really all comes down to whether or not the technology can properly meet the right incentive set and have the right commercial utilization. These are the things that we have to put together and we are obsessed with getting the technology right. We think we have the right paradigm. The peer-review process has given us unparalleled clarity and understanding of trade-offs, along with where we can go.

It has also allowed us to talk with everyone in the world about what we can do using a common language. We've mastered virtual network infrastructure, consensus protocols, and the underlying cryptographic primitives. We have a very good understanding of what needs to be done in order to build a global skill system. We also know how to do that in a responsible, peer-reviewed, sustainable way. So, from a technological perspective, we feel our approach is right.

Marketing and commercialization

This year, in particular, we're going to start hitting commercialization hard. I've announced to the company that we are on a 'Cardano first' strategy. This means that if we are building a product we will always ask ourselves if we can deploy it on Cardano. So, if someone comes up to us and says, "Hey we'd like you to do some interesting blockchain solution," whether it be supply chain, authentication, credential verification, we will look at Cardano first. That might be in Ethiopia, Georgia, Mongolia, or closer to home like our partnership with New Balance.

I think it's very important to use our own product in order to build these things properly. Hopefully, the Ethiopia project will be able to launch its currency on Cardano. This is the same for the credential verification project for Georgia. Our strategy is to always begin with Cardano first, this year and into the future.

We're also going to get very aggressive about the commercialization of the technology, especially as Shelley and Goguen are deployed. We feel that this platform has a right to exist and brings a lot to the table. It allows people to solve problems in ways they couldn't previously. We believe that this is the platform that will bring future solutions into existence. We will push that mentality to our partners at Emurgo and the Cardano Foundation.

We're excited to explore incentives. At the moment, we're looking at tokenomics, incentive schemes, and governance systems as first-class citizens in the growth of the product. The reason why bitcoin was so successful was the simplicity of its incentive model. Satoshi created the model for people to mine it. Similarly, if we're to be successful, we need incentives that are directly aligned with the growth of the system. So, with the launch of the Incentivized Testnet, we're learning a lot about the business of stake pools and the business of maintaining a stable cryptocurrency.

We already have 500 stake pools registered and we're learning critical information. This includes everything from what saturation metrics should look like to who is a good operator, who is a bad operator, and how the market and user experience look. This is a topic that we are incredibly interested in exploring this quarter. Our partners at Emurgo and the Cardano Foundation are also investing a lot of time to make sure that we fully understand how incentives work in the Cardano ecosystem.

As we exit 2020 and throughout the next decade, incentives will be a source of continuous research. The better we get, the faster the feedback loop becomes, the faster we can grow to achieve a billion users and become a truly global social operating system that is beneficial to everyone. With all that being said, commercialization, technology, and incentives are the three things that will need to be aligned for us to achieve that coveted number one spot.

We are building Cardano for a reason. It is not an academic project: it is a commercial project and we want to see it grow. This is an exciting time but we must remember where we came from. We came from bitcoin and bitcoin will always be around for us. It will always be a valuable project, and will always have a soft spot in my heart.

So, on behalf of the Cardano community, Happy Birthday bitcoin! Thank you so much for all you've done. Thank you also to the bitcoin community. We wish you great success, stability, and innovation.

This is an edited transcript of Charles' January 3rd 2019 AMA.

Mongolia - great for Atala and Cardano pilots

Ministers and businesses are enthusiastic about blockchain

16 May 2019 Charles Hoskinson 5 mins read

Mongolia - great for Atala and Cardano pilots

Think about Mongolia and the image that’s likely to spring to mind is of sweeping grasslands, mountains, freezing winters and nomads. An unlikely place you might think for ground-breaking technology, but in fact it’s a great country to do blockchain pilots. The capital, Ulaanbaatar, has almost tripled in size since 1990 and now accounts for half of the country’s three million population. That growth has created problems, including what the World Health Organization has identified as some of the worst air pollution in the world.

In the winter, temperatures can drop to −40C and most people live in gers – round wood and canvas structures heated by fires. So, they turn to burning raw coal – and in some cases anything they can get their hands on, from dung to car tires – to stay warm.

I’ve just got back from Ulaanbaatar, where we’ve been working out the potential for an internet-of-things project to assess air quality. The idea is to put sensors in place and gather the measurements using IOHK’s Atala enterprise blockchain. Once in place, such a network could generate fraud-free, time-stamped data so the authorities know where the pollution is being generated and can focus on cleaning up the worst areas. Putting thousands of sensors in place is expensive but people could be encouraged to do so, and keep them working, by being paid using Cardano as the aggregated data comes through.

IOHK Mongolia
The away team assembled by Charles Hoskinson for Mongolia included Manmeet Singh,
information chief of Emurgo, and Lars Brünjes, IOHK’s director of education

The focus in our discussions with ministers in Ulaanbaatar was on solving these sorts of problems, which occur in all fast-growing countries. Another example is that 40% of medicines in rural areas are counterfeited or adulterated or expired; the figure is 18% even in urban areas. So, we want to put a traceability project together for that using Atala. Bringing accountability and transparency to medical supply chains can help protect people from dangerous or counterfeit drugs – and save lives.

Then, there is the fact that almost everyone has access to a mobile phone network – and 30% of the population receive government disbursements of some kind at an enormous cost. Linking those two together using our blockchain technology could save the government a lot of money and make things easier for the recipients, even villagers living on the peaks of Mongolia.

Other potential areas for Atala and Cardano include two very different sectors: the cashmere industry and university accreditation. They actually make about half of the world’s cashmere in Mongolia. The wool is very expensive in the boutiques of Tokyo and Paris, but goat herders here sell to China at a very bad price, there’s a potential to improve things there with better logistics and proof of sourcing. As for the universities, there are 65 of them in Mongolia, most of which are in Ulaanbaatar. We're really interested to see if we can put graduates’ diplomas up on a blockchain so people can prove they are qualified.

When it comes to attracting investment, the Asian Development Bank has put hundreds of millions of dollars in for various projects, but the audit trail is not so good here. We can tackle that.

Frontier Fintech summit in Ulaanbaatar
Tsogtbaatar Damdin, Mongolia's foreign affairs minister,
addresses the Frontier Fintech summit in Ulaanbaatar

These are real, complicated situations, and the blockchain comes in as part of these solutions. Atala can be used for processing and aggregating the data, which can then be fed through to Cardano to handle ada payments – so keeping huge volumes of data off the Cardano blockchain.

While we were in Mongolia, we attended the Frontier Fintech summit. It was there that we announced we had taken the first step of signing a memorandum of understanding with the Mongolian Blockchain Technology and Cryptocurrency Association, and the Mongolian Fintech Association to advise on potential blockchain projects and develop blockchain education, but it’s early days. Building relationships, identifying the right partners and developing the technology and infrastructure takes time, so we need to be patient – projects like these are likely to take between three and seven years. That’s why education is such a central part of our mission, training people on the ground to build solid foundations, as we’ve already done with our recent Haskell course in Ethiopia.

But providing solutions to these pressing problems is just the beginning. If we can get just one solution in place, we provide a gateway into the cryptocurrency ecosystem for hundreds of thousands of users. That expands the Cardano world, because these people will want insurance, bank transfers, and the other financial tools that we tend to take for granted in the developed world. And that creates business for the whole blockchain world.

A Brief Update on Cardano Development

Processes are evolving under the project management team

9 April 2018 Charles Hoskinson 10 mins read

A Brief Update on Cardano Development

After returning from my yearly global sojourn, I wanted to update the Cardano community on the status of the project. Since the beginning of the year a lot has happened. Cardano continues to grow at a rapid pace and the project is evolving into a new stage. The Byron release back in September of 2017 was an experiment for IOHK. It's the first cryptocurrency we have launched as a company. It's the first time we've had to manage public release cycles, segregated stakeholders (the general public, exchanges, developers, etc). Furthermore, the Cardano project has half a dozen software companies collaborating on it, thus we have to invest a huge amount of time in coordinating, communication and timezone overheads.

Since the September release, we've learned a huge amount about all of these processes and also in dealing with the needs of our broader community. We certainly haven't achieved a Nirvana-like state of perfection, but processes have definitely improved.

I'd like to share some of these improvements as they are mostly hidden from the general public, yet have a huge impact on our ability to deliver a long-term roadmap. First, since September, IOHK has built a tremendous amount of project management capacity, led by Elieen Fitzgerald.

Under her department, Eileen has managed to capture business requirements, draft project charters, improve our resource allocation and budgeting processes, improve development estimates, get better weekly reporting and manage the inter-dependencies between projects. We have also had an increasingly easier time managing third-party relationships, like our partnership with Runtime Verification for the K framework, IELE, and smart contract research.

Some of the outputs of these processes are that we are moving to regular release cycles for Cardano, with the first cycle starting next week on Friday. Our hope is to cut a develop branch for release and then run the release through a rigorous QA cycle currently planned for one month. Over time, this cycle can be shortened through automation and parallel processes speeding up delivery. Updates will become more frequent, higher quality and encumber less user disruptions.

The goal of the project management department is to ensure when we give a date for delivering a feature, a release or a major update that the date and quality are delivered. This goal is one of the hardest to achieve for a software company and much more so given the nature of the software we build, but it's also incredibly important for those who rely upon us for their own commercial interests.

Over time our project management methodology will become increasingly public and eventually will be ported into a public GitHub repository. We'd like IOHK to follow a creative commons process that other software companies and projects in our space can benefit from, and add to, as they pursue their own projects. We'd like to explore lighter weight versions of the processes for DApp development so that our developer community can follow best practices.

Second, working with exchanges and others, such as Ledger, we've been systematically redesigning Cardano's architecture, APIs and other components to be more friendly for those who wish to use our software. For example, you can see our new APIs here.

Another output has been moving our development towards a specification-driven process. The first component of the Cardano Settlement Layer to be ported into this process is our wallet backend, with the following formal specification:

Figure 1: Cardano SL's Formal Wallet Specification

Figure 1: Cardano SL

The goal is that each part of Cardano will be specified in a format similar to the one above. These specifications are implementation independent, will eventually be analyzed using formal methods and can be used as a basis for test suites and improvement proposals. 

We are aware that many want to build their own mobile clients or modified software. To this end, we've been exploring the best way of discussing a unified backend architecture. I would personally like to see dozens of wallets and great user experiences materialize for Cardano, but I'd also like to make sure that these experiences are useful, secure and easy to deploy.  

Over the coming months, large chunks of Cardano's code will be ported over to, or replaced with, these specification-driven designs. This likely won't be directly noticed by our users. Rather, users will experience indirect symptoms, for example things getting faster, like wallet recovery from seed, fewer issues connecting to the network, a smaller memory and disk footprint as well as other improvements.

As we now have the talent, processes and clear roadmap, Byron will continue to rapidly improve and become more feature-rich. The release we are cutting next week to QA will include paper wallets, much faster wallet restoration and numerous fixes. We expect it to clear QA in mid-May and for updates to be released to our users monthly thereafter. 

Third, the most anticipated upcoming release is Shelley. Shelley is a massive project with many workstreams and scientific dependencies. It also contains many social processes involving community coordination and management. Effectively, Shelley is about turning over the network fully to the users thereby decentralizing as much as possible. 

The work we have done with Byron has given us a great deal of knowledge operationally, about the best way of iterating towards Shelley; however, special care has to be placed on consensus. IOHK has developed a custom, proof of stake protocol called Ouroboros for Cardano. It has never been used in a cryptocurrency before and has a completely original design. 

Thus we have been extremely focused on a proper deployment of Ouroboros to the general public. Byron is running a version of Ouroboros with delegation locked to core nodes under the control of IOHK, the Cardano Foundation and Emurgo, and block rewards turned off, but when Shelley comes this cannot continue. Staking rights will be returned to Ada holders and delegation will be fully under their control. 

To be clear, Ouroboros isn't a forced, delegated, proof of stake protocol like EOS or Bitshares. It's a pure, proof of stake protocol where for epoch elections every active Ada account is factored in. Anyone who holds Ada in a normal address in the global UTXO has a probability of being elected as a slot leader regardless of the amount of Ada they hold.   

However, the reality is that most will not want or have the ability to host consensus nodes and consistently show up to fill the slots they have been elected to commit. Thus, we developed a delegation system and the concept of stake pools for those users. 

Briefly, anyone can run a stake pool. There isn't a minimum threshold of Ada or a special club. Rather, there will be a blockchain-based registration system and a special transaction type to register a stake pool on-chain. Registered pools will be listed in the delegation center of Daedalus and pulled directed from the Cardano blockchain thereby preventing censorship or bias. 

Over the last few months, we've had to invest a huge amount of careful design and security thought into the process of delegation. There are dozens of factors and scenarios to consider, from cold staking to automation of rewards. But we have converged on a reasonable design for the Shelley release, and a paper will be released soon on eprint.

The summary is that Ada holders can create a delegation certificate for the Ada they hold and register it on the Cardano blockchain. This process in effect separates stake rights from the spending keys for their Ada addresses. Thus the delegation certificates can live in Daedalus, but the spending keys could be kept offline on a paper wallet or ledger device for example. 

Delegation will be done through a special transaction and from a user experience viewpoint, via the delegation center in Daedalus. A user can find a stake pool they wish to delegate to, select it, and click a "delegate" button. It's just that simple. As we launch Shelley testnets, we'll experiment with different user experience flows, from length of delegation to partial delegation (splitting stake between pools).

Another advantage of this process is that unlike Bitcoin mining pools, as our protocol natively understands delegation, it can automatically pay rewards to those who delegated without having to trust the pool operator. At the end of each epoch, our goal is to close the reward pool through a special transaction, paying all those who delegated proportionally to their delegation amounts.

Some benchmarks and threshold will have to be conducted over the coming months to optimize for space and prevent penny-flooding attacks. We will also need to explore different user experiences including notifications and other user interface considerations. 

There are natural questions to ask. How will we ensure that when Shelley launches there will be enough stake pools to ensure a reasonable amount of decentralization? How will these pools establish their brand and reputation? We considered these concerns and decided to open enrollment for a collection of beta testing stake pool operators. 

The goal with this process is to identify a set of 50 to 100 independent entities that are geographically well distributed who would like to run a stake pool as a business. The process will progress as follows:

  1. Collect as many applications as possible at until the end of April
  2. Process and winnow applications until we have a good set of 50 to 100 candidates
  3. Invite the candidates into the IOHK slack and begin discussions about hardware configurations, deployment strategy, docker images, etc
  4. When the Shelley testnet is launched, invite the stake pools to register and work closely with them to beta test various scenarios and experiences 

These beta testers will not get a special advantage or consideration when Shelley launches. They are necessary to test Shelley's design and ensure our assumptions and choices are reasonable as well as improve deployment strategy and documentation. When Shelley launches, there will be a grace period where all those who desire to register a stake pool can do so and Ada holders will be free to choose to delegate to anyone they want. 

Once the grace period expires, auto-delegation will be turned off and rewards turned on: Cardano will be fully decentralized. 

In closing, Cardano is a huge project. There are so many brilliant minds, great engineers and parallel efforts that it's difficult to capture all of it in a single post, much less just convey our progress. What's amazing to me is that we have really great processes established and are daily moving forward (a fan made a great website showing our daily commits: 

What's also amazing to me is how quickly our scientific research is moving from the lab to code. Ouroboros has gone through over a dozen revisions and now is converging to a state where we can bootstrap from the genesis block without a checkpoint (an industry first for proof of stake). Our sidechains research is state of the art and a paper is coming in May. 

We have also brought game theorists and programming language theory experts together. The output has been incredibly innovative with new accounting languages like Marlowe and an increasingly richer theory for incentives for stake pools, network maintenance and other topics requiring an honest majority for cryptocurrencies to run properly.

Figure 2a: The Marlowe Programming Language

Figure 2a: The Marlowe Programming Language

Figure 2b: The Marlowe Programming Language
Figure 2b: The Marlowe Programming Language

I'm astounded how we are able to think in systems now and by the quality of the people on the Cardano project. It's taken years to build this team and go from dream to regular status reports. I look forward to achieving our milestones and seeing Cardano change the world. 

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Mike Beeple