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

09/17/21 • 51 min

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.

Previous Episode

Searching for Asia’s ‘hidden treasures’ in NFTs and GameFi

Why is Axie Infinity so popular, and what is the potential of play-to-earn gaming? Two venture capitalists share insights on Asia’s special place as GameFi’s hub.

Next Episode

Former US Treasury advisor predicts no ‘real action’ from Fed on CBDC (ft. Michael B. Greenwald)

Bitcoin took another major leap recently toward becoming mainstream after its adoption by El Salvador as legal tender. Meanwhile, central bank digital currencies (CBDC) are gaining momentum in economies around the globe.

Michael B. Greenwald, the first US Treasury attaché to Qatar and Kuwait, and now the director of Tiedemann Advisors, sees El Salvador’s venture as Bitcoin’s great inflection point as the world keeps a close eye on Bitcoin’s first national testbed.

“Countries like El Salvador, they're not going to have huge impacts on what the U.S. does or others do, but it definitely does bring the issue to the table and it raises alarm bells,” Greenwald told Forkast.News in a video interview. “Ultimately, it's going to be the large central banks and what it means for them as they create a new digital asset framework.”

In Asia, China’s e-CNY experiments are expanding to more cities and sectors. The digital yuan may be China’s effort to counteract what Greenwald calls the “weaponization of the dollar”.

“But let's remember there's a divide of the Fed right now,” Greenwald said. “You've got Randy Quarles and Lael Brainard, where one is pushing a stablecoin approach and one is pushing a central bank digital currency.”

Such divisions will likely spur debates for years to come and may ultimately lead to U.S. policy paralysis, Greenwald predicts, “without any real action.”

In the meantime, the digital yuan is already being used widely in what is already essentially a soft rollout across China, from public transport to the country’s futures market, which Greenwald sees as an alarming challenge to the dollar’s future international dominance.

Could there also be a scenario where these rival currencies will one day coexist in the same digital wallet? According to Greenwald, a future digital dollar and the digital yuan will unlikely cozy up to each other, especially not in the near future.

“But I do see a digital dollar in the same wallet as a digital yen or a digital euro or a digital pound,” Greenwald said. “The cross-border issue in a future digital wallet, that’s definitely one of the issues the Fed is looking to tackle in the coming months to years.”

Watch Michael Greenwald’s full interview with Forkast.News Editor-in-Chief Angie Lau to learn more about the internal divisions within the U.S. over a CBDC, the future of Bitcoin as a currency outside El Salvador, how the central banks of the art world are leading the NFT revolution and more.