Charles Hoskinson: I Solved Privacy (How I Did It…)

**Charles Hoskinson** (0:00)
Hey, guys.

**Andy** (0:00)
Charles.

**Robbie** (0:01)
Hey, Charles, welcome to the show.

**Charles Hoskinson** (0:03)
Good to see you, how y'all been?

**Andy** (0:05)
Good, man, good, man. Probably not as busy as you, fighting all the quantum bowls on Twitter.

**Charles Hoskinson** (0:12)
I got six companies, man, I don't sleep.

**Andy** (0:17)
Well, congrats on the Midnight Launch. The Maynet was March 31st, I believe. You had some big companies in there as federated validators.
Maybe just give us the high level here, Charles. Why Midnight? Why does this make sense from your kind of purview of the space and what is needed going forward? And really kind of like, what is this product?

**Charles Hoskinson** (0:39)
Yeah, so I've been in the industry a really long time, like a decade and a half. And one of the problems with being in the industry is that everything starts repeating itself and rhyming.
So you hear the same narrative again and again. So you guys probably noticed this too, because you've been around for a bit. We're like a big company, we'll announce, we're using cryptocurrency, we're using cryptocurrency, we're going to do this pilot. Everybody gets all excited, like Google's coming in, or Microsoft's coming in, or Sony's coming in, or whatever. And then like a year or two later is like, whatever happened to that Mercedes-Benz bond issue inside Ethereum, or whatever happened to that project adept with IBM? Like I remember hearing about it. Why did that thing fail? So actually years ago, I took the time to start looking into these things, because I was interested in myself. I said, I want to, you know, big people come on in and do things in the space. And generally speaking, they fail along one of three lines or collection of the three lines. So it's either it's too hard to use for their user base, the compliance team or regulatory side goes crazy, and they say there's just no safe way for us to do this, or the balance of privacy and publicity is somehow mismatched, and they have to do all this off-chain stuff to add privacy in, and then it's no longer a blockchain, because you have like a centralizing function to do that, or some combination of these types of things. So, what we asked is could we build like a meta-chain that's like the ChatGPT of privacy and simplicity and compliance, and it can work with Ethereum and Solana and Bitcoin and Cardano, these other systems, and people can pay in the assets they want to pay in, so they can pay in Bitcoin or Sol or stable coins or what have you. And what it allows you to do is reason about these things, privacy and abstraction and compliance, and then it makes it very easy to build these things into your application, whether that be a DEX or that be a prediction market or a privacy-preserving stable coin.
And where it gets really fun is then you can start facilitating cross-chain activity. So you think of Bitcoin DeFi as an example. Let's say you're a Bitcoin holder, you can lend your Bitcoin to a stable coin, you can do that as a taproot transaction on the Bitcoin network, and then you can deploy that stable coin in some yield-bearing thing somewhere, and then you can, as you get yield, buy Bitcoin with the yield and then it comes to your wallet. Now the end user doesn't want to do 14 steps, know how four daps work and six networks, they just have an intention.
So like a chain abstraction type of deal and an account abstraction type of deal, I want to make yield with my Bitcoin. So I want to click like stake my Bitcoin or something like that. So you click it. Well, something has to be a coordinating layer, and also you'd probably like to do that with some degree of privacy. So people don't know you're doing it, they don't know how much yield is coming in or any of these other things. It's kind of hidden from the space as a whole. So that's really the space that Midnight occupies. The other thing is Midnight occupies the Web 2.5 space. So the most valuable companies in our industry are not Web 3, they're Web 2.5.
Like Binance is a great example. There's this big regulated exchange network, but then you also have Binance Smart Chain, and when you put them together, it's 400 million people and sees these worth more than Bill Gates. Or you look at Tether, where it's a regulated business, it's got bank accounts and there's an owner. But then there's the Tether Asset, and that lives on the blockchain side. But it's not really one or the other, because it's kind of a little bit of both. It's the peanut butter and jelly. So the problem with Web 2.5 is there's no obvious way to do that that's repeatable. So what ends up happening is they end up building their own chains, whether it be BNB chain or ARK or these types of things. And it reminds me a lot of the like, just years ago, we had the consortia chains like Fabric and R3 versus the Open System. And Open Systems tend to win over consortia. So we really wanted a home that was open, that could live above all the other chains, that could be a natural place to put Web 2.5 as well.