Charles Hoskinson on Cardano's Future, Ethereum's Mistakes, and Crypto's Missing Safety Net | Markets Outlook

**Charles Hoskinson** (0:00)
I like looking at it like entropic to OpenAI and Google. So Google initially had the big lead, and then OpenAI had the big lead, and then somehow this entropic thing came out, and they were able to just leapfrog everybody. Well, they didn't fundamentally change, they just had the right mindset. They started with an AI constitution, and they had a very clear line of sight to how they wanted to build Claude and these other models, and it wasn't very sexy, and a lot of people ignored them, but now they're kind of on the other side, and they're the leader of the pack, because that philosophy turned out to be the right one for how to build an agent like that. Much the same way with Cardano, I think people are starting to wake up, especially in the age of AI hacking, where everything is getting broken, that speed the market's not necessarily the most desirable thing.

**Jennifer Sanasie** (0:51)
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Charles Hoskinson, welcome to Markets Outlook.

**Charles Hoskinson** (1:28)
It's great to be on, Jen. How you been?

**Jennifer Sanasie** (1:30)
I've been well. How have you been?

**Charles Hoskinson** (1:33)
It's been a lot of fun. We had a bridge hack on Monday on the Binance Cardano side, and a bunch of night got stolen and dumped. So that was the case of the Mondays. But we're powering through, we're getting things done, and the network is just strong and resilient. Overall, actually, I'm pretty optimistic about the second half of the year. The first half was pretty garbagey, and I think things are finally picking up and moving forward.

**Jennifer Sanasie** (1:58)
Fun is not a word I think I would use to describe a bridge hack. I mean, what does that feel like to wake up and realize that something like that is going on in a network that you've contributed to and you've spent so much of your time building? You obviously have a huge community that follows you and follows your projects. What's that feeling like as this unfolds?

**Charles Hoskinson** (2:21)
Well, one of the reasons we built Midnight was to stop these things. This particular bridge was built by a Chinese company, it was Wanchain and it's a legacy bridge. I came on your show before and we said, hey, Fable and Mythic are here, Soles here and these AI models are going to be used to hack everything. It's not just crypto, there's more vulnerabilities in the last two months that have been discovered with the Linux kernel than the last two years. It gives you a sense of just all software is under this enormous assault.
So Cardano and other systems that were built with higher assurance be fair better, but that's like being 90% resistant to a deadly disease. If you're exposed to it enough, eventually you still catch the disease and it's no solace, you still die of it. So we have fundamentally changed the way that we do things. And when you look at things like ZK systems, like Midnight, you move from a trust a bridge operator, trust a multisig or trust some software to trust a zero-knowledge proof and you're getting back to that trust the math as opposed to trust people.
So you need to get there. The other two things is that when bad things happen, we need better mitigation systems to try to figure out how to get money back to the people who were victimized. So how do you prove you own things? So that we have Midnight Passport, you pair identity with a cryptocurrency and then you can do selective disclosure for these things. So you know it's Jen's wallet or Charles' wallet, so you can actually have non-reputability. And then finally, we need insurance for these systems. And it's been a long-standing thing for both wallets and bridges. They get hacked, and there's nothing you can do about it. And if you have billions of people and trillions of interactions per year, at least one thing is going to break every year for a variety of reasons, insider threat notwithstanding. So you need some form of recovery system where once you identify people, you can pay a policy out. So we're almost there. I was in Bermuda for SALT earlier.