“Crypto Titans” is a series of personal interviews conducted by CoinMarketCap with prominent and forward-thinking minds tinkering on and behind the scenes of the cryptocurrency landscape. Click here to see all the Crypto Titan interviews up to today!
Charles Hoskinson is one of the founders of Ethereum, the current CEO of IOHK (which built Cardano, currently ranked 13 on CMC) and a lifelong mathematician. He’s been interviewed on Larry King (finally making his mother proud of what he does), taught a Bitcoin class online for 80,000 and seemingly mastered the art of working from home. Yet when you get him talking about crypto, the conversation can easily end up in Mongolia. Why, you might ask? Because, according to Hoskinson: “It’s crypto friendly now, Mongolia. And we’ll be there forever. It takes a little while to get some things done, but it’s a good place.”
Read on to find out what else crypto, Charles Hoskinson and Mongolia have in common.
What was the jump that got you started in the crypto industry?
I got involved in cryptocurrency in 2011. I mined a little bit, I traded a little bit. Somebody dropped by my office a paper, the Bitcoin white paper. I read it, and I went to Bitcointalk.org, and I went to Reddit. I had a great chance and an opportunity to meet a lot of cool and interesting people.
But I didn’t professionally get involved until 2013, and how I did that was through education. I created a free course on Udemy called “Bitcoin or How I Learned to Stop Worrying and Love Crypto.” I ended up getting over 80,000 students.
It gave me a great opportunity to meet everybody. I met Adam Levine, Andreas Antonopolous, Roger Ver, Eric Voorhees and all these other wonderful people in the space. I leveraged that to start a cryptocurrency business. I started a company called Invictus Innovations, and we built Bitshares with, of all people, Dan Larimer, ironically.
Then I started Ethereum with Vitalik [Buterin]. After that, I was in a position where I could do what I wanted to do, so I created IOHK, which is a research and development firm. I’ve been here now for five years. It’s been a long road.
In all of your time working in and around cryptocurrency, what’s a common misconception or a common myth that you often meet?
It depends on the era. I’ve been here for nine years, and so things have changed quite a bit over the years. In 2011/2012, the perception of crypto — if people even knew about it, because the vast majority of people didn’t — was that it was basically an underground currency to buy drugs. That was the primary perception that people had. They didn’t really get what we were trying to do or what this technology was about. They just said, “Oh, it’s like cash for the Internet,” and obviously that’s going to be used for nefarious purposes.
The next generation was probably 2013/2014 where people realized that you could do more, but they still were kind of stuck in the tokennomics type of thing, where everything was about assets and issuing assets and building a better asset. Everybody just thought we were trying to destroy the U.S. dollar in 2013 or 2014. That was the only point about the entire ecosystem: we’re a bunch of crypto anarchists against the central bank.
Everybody just thought we were trying to destroy the U.S. dollar in 2013 or 2014.
Then in 2017, we had the ICO revolution, and the biggest misconception was that we had created the Magic Money Machine where if you put money in, you instantly get money out and everybody gets rich and becomes a millionaire. Unfortunately, that hurt a lot of retail investors.
Now, in 2020, I don’t know. There are a lot of different conceptions, but what’s nice is crypto has a bit normalized in the public perception. People are aware of Bitcoin. They kind of accept it. It’s been around long enough that it’s a fact of life.
Do you really think crypto has become that mainstream?
No one knows what I do still. In fact, I always tell the story when people ask this question. I was in Toronto two years ago and I was being interviewed by Larry King. And for the longest time, my mother did not care at all what I did. She’s just like crypto is a scam, it’s not real. I was like, “I’m CEO, I have a company, I have all these employees and travel around the world out of meeting heads of state and so forth…” She didn’t care at all.
Right after I finished the Larry King interview, I called her and she said, “What did you do today?” I said, “Oh crazy story. I got interviewed by Larry King.” And she said, “Really?” Every day after that she’s like, “Here’s my son. He’s famous. He talks to Larry King.”
Everybody has their entry point and everybody has their threshold. Once you achieve that threshold, then you get a fair shake. There’s been a lot of misconceptions, but I think we’re over the worst misconceptions, the dark money, or the “we’re trying to topple the U.S. government” or this is a magic Internet machine to make money.
Now we’re actually starting to be like cell phone apps or the internet, like the software industry after a decade or two in when people are used to it, it’s a normal thing. They know people are making money. They don’t necessarily know how it works, but they can accept that there’s some real life utility there.
Has the crypto sphere’s reaction to the COVID-19 pandemic strengthened or changed your belief in crypto? Especially in light of the fact that crypto seemed to fall in tandem with the S&P 500 at some point.
It was a little disappointing that we didn’t get a bump, because the pull point of crypto, or at least the selling point that we’ve been pushing, is that crypto is countercyclical — when the markets crash, crypto goes up, when there’s fear and blood in the water, people buy Bitcoin as a hedge.
It looks like instead what people did is they mass liquidated and went to the U.S. dollar. But I think there’s probably a bifurcation there, or at least a bimodal distribution of sellers. I think the institutional investors liquidated their crypto assets and went to dollars, but a lot of retail investors actually held, which is why we did not freefall into 1,000 territory or 800 territory.
I was encouraged to see that the investor under the $100,000 price point was much more resilient than the investor above the $100,000 price point. If you’re an investor above $100,000, you’re institutional or a big guy, you go look at trends and you say, “Oh, everything’s freefalling, just go to cash, hold it and then we’ll reinvest after we get a better sense”.
When you’re a retail investor, you tend to be a bit more idealistic and philosophical and you say, “Well, this thing should hold.” The fact that the retail people held tells me that’s very encouraging.
I noticed the largest buying rate of cryptocurrency came from people under the age of 30. These are the people who are two to three times more likely to hold a cryptocurrency than a stock or a bond. That tells me that as the young people get older and wealthier, they’re probably to keep that preference, and that’s going to lead to a large wealth transfer into our industry as the baby boomers exit.
I’m glad the industry held together. I’m a bit sad that more of my colleagues didn’t go out, make videos and be a bit evangelistic about holding the faith. I did a series of videos you may have seen where I said, “Hey you have nothing to fear.” I really wanted to see that coming from Roger and coming from Eric and coming from the rest of the gang, even CZ.
Just because we have these rivalries and we’re always fighting each other day by day for market position and mind share — in the end of the day we are all in the same boat. We’re fighting over what cabin quarters we have in that boat, but we’re all in the same boat. And if our boat sinks, we all sink.
That was a time of a lot of fear and sadness, and it would’ve been nice to see an industry-wide response. I think it would have calmed a lot of people down, and it would have also probably created a backstop and Bitcoin wouldn’t have been hit as hard by the market momentum.
In the end of the day we are all in the same boat. We’re fighting over what cabin quarters we have in that boat, but we’re all in the same boat. And if our boat sinks, we all sink.
The broader macro point about COVID is that it shows the need for our technology as an industry as a whole. I mean, money’s a vector of disease. We need global commercial systems: you need to be able to transact online. Voting needs to be done digitally. All these things that we do are native and other systems, because they don’t do it, they’re suffering terribly.
In the U.S. Congress, for example, they were having some difficulty holding a vote for their bailout because some of the senators have been infected with COVID, and they’re like, “Well, you have to show up to vote.” That’s antiquated. Why can’t I just vote at home using a digital system or something like that? Our space, it’s like five lines of code. We know how to do this. It’s built into our products. In those systems, it’s very difficult to do that. This crisis has proven beyond a reasonable doubt the need for our technology and it’s proven the resilience of our industry yet again. The leadership gets a C-minus. But the technology gets an A-plus. I’m very proud and happy about that.
Do you have any advice for people entering the crypto industry?
You have to enter it for the right reasons. If your goal is to get rich, you’re probably not going to be. The vast majority of people that start businesses, the vast majority of people that go down new endeavors, they tend to fail. It makes no sense at all to go in and just jump in and say, “Oh, if I enter this industry I’m going to get very wealthy.” Unfortunately, there’s a lot of people who’ve done that. That’s an anti-pattern.
What you need to do is be very passionate about something. It could be a local problem, like, “I’m really, really tired of our water supply or power intermittency that we have in our village.” It can be a global problem, like “I want to tackle global warming or the Pacific Ocean trash patch.”
But if you’re very passionate about something, then what blockchain is about, what our industry is about, is a collection of tools to solve a problem. And these aren’t magic. They’re just tools, just like cars aren’t magic and airplanes aren’t magic. They have their limits. They have their trade offs, but they may make things a lot better, a lot faster, a lot cheaper, allow you to do new things you couldn’t do before.
But you still need to have a reasonable business model. You still need to be able to do all kinds of things that normal entrepreneurs do. If you cannot explain your business model, how you make money, why you make money, what you’re trying to accomplish and you’re just saying “blockchain” or “magic,” then you’re probably misguided.
Don’t get enamored or dazzled by the power of these tools, and don’t believe that they do more than they actually can do. Despite the fact these tools exist, you’re not allowed to not have a business model and you’re not allowed to not take profit. You have to figure that out. If you can’t, well, then you don’t have something real. That’s my advice I give people. I’ve seen too many good people enter this space with unrealistic expectations or a feeling of, “Well, all these other people are making money. Why? Why am I not making money in it?”
If you cannot explain your business model, how you make money, why you make money, what you’re trying to accomplish and you’re just saying “blockchain” or “magic,” then you’re probably misguided.
Don’t confuse being lucky with being smart. One of the biggest issues in our industry is a lot of early adopters who have bizarre philosophies that aren’t necessarily right got really rich, really quickly. And they think because they got really rich, really quickly, that’s a justification or a validation of their brilliance and of their philosophy, and that their philosophy is right. They just keep doubling down and doubling down and doubling down.
You make a 1,000x in one year. You got lucky. There’s no smartness about that. People always need to remember that. Take it to heart, too. The final piece of advice as an entrepreneur is, if you somehow get lucky and you find yourself with a windfall, take it, take half out, diversify a bit and preserve your winnings and don’t get ahead of yourself.
Don’t confuse being lucky with being smart. One of the biggest issues in our industry is a lot of early adopters who have bizarre philosophies that aren’t necessarily right got really rich, really quickly.
Have a business model. Only enter it if you’re here to solve a real problem. Be conservative about things. Be passionate about things, and understand that the laws of business physics still apply to you and you’re gonna fall if you jump.
For a more personal question, do you have a “favorite” failure in either crypto or your life in general?
A lot of the decisions I made when I was at Ethereum I consider to be suboptimal. This is a great example of where you think people were going to work together for the greater good, or for rationality, or for their own financial best interest — but they don’t.
The mistake I consistently have made throughout the spaces is that people tend to behave in ways that are counterintuitive. You sit down for negotiations or for business plans, you’d say, “What’s the rational choice?” You do all this game theoretic modeling and you try to understand why people would do what they want to do.
For example, with Ethereum, the choice of a for-profit versus a not-for-profit — it’s brain dead obvious that most people would pick a for-profit. It gives you more freedom for your business execution. Second, if you create a lot of value, you own that value, where the not-for-profit, you’re walking away from that value. No one has any incentive to stay with a not-for-profit, which is exactly what ended up happening with Ethereum. They had eight founders, all seven of the eight left and all created their own companies. Some of these companies aren’t even in the Ethereum space. For example, Parity Tech is building a competing product, and Consensus may even start pivoting, and obviously I’m not doing work on Ethereum.
The mistake that I’ve made over and over again is assuming that people are going to be rational, and assuming that people are going to make decisions that are best for them. What I found is instead that people consistently make decisions based on incomplete information or pettiness or emotion, and I think that’s directly connected to the age of our industry.
A lot of people are very young and inexperienced in our industry. My favorite mistake is just mis-predicting. Obviously, I made a lot of strategic mistakes, like product ordering. For example, with Cardano, we should have released Icarus before Daedalus, and we should have probably used a different language to implement it: Haskell just was not ready.
The mistake that I’ve made over and over again is assuming that people are going to be rational, and assuming that people are going to make decisions that are best for them.
There’s a hundred decisions I’ve made where I want do-overs with those decisions. The worst social media mistake I ever made was the MetaMask “Do you know who I am?” tweet, which has just plagued and haunted me for years. It really has. It’s been just so unfair. But it is what it is. What can you do? You can’t get these things back. The broader lesson there, social media is not your friend, it never will be fair.
I also regret that I never had a chance to update my cryptocurrency class that I did in 2013. I always say I’m going to do it, for seven years I’ve been like, “I’ll get around to it,” but I’ve never gotten around to it. I wish I did, because it was such a good class and I had so much fun teaching 80,000.
It must be very out of date by now.
Yah, I was like, “$10,000 Bitcoin is a hypothetical. It’s never going to happen, but here’s what it would look like.”
I mean, that was even before ASICs existed for mining. It gives you a sense of how long ago that was.
Do you have any tips for people that are now working from home?
Working at home, you have to be tremendously self-disciplined. I was homeschooled all the way up through high school. It made it really easy for me, because I was used to working at home. Also being a mathematician, you’re always in your own head. You can be in a prison cell or on a rock or on a deserted island, and you can still be productive. But there’s a reason why there aren’t many mathematicians around here: a rare and probably good-to-be-rare breed of people.
There’s a reason why the divorce rate is starting to spike a bit in China and now in the United States. People are like, “Well, I love you on the weekend, but God, seven days a week. I don’t know if we can make that work.”
For most people who are very social, it can be tremendously difficult. The first thing you have to solve is the self-discipline problem. What I recommend is to use something like the Pomodoro Technique. Set a timer for 45 minutes, take a 15 minute break. Second, create a computing environment that’s distraction-free. We call this deep work, but basically the reality is every 15 minutes your cell phone, Facebook, Twitter, whatever, it’s just going to be there to distract you.
Don’t install those apps. Don’t log into those accounts. If you can create a distraction-free environment and you can do a 45/15, then you’re probably going to be in a position where at least you can do the work that you need to do that day. You might find yourself to be even more productive than if you were in an office, because you can do a lot of deep work.
The challenge, though, is that you still don’t have that socialization, that person-to-person contact. For some people, that can be deeply depressing. We’re a remote company. We operate in 20 countries. We have over 200 people. And as a remote company that operates in 20 countries, most of our people basically work at home. We’ve lost some very good people, not because they were incompetent or they didn’t do their job, but just they got brutally depressed working at home and they hated it. They actually had to quit and go find a different company somewhere else. It’s a constant struggle and it’s hard for people to find that right balance.
The other issue is that when you start working from home, you start noticing the things that are at home. Children, animals, wife, husband. There’s a reason why the divorce rate is starting to spike a bit in China and now in the United States. People are like, “Well, I love you on the weekend, but God, seven days a week. I don’t know if we can make that work.”
It’s super important to spend some time with the family and find a way to communicate, listen and work well with them, because if you can accomplish that, then at least you can take a productive break and you won’t be fighting every 15 minutes. But it’s an adjustment. It really is an adjustment. It takes quite a bit of time to get used to it. On the other hand, it’s no commute, no traffic, you can work at 9:00 a.m., you work at 9:00 p.m. You can do a lot when you work at home once you actually master that.
To completely change the subject, I saw on Twitter that you have an eagle in your profile picture.
That’s not an eagle, that’s a falcon.
That’s in Mongolia. I love Mongolia. It’s one of my favorite countries. I go there as often as I can.
Those are hunting hawks and hunting falcons. They also have hunting eagles as well. You use them to actually hunt small animals. What happens is people ride on horses or camels, and they have these birds that they trained since birth. They actually steal them out of the nest, which is a crazy prospect, I don’t really want to go into a golden eagle\s nest and steal its eggs. But they do, and then they hatch them, they raise them, they hand-feed them, and then they train them to actually go and catch things and fly back and give them things.
It’s a Mongolian tradition. They’ve been doing it for over 2,000 years. Every time we go to Mongolia, the very first thing you do is go and play with the birds, because it’s one of the few countries in the world where you can actually do that.
There’s actually tremendous opportunity for arbitrage in those markets, because they sell them for 100 bucks or 200 bucks, and the wealthy Arabs tend to buy them for $20,000, the same bird. So if you start a bird train, you probably could make quite a bit of money.
I go to Mongolia quite often and that’s one of the few things that I really love to do. I ride camels in the Gobi Desert, and then I also try to play with the hunting falcons and hawks and eagles. That particular bird? He’s pretty old. You might notice its beak has some damage, and he’s retired now, so they don’t really do much with him.. But he’s super, super sweet. He’d just sit on your shoulder all day long, you could walk around with him.
How did you discover Mongolia? I feel like very few Americans have been there.
My former secretary is married to a Mongolian woman and we were in Asia at the time. We had a spare week and he said, “Let’s go to Mongolia,” kind of a “meet the parents.” And I said, “Sure, this is going to be fun, but let’s make it worth our time.” And within two trips, I was meeting the president of the country. It’s just a surreal experience. I was like, “I don’t know how this happened, but wow, okay. We’re gonna we’re just gonna go with it.”
You just show up and the president meets you and you’re like, “Ok, I guess we’re doing a state visit.” We met the minister of foreign affairs. I ended up learning a lot about the cashmere business in Mongolia, and how that entire industry worked. I was invited to speak at the MFA and so forth. It was pretty surreal.
This is the other favorite thing about the cryptocurrency space, that you get access to people you never think you would be able to talk to, from rock stars…
…I had dinner one time with Matt Sorum from Guns N’ Roses. Apparently he’s in our industry, he’s the drummer for the Roses. I asked him how the hell did Slash come up with “Sweet Child of Mine.” And he’s like, “Oh, man, I got a story to tell you.” It’s like, all right, this is going to be a fun dinner…
…to the president of f****** Mongolia who looks like Gengis Khan. He was a former judo champion and got this giant neck, and he’s just like sitting on a throne saying, “What will you do for Mongolia?”
What is going on? This is crazy. Don’t ask. It just happens. You just accept it. You’re just there. You’re doing falcon stuff. It’s that flavor of the week. And next week you’re in Japan and eating stir-fry at 3:30 in the morning and scorpions at 4:00 in the morning. Then next week you’re in Thailand and at a snake bar and you’re like, “This is our space. It’s weird.”
This interview has been edited and condensed.