Why Cardano’s Charles Hoskinson says DeFi is ‘up for grabs’

Cardano’s much-anticipated Alonzo hard fork finally kicked off a new era of smart contracts on the blockchain. Because of that new capability, the proof-of-stake platform can now host decentralized applications (dApps) in the highly competitive decentralized finance (DeFi) space.

But the unregulated Wild West of DeFi recently received some significant noise complaints from the Securities and Exchange Commission Chairman Gary Gensler, who told the Wall Street Journal that DeFi projects are not exempt from regulations.

“We will see over the next few months to years, some form of a crackdown,” said Charles Hoskinson, the CEO of Cardano developer Input Output Hong Kong, in a video interview with Forkast.News. “[That] means that the next generation of DeFi is up for grabs.”

Hoskinson compares what might be an upcoming surge in DeFi regulations to the initial coin offering (ICO) upheavals of 2017, in which global crackdowns on questionable crypto projects and outright scams shut down waves of companies but also led to the creation of new financing models that gave birth to a new generation of projects like ICP and Solana.

“The winners of the future in the DeFi space are going to have liquidity and interoperability, the ability to move multi-chain,” Hoskinson said. “And finally, cost predictability is such an important thing... It’s so bizarre how we just tolerate massive swings in the price of doing business.”

Cardano did not make it to the first wave of DeFi, which generated superstars such as Uniswap, MakerDAO and many more. Even so, despite calling DeFi’s current state a “bubble,” Hoskinson remains bullish on DeFi in the longer term. Cardano, its founder says, has had its eyes on the so-called “second wave of DeFi” all along.

“We need governance, we need certification, we need insurance, we need regulation on these things, metadata identity... at the same time, you need to decentralize,” Hoskinson said. “The next wave of [DeFi] will do that with a straight face and will be significantly harder to regulate in a traditional sense. The way we constructed Cardano was for that second wave.”

Watch Hoskinson’s full interview with Forkast.News Editor-in-Chief Angie Lau to learn more about Cardano’s plans for its new smart contracts ecosystem, how a regulatory compliant DeFi community might take shape, the promises and pitfalls of non-fungible tokens (NFT), what he sees as the top five uses for smart contracts, and more.