Chapter-1-In-the-beginning.md

Chapter 1: In the beginning

‘The best prophet of the future is the past’ ― Lord Byron

Origins of blockchain and cryptocurrencies

Anyone who doubts the adage ‘the truth is stranger than fiction’ should look at the history of money.¹ From the round stones on Yap island, to the Irish ‘paying through the nose’ to the Danes, to the peace and prosperity of the Belle Époque era, to the adoption and abandonment of the gold standard…cryptocurrencies, and the blockchains² they run on, are just the latest twist in a long and colorful story.

To understand a third generation blockchain such as Cardano, we must first review its predecessors. The first generation is Bitcoin,³ whose goal was to create decentralized money. Could there be a scarce, tradable token that lives on some sort of decentralized blockchain maintained by people all around the world?

This wasn’t a new pursuit. Bitcoin happened to be the breakthrough, but it was built on previous attempts. The idea of Bitcoin started in the 1980s, with a lot of ideas coming from the ‘cypherpunk’ movement.⁴ Ecash preceded DigiCash with pioneering work from Hal Finney and David Chaum. During the 1990s and into the early 2000s, Nick Szabo proposed the ‘bitgold’ system. There were other contributing factors like the technological advances of the Arm chip powering smaller devices, making processing possible.

In 2008, Bitcoin was just a pipe dream in the form of a white paper.⁵ Satoshi Nakamoto is the pseudonym for whomever it was who wrote this paper. The Bitcoin founder has remained anonymous, even after their email account was compromised and emails publicly shared. Since the beginning, Bitcoin has been shrouded in mystery. It is an experiment born out of discontent with the way things are, and idealism for how things should be. On January 3, 2009, Satoshi Nakamoto mined the first block – the genesis block⁶ – for Bitcoin. These 100,000 lines of mediocre C++ code⁷ attracted a lot of brilliant minds.

From early supporters such as Hal Finney to Martti Malmi, many others flocked over the years as Bitcoin grew from a few crypto anarchists on a mailing list, to a global movement. All this despite no marketing budget, with a logo provided by a forum user with the name Bitboy.⁸ Bitcoin has since proven its resilience. It has been declared dead countless times and endured many crashes. It has lost many of its early contributors. Developers such as Mike Hearn and Gavin Andresen fell out and left. Satoshi Nakamoto, the pseudonymous founder, vanished. Despite these obstacles and setbacks, the dream has persisted.

Within a few years, Bitcoin accrued thousands of users who could send and receive value without a trusted third party, or intermediary. The price of bitcoin went from less than a penny to $1 in 2011, to $1,000 in 2013, $17,000 in 2018 and a peak of $67,000 in 2021. Amid this, there were the crashes, such as the ‘crypto winter’ of 2017, when the bitcoin price fell from about $20,000 to $6,000 within weeks. There was a similar crash in early 2022, with two-thirds of the price again being lost.

The idealism of Bitcoin is about creating better money, or ‘sound money⁹ in a digital age’ as described by the economist Saifedean Ammous in The Bitcoin Standard. Bitcoin appeared after the 2008 financial meltdown, the worst global financial crisis since the Great Depression. Many people were starting to go back to first principles, questioning whether central banks could be trusted to create ‘sound money’? Can other people create better money? Does the world really need banks to act as middlemen? Can’t I just be my own bank? Questions like these, along with a mistrust of institutions, were the seeds from which Bitcoin grew.

What are the properties of sound money?

Money is usually defined as having three primary properties:

1. Unit of account
2. Medium of exchange
3. Store of value.

Money being a unit of account means we have the ability to measure prices in a consistent way. We should be able to compare goods and services in dollars, euros or sterling. Without it, it might be like prison where you compare and trade cigarettes for bread, books, baseball cards, or whatever is lying around. It would obviously be chaotic, making price discovery¹⁰ next to impossible.

Medium of exchange, means the token should be widely accepted. For a proposed money to function, it should be able to be exchanged for goods and services and act as an intermediary instrument. Being a valid means of exchange avoids the limitations of the barter system, where what one wants must be exactly matched with what the other has to offer.

Finally, a store of value is the property, whereby when you get money, it doesn’t fade, doesn’t evaporate into thin air, spoil or rot. Many goods have some of the properties of money. For example, if you were in prison, bananas or tinned food may be a viable means of exchange. But, in general, food can’t be used as a store of value because it perishes. For money to be a store of value, it must be durable in value over time. It should be physically durable also. Even if you forget to empty your pockets before washing your clothes, euro notes and coins are usually usable afterwards. There are plenty of coins still around from Roman times and earlier.

There are many other properties. Like is it transportable? Gold is often said to be a poor means of exchange because it’s difficult to haul over long distances. Would a large store of gold in a basement be valuable to someone fleeing war? Transportability of money may supersede all other properties in such a scenario.

Fungibility was a term familiar only to commodity traders until the 2021 craze for NFTs (non-fungible tokens).¹¹ It’s a measure of sameness, of whether two things are identical, or whether each is unique. If fungible, then there is no practical difference between two things. For business to flow smoothly, there must be consistency in that a dollar is a dollar, is a dollar. This could be in digital form in a credit card payment, a loan, or a physical note handed over. This is what you would expect with two units of the same currency. However, if you buy an expensive painting from a gallery, you want it to be non-fungible, a unique object.

Divisibility is another important property. You can try, but a coffee shop is unlikely to accept seashells as payment. So it is convenient to replicate a ‘cash in, cash out’ system. Digital currencies facilitate divisibility in a mathematical sense very well by design. However, some are more intuitive in practice. For example, paying a $10 equivalent for this book in different cryptocurrencies (July 2022) would work out as follows:

0.00043 Bitcoin (BTC)
0.0063 Ethereum (ETH)
20.01035705 Cardano (ADA)

Some real currencies are losing divisibility and there have been proposals to get rid of the penny, which is a fundamental unit of account. Rounding was introduced for cash transactions in Ireland in 2015, which means that the total amount of a bill will be rounded up or down to the nearest five cents.

How you might go about defining the different types of inflation and what exactly is ‘sound money’ is worthy of a book of its own. Bitcoin takes a stance on how to provide the properties required for a form of money. It is scarce, with just 21m bitcoins in existence. One bitcoin is divisible into 100,000,000 satoshis. Bitcoin is digital, so regards itself as durable. Bitcoin is portable as a monetary asset. In April 2020, a crypto exchange transferred coins worth $1.1bn in a single transaction in a matter of minutes at a cost of 68 cents.¹² Bitcoins are fungible, but not perfectly so, because anyone can trace transfers between wallets on the blockchain.

At a high level, Bitcoin attains the above properties through decentralization.¹³ Decentralization, at its core, is about removing, or ‘killing’ the middleman but there is no set definition the industry agrees upon. This has been a bone of contention for some time, especially when it comes to proposing legislation. The term has also been misused as a marketing buzzword and more cynically as a smoke screen for flagrant misconduct by centralized entities posing as web3¹⁴ idealists. This led to the establishment of the EDI ‘Edinburgh Decentralization Index’ which is an attempt bring clarity by developing a framework to evaluate blockchain decentralization. The index being developed by the University of Edinburgh¹⁵ looks at objective measures like the distribution of the currency, the treasury, developer distribution, the level of decentralization of consensus, etc. More about the EDI later.

The haves and the have-nots

If we were to meet for a coffee in a developed country, the apparatus and mechanisms are in place to make payment seamless. Although paying with a credit card is effortless and instant as a consumer experience, there is a lot of ‘centralized’ activity behind the scenes. You, the card holder, got your credit card from an issuer. This issuer is typically a bank, or some financial institution, issuing credit cards on behalf of the big networks (Visa and Mastercard). The coffee shop is the merchant in this case. Then there is a fourth party involved, the acquirer. This is usually a bank, such as JP Morgan Chase or HSBC, where the coffee shop (merchant) has its account.

This entire authorization process, from the time you tap your card for payment takes a few seconds. It doesn’t matter if your bank is in Ireland and the merchant’s bank is in Japan, the data flows quickly in real time. The full authorization and value transfer between banks can take several business days behind the scenes. The settlement process is heavily regulated, expensive and not inclusive.

Banks would not offer these services if it were not profitable for them. As a consequence, there are three billion people ‘unbanked’, mostly in the developing world, where such infrastructure doesn’t exist. For these people, there are no banks, there are no accompanying services such as credit or insurance.

Any form of money is only as good as the trust people have in it. Trust is variable and affected by economic events large and small. People must have faith that the money they use is worth something, that it holds the properties and characteristics they expect.

So this is what Bitcoin set out to achieve. It was, and is, a very ambitious and idealistic goal to offer an online form of money that was not reliant on a central authority issuing it. People had to have faith in it as a viable form of money. There is no Federal Reserve or central bank involved. Nobody is in charge, but everyone is in charge. Bitcoin achieves this through cryptography (explained in later chapters) to preserve ‘inclusive accountability’, the notion that everyone can ‘check each other's homework’.¹⁶ Everyone can see and review the record to ensure transaction(s) are valid and nobody is telling fibs.

Another driving force behind Bitcoin was discontent and exasperation. People lost faith in institutions and their mechanisms. The genesis block of Bitcoin had embedded within it a reference to a headline from The Times newspaper of January 3, 2009, ‘Chancellor on the brink of second bailout for banks’, implying frustration with events of the time. The 2008 financial meltdown was just the latest in a line of institutional failings.

Most, if not all fiat currencies¹⁷ eventually lose their value and/or collapse. Power corrupts. There are so many political and moral temptations to debase the currency for short-term benefits, at the expense of long-term gains. You don’t have to look far back in history for examples. The Weimar Republic in Germany, Venezuela, Argentina and Zimbabwe have all suffered from hyperinflation.¹⁸ The effects of the 2008 financial crisis are still rippling and have been compounded by the costs of keeping people in jobs during the Covid-19 pandemic, with trillions of US dollars printed out of nowhere.

What is blockchain?

Bitcoin runs on a blockchain. However, cryptocurrency is just one application of blockchain. If creating and trading digital tokens, they reside on a ledger somewhere. This ledger is often compared to a database. Some crypto skeptics claim, ‘It’s just a database! What is the point?’ Blockchain has the potential to remove the need for a central authority in many scenarios. That is a pretty compelling selling point. You can think of blockchain as a ‘trust broker’ where separate parties, who don’t trust each other, need to work together. Blockchain is also commonly referred to as a distributed ledger technology (DLT).¹⁹

So it's a special kind of database; it stores a record of events and all sorts of metadata (data about data) related to transactions. Normally an intermediary such as Revolut, or Bank of Ireland, would verify and hold all your banking history on behalf of Visa or Mastercard. What if you don’t trust them anymore? Or if you don’t want to pay transaction processing fees? This is the core innovation of Bitcoin, to provide an alternative system with a blockchain that acts as a ‘trust broker’. So, succinctly, a blockchain is simply a ledger and it stores transactions and associated data so anyone can verify claims.

Blockchains achieve this using cryptographic methods and a consensus protocol.²⁰ Think of it as using mathematics and computer science to create a type of database in the cloud. Once a record is written, it’s immutable, it’s a fact that cannot be altered. So once there is a decentralized trust broker that eliminates the need for a centralized authority, it can be used for many other things. If the human element can be removed by creating decentralized money, the obvious next question was ‘can the same mechanisms be used for decentralized authentication? …for decentralized voting, and so on?’

Blockchain use cases

Voting can be recorded on a blockchain and be immutable, transparent, tamper-resistant, inexpensive and convenient (vote with a mobile app). Is democracy safe when such a high percentage of an electorate don’t believe in the outcome of an election? Should a country’s leader be able to decide unilaterally to invade another country without a public vote? Without passing a high majority threshold?

Property rights are currently managed by some form of central registry. So if you have a title, or deeds to a house, a central actor has to maintain that database. What happens if that actor can manipulate or edit that database? What happens if there is a change of government?  Like when Isis took over Syria, or the turmoil in Ukraine. If the central actor(s) can just decide to update the history, then it becomes very difficult, after peace returns, to decide who actually owns what and where. Millions of people throughout the world live on disputed land. A blockchain could provide a more just system, without the presence of a central authority.

Along with Banking, Publishing is one of the oldest industries around. Although e-readers and online book shops disrupted the model to some extent, most companies operate in a centralized manner. You are typically buying a license to view an eBook, without ever owning the product. Book (book.io) is an innovative new platform that aims to disrupt the publishing space by bringing books (‘decentralized encrypted assets’) to the blockchain. Under this model, the buyer owns the digital asset, can resell the book after reading it, and ‘read to earn’ rewards to buy other books or engage with the platform in other ways, such as AMAs (ask-me-anything) with the author. There are all sorts of implications for readers, authors and publishers outlined in Book’s whitepaper.²¹

Supply chains are another ideal use for blockchains. During the Covid-19 pandemic, supply chains for personal protective equipment and vaccines were critical for millions of people. These goods were handled by many companies, and people were making life-and-death decisions based upon the stability of these supply chains and the reliability of the information in them. With blockchain technology, you don’t have to trust a central authority or third parties to make sure that the records were accurate.

Identity itself is a critical personal asset that is essential for many services to function inclusively for all. Traditionally you would need a passport or driver’s license for know-your-customer (KYC) checks or just get a credit score to be eligible for a loan. Many people’s identity has become linked with personally identifiable information (PII) in online profiles held by Facebook, Google and other centralized behemoths.

Today, your identity is at the mercy of third parties. Statements and claims are then made about that identity, again by credit agencies and government services. You, the subject, don’t actually own your own identity online. You’re not in control, and your identity – usually in the form of many identities online – is typically managed by middlemen and third parties who have the potential to manipulate the records against your best interest. Decentralized identity made possible by decentralized IDs (DIDs)²² and DID documents,²³ resolves many of these issues and provides greater privacy to the user.

Decentralized finance (DeFi) is about blockchain disrupting traditional banking services. Banking customers in the developed world are not in dire need of DeFi. In the developing world, where you might pay up to 80% interest on a microfinance loan, it’s easy to see why DeFi is starting to be accepted. That’s an important potential aspect of blockchain and cryptocurrencies – bringing three billion ‘unbanked’ people into the economy, liquefying trillions of dollars of illiquid wealth.

The above examples only scratch the surface. There are many other platforms that we use daily that can be improved with decentralized alternatives. So the point of these systems is to find a way to build them in a way where they work for the small guy in Africa, as much as they do the affluent banker sitting in a Manhattan skyscraper.

Charles Hoskinson’s early days in crypto

Charles Hoskinson is a Colorado-based technology entrepreneur and mathematician. He studied analytic number theory before he discovered cryptography. He was a supporter of the Ron Paul campaign for the US presidency campaign in 2008 and often speaks glowingly of how Paul inspired him.²⁴ Hoskinson was involved with Bitcoin from the early days:²⁵

So, the 2008 financial crisis happened and then I just kept seeing political failure after political failure. I said, there’s got to be a different way and then when Bitcoin came out, it was a marriage of a lot of things I loved. I love open-source²⁶ software and I love cryptography and the real hard science stuff, but then at the same time, there’s kind of this political undercurrent of anarcho-capitalism and libertarian ethics and these things that lived in the Bitcoin space and there was a completely different monetary policy. I said, ‘wow that's really cool, it’ll never work … but it’s really cool’, because it was one of those ‘chicken and the egg’ type of ecosystems where you say, ‘Well, for it to work, a lot of people have to take it seriously, but people only take it seriously if it works. How do you get that critical mass?’ Everybody said, ‘Oh, deflationary money can't work … We tried that in the 19th century, and it was a miserable failure so, yeah, don't even think about it.’ All the economists said Bitcoin would die.

I was a speculator. I bought a lot of Bitcoin and I was a miner. I had an AMD CrossFire set-up, and I was on Slush Pool²⁷… 1.2 giga hashes of mining power, which was quite a lot back in those days and I made a lot of Bitcoin, but I didn’t take the space too seriously. Then right around 2013, I noticed an inflection point; it was after the Cypriot crisis²⁸ where the government said, ‘Okay, it’s alright for us to just start taking money out of other people’s bank accounts to pay for things.’ Whoa! That’s probably going to happen here if we’re not so careful, and lo and behold bitcoin went from $4 to, I think $263. It was just a crazy surge and so, I said this will probably be a big thing. I need to get on the ship and if I don't get on the ship, it will sail right by me.

I had the analytic skills from the math world, and I programmed a lot, so I had cryptography skills and I’ve known about a lot of the stuff because there’s a strong overlap between number theory and cryptography. And then I also had all this monetary policy knowledge, so I got excited about the cryptocurrency space, but I didn’t know anybody. I didn’t know what to do in the space.

So, I said, ‘All right, well, I’ll go talk to one of my old professors and ask his advice’ and that’s Karl Gustafson over at the University of Colorado Boulder … Karl said, ‘Charles, those who cannot do… teach.’ So I created a free course on Udemy about Bitcoin. It was called ‘Bitcoin or how I learned to stop worrying and love crypto’²⁹ and I got 70,000 students and thousands of emails and I met everybody. I met Roger Ver, Erik Voorhees and Andreas Antonopoulos and all the big names in the cryptocurrency space, before they were big.

Bitcoin was ahead of its time in 2009. It allowed for the creation of decentralized value, and for it to be sent and received like an email. It wasn’t long until people wanted more. Just like when the web browser evolved from static to dynamic pages, programmability³⁰ was required to meet the demand for more applications.

As well as moving value, there’s also a story behind every financial transaction, because there are terms and conditions. For example, if you want to buy a book online, there will be a check to see if you have enough funds. If you pay the required amount, the book is sent to your Kindle if, and only if, payment is received. This is a contract; this is the story of a simple transaction. The first-generation blockchain, Bitcoin, wasn’t equipped for this. Hoskinson, and others such as Vitalik Buterin, another future co-founder of Ethereum,³¹ wanted to improve Bitcoin. But they were met with resistance, and it wasn’t easy to reach agreement on how to proceed.

Invictus Innovations & BitShares

Hoskinson met many people through his Udemy course. One of his students was Li Xiaolai who had founded Bitfund.³² Xiaolai offered funding to start a business together, so in June 2013, Hoskinson started a thread on Bitcointalk called Project Invictus,³³ named after a [William Ernest] Henley poem. The post asked what could be done to make Bitcoin ‘undefeatable’ and solve existing problems. The feedback focussed on two industry needs. First was the need for a stablecoin,³⁴ to limit exposure to volatility. The second was a need for a decentralized exchange.³⁵ This was around the time of the Mt Gox³⁶ collapse, so centralized exchanges were deemed a single point of failure. CH:³⁷

I said ‘alright, well is there a way we can bundle both solutions together?’, and of all people, the very first person who replied on the thread was Dan Larimer,³⁸ and he said, 'I'm in!' ...and he had this paper called BitShares.³⁹ So I read the paper, we rewrote it together, his dad (Stan) was involved. Stan, Dan and I, we started a company called Invictus together. [...]it ended up being two Larimers and one Hoskinson, so I took a buyout.

Around the same time, Buterin grew frustrated trying to expand Bitcoin’s functionality with colored coins⁴⁰ and Mastercoin.⁴¹ Trying to augment Bitcoin proved to be more effort than it was worth. CH:⁴²

Let's be honest here, it (Bitcoin) is the least sophisticated ledger, the least sophisticated consensus algorithm and it consumes more power than the country of Sweden or Switzerland. It is the least sophisticated scripting language, it is not useful at the moment, and it requires enormous effort to innovate.

We created Ethereum on the bones of colored coins and Mastercoin. We didn't just go create Ethereum. Everybody in that damn project was trying to do something useful with Bitcoin and they couldn't! They spent millions of dollars, and months and months to do basic things like issue an asset, and then suddenly with Ethereum around, you could do it with a few lines of code that we could put on a f$$king t-shirt!

So this is my counterpoint to Bitcoin, and my primary issue with Bitcoin, is of the insular nature of the community, especially the maximalists,⁴³ the inability to adapt and grow and adopt new technology, even when it's obvious that that tech is good like NIPoPoWs,⁴⁴ the fact that they brutally attack people who are innovating and call those people criminals and scammers for having the audacity to try different things.

The fact that the monetary policy can never be updated or evolved, that's both a blessing and a curse, and the ignorance of science, especially when it comes to proof of stake,⁴⁵ and this belief that what they've done is perfect and never can be changed and that cult of personality around the cult of Satoshi. That said, its digital gold, it's a standard, I think it’ll always have value. It's done a huge amount of good. Bitcoin is why we're all here, it's why I'm here. So I never will say it's a bad project and I'll never say it's not worth holding BTC.

Origins of Ethereum

Hoskinson met Anthony Di Iorio through a contact of his. Di Iorio ran the Bitcoin Alliance of Canada (BAC)⁴⁶ and asked him if they could use some of his educational material on Udemy. Hoskinson agreed and they started working together. Di Iorio shared Vitalik Buterin’s white paper and Hoskinson read it and provided feedback. The white paper went through several iterations, the group converged together, and the result was Ethereum, deemed now to be the second-generation blockchain. Gavin Wood was credited by Hoskinson as the person who built it in a proper way that actually would work. Hoskinson helped set up the initial legal structure. The main point of Ethereum was to add programmability to cryptocurrencies. CH:⁴⁷

So in 2009, to about 2013, that was the experimental phase of Bitcoin and then in 2013, Bitcoin got to about a billion dollars, a stable industry formed around it and I said, ‘Alright, well, it’s not going anywhere.’ Bitcoin is here to stay. The problem with Bitcoin though, is it’s blind, deaf and dumb, and what I mean by that is that you can’t do much with it other than just push bitcoins around. You can’t issue your own currency; you can’t write applications.

It was similar to when JavaScript was introduced to the web browser. Before that, the web browser worked, but websites were dull and static. JavaScript allowed for the likes of YouTube, Facebook and Google to offer dynamic content with videos and e-commerce. Similarly, with Bitcoin, you could send, receive, and display transactions, you could use metadata for interesting things but dApps weren’t possible, ICOs⁴⁸ weren’t possible, you couldn't issue your own custom token … all the interesting and useful features that now make up the DeFi landscape of the industry.

Ironically, Ethereum was announced at the January 2014 North American Bitcoin conference. Bitcoin had just surged from $100 to $1,000, so the event was boisterous and rowdy. The first Ethereum t-shirt, made for the conference, had source code on the back of it for issuing your own token. It was so awkward to do that with Mastercoin and colored coins. So ironically, Ethereum was also born out of frustration, frustration with Bitcoin’s rigidness and poor developer experience. By bringing a programming language to a blockchain, this allowed smart contracts⁴⁹ to be written to have customizable transactions. So now when Alice sent value to Bob, terms and conditions could be embedded within the transaction, bespoke to her particular needs.

Figure 1.1: Ethereum T-shirt at January 2014 launch

Hoskinson wanted to set up a proper company, a for-profit and have Founders Agreements.⁵⁰ After looking at the project’s structure and direction, he was worried nobody had any incentive to stay involved after the project was launched. He wanted ‘golden handcuffs’, vesting, and standard things a normal company would have. There was a disagreement as Buterin wanted it to remain an open-source project. Hoskinson argued that if everyone was paid upfront, nobody would be motivated to commit long term. It didn’t work out, Hoskinson left in June 2014.

There were no egos, or books written at that point. The group just wanted to produce ‘something interesting and cool’ to extend the functionality of cryptocurrencies. Ethereum went on to be a huge success. The term 'the Flippening' was even coined. It referred to the hypothetical moment of Ethereum overtaking Bitcoin as the biggest cryptocurrency. The main problem was scalability, it can’t handle millions of users, and billions of transactions. Bitcoin could only manage 7 transactions per second, Ethereum 10-20.

Governance was also a problem. It became a victim of its own success. Every single time there was a major debate, instead of resolving it amicably, there were messy hard forks.⁵¹ Ethereum split in two, with one half forming Ethereum Classic. Likewise Bitcoin had a breakaway faction forming Bitcoin Cash.⁵² Sustainability problems emerged. After the ICO money runs out for a project, or its venture capital funds run out, who will step in and fund things? These gaping holes in Ethereum’s design would be addressed by third-generation blockchains such as Cardano and Polkadot (founded by Gavin Wood).

The Ethereum platform forked into two versions: ‘Ethereum Classic’ (ETC) and ‘Ethereum’ (ETH). Prior to the fork, the token had been called Ethereum. After the fork, the new tokens⁵³ kept the name Ethereum (ETH), and the old tokens were renamed Ethereum Classic (ETC). Ethereum Classic formed as a result of disagreement with the Ethereum Foundation regarding The DAO Hard Fork.⁵⁴ Some people wanted to reimburse the funds. Others united under the ‘code is law’ philosophy, rejected the hard fork and split into Ethereum classic. Users that owned ETH before the DAO hard fork owned an equal amount of ETC after the fork.

Re: time at Ethereum. CH:⁵⁵

I don't imagine Vitalik has a super high opinion of me, and it is what it is. The reality is that we have very big philosophical disagreements about how things ought to be run. When I was there, I said, 'look if we are taking other people's money, we have to put that money into a structure that creates accountability. Furthermore we have to put golden handcuffs on the founders and keep them loyal to the project, because there's too many of them. There are eight founders and if they're not locked into something, then what's going to happen is they're all going to run away and create their own ventures.'

Which is what they did, Anthony (Di Iorio) did 'Decentral', Gavin (Wood) did PolkaDot⁵⁶ and Parity, I did Cardano. Seven of the eight are gone, and furthermore the incentives were set up that we got paid up front, with a founder reward, which I didn't take, the other seven did... basically if the projects successful, hallelujah, if it fails, hallelujah... but you've already got your maximum reward up front, whereas in an equity finance model, you have to build value over time, and you have a venture capital arm keeping you accountable.

So first, there was a fundamental disagreement about business strategy and execution vision. I felt a for-profit model with VC money, to build the protocol, made a lot more sense and then when the protocol was done, spin it out and have a governing foundation run it would be probably a much better approach.

That's one dimension, the other dimensions are interpersonal reasons. We had, for six months, been living like hippies in the Switzerland house and he was traveling around the world, and communication was very siloed, and paranoia and fear started building up. There are three books now written about this, and those books paint a portrait that there was a bunch of very brilliant people, that got two doses of brains and half a dose of social skills, myself included, and when you put them into a high-stress hippie-like situation, it breeds a lot of conspiracy theories and fear and these types of things.

...and frankly, there were just too many founders. So at some point you have to consolidate and there were really two different paths that Vitalik could choose, he was sitting in the middle, he could pick the business side, which is what I was advocating, and Anthony Di Iorio and Joe Lubin were advocating, or he could pick the tech, crypto anarchy, not-for-profit, egalitarian, meritocratic, open-source world.

Cardano is born

Now 0-2 as a crypto entrepreneur, Hoskinson felt disillusioned, but another door was to open. CH:⁵⁷

After Ethereum I took some time off, about six months, and I was actually going to leave the space. I did a TED Talk,⁵⁸ and I said ‘alright, this is my exit point, I'm going to tell everybody what the space is all about and then I'm just going to go do something else.’

Hoskinson’s talk focused on the matter closest to his heart, making finance universally accessible to everyone. He proffered that the main point of blockchain technology is about economic identity. That it should be geared towards the three billion people in the world without access to a bank account, who don't have identity systems nor property systems and therefore, live in perpetual poverty as victims of geopolitical circumstance.

The talk was well received. Jeremy Wood, who had managed operations at Ethereum and stayed in touch with Hoskinson, invited him to Japan to talk about a new venture with local businesspeople. Negotiations went back and forth for a few months on the proposed structure, how funds could be raised, and they reviewed Hoskinson’s unused roadmap from Ethereum. Eventually a deal was reached with Japanese investors to start the ‘Ethereum of Japan’ which would become Cardano.

There are three Cardano ‘genesis’ entities you need to know about:

The Cardano Foundation (cardanofoundation.org), now based in the Swiss canton of Zug, was set up as a governance body and is the legal custodian of the brand. The CF⁵⁹ is tasked with advancing the public digital infrastructure of Cardano. They liaise regularly with lawmakers and regulatory bodies, develop enterprise infrastructure tooling, strengthen operational resilience, and drive education and adoption through courses⁶⁰ and certifications. They also play a key role in developing sound and representative governance.

The Japanese people formed a company which later became Emurgo (emurgo.io),⁶¹ the commercialization arm of Cardano. Emurgo focuses on Education, Fintech infrastructure, developing the Yoroi wallet, ecosystem growth, smart contract audits and a social network called ‘Cardano Spot’.

In 2015, Hoskinson and Wood co-founded Input Output Global (iog.io), formerly IOHK (iohk.io). IOG is the development and science arm for Cardano. The rest of 2015 was focused on protocol development and a team of scientists were hired. The Cardano crowdsale⁶² ran from late 2015 to January 2017, managed by a Japanese company called Attain⁶³ who aggregated all the funds. IOG got a 5-year contract to build Cardano.

Right from the start, their mission was clear: ‘using peer-to-peer innovations to provide financial services to the three billion people who don’t have them’. IO believed in the founding principle of ‘cascading disruption’ – the idea that most of the structures that form the world’s financial, governance and social systems are inherently unstable and thus minor perturbations can cause a ripple effect that fundamentally reconfigures the entire system. The company committed to identifying and developing technology to force these perturbations in order to push towards a more fair and transparent order.

All of 2016 was devoted to science and research. The initial small team with massive ideas was Charles Hoskinson, Chief Executive; Jeremy Wood, strategy chief; Nikos Bentenitis, operations chief; Chikara Wakae, communications chief; Richard Wild, design chief; and Tomas Vrana, full stack developer.

November 4, 2020. What is IOG? CH:⁶⁴

With input output, what I wanted to do there was marry two things simultaneously. One, I wanted to have a company with a very strong philosophy about how to build products. I said, ‘these products are born as a scientific method and of evidence, and we need to follow formal methods⁶⁵ and evidence-based software and we need to follow a rigorous academic approach to protocol development’.

So that was one thing, the other thing was the types of products I wanted to build. What I believe in is the philosophy of cascading disruption. So basically what that means is that you're like the first domino, you're like the little pebble on the top of the hill that when you push it, it creates an avalanche. So you build a product, you embed in it all these processes and rules and then after a while, maybe a few years… you can actually walk away, and the product becomes self-evolving.

Back in 2015, IOG stepped back and asked a very simple question which was ‘What is the consequence of Ethereum's success? If it works, what's going to happen to the industry?’

They identified three problems that were inevitable if Ethereum was to succeed.

Scalability. The problem with the way Bitcoin and Ethereum were designed, and Vitalik Buterin has basically admitted this by building Eth 2 (Ethereum 2.0),⁶⁶ is that Ethereum can only get to a certain capacity, and at that point, it becomes untenable. Transactions get too expensive, system bloat sets in. A different protocol stack was needed so that, as you gain users, performance level is consistent. It needs to work similarly to centralized systems like Facebook or amazon where it can handle millions to billions of people. IOG sought to figure out how to solve that problem.

Interoperability. The world is made up of many standards, varying for different industry verticals and jurisdictions. It’s likely legacy financial systems aren’t going away, so it’s best to work with them on bridging where possible. Wi-Fi standards would never work if they were tied to manufacturers. If your Huawei mobile could only talk to a Huawei router, it wouldn’t be practical to roam anywhere. The reason Wi-Fi works is because it works for everybody regardless of your mobile manufacturer. Similarly, like with your funds and your identity, it would make life easier if information could flow seamlessly between the thousands of cryptocurrencies and legacy systems.

Governance, sometimes referred to as sustainability. Bitcoin and Ethereum have both encountered problems as they scale. There were no governance mechanisms to drive change. When they grew to millions of users, eventually it became impossible to make controversial decisions without fracturing the project. For example, Bitcoin had the ‘Big blocks versus SegWit’ debate which led to it splitting in two, Bitcoin Cash and Bitcoin. Ethereum had similar upheaval with the DAO hack. This divisiveness is a big obstacle to government adoption, Fortune 500 adoption and mainstream adoption because everyday users and corporations fear more infighting and hard forks every time a controversy, or hard decision arises.

Governance is not a sexy topic on Crypto twitter,⁶⁷ but it’s arguably the most important for a project’s long-term viability. Who decides how to change the system? How and when should an update be executed? A blockchain needs to have a short-range microscope for near and present dangers, and a long-range telescope for technical challenges on the horizon. For example, if all hell breaks loose when debating a parameter change, what happens when quantum computers arrive? It is inevitable somebody in the next few decades will produce a commercializable quantum computer that can break cryptography. We know it’s coming, so how does a fledgling protocol deal with this? IOG has had quantum resistance planned since the early days of the project and will implement it when appropriate.

There are also funding problems with first- and second-generation cryptocurrencies. There's a tragedy of the commons⁶⁸ scenario where most people agree essential infrastructure, or critical updates, are required but there's no mechanisms to apply for, or approve, funding for development.

From 2015 to 2017, IOG took a big step back and just did academic research and asked foundational questions, without deciding on anything. They asked, ‘what is a blockchain?’ They didn't even decide on proof of work or proof of stake. They just tried to create definitions and models and understand enough foundations so they could reasonably approach these problems.

Professor Aggelos Kiaysis⁶⁹ came onboard in 2016. IOG invented a new proof-of-stake protocol called Ouroboros, and proved it was possible and secure. They invented a whole gamut of interoperability protocols like NIPoPoWs (Non-Interactive Proofs of Proof-of-Work) and sidechain⁷⁰ protocols, as well as a governance stack. IOG staff have written and published 200+ academic papers cited countless times throughout the space, often by competitors. IOG staff have appeared at most major Cryptography conferences in the world.

As well as seeking out the best academics, IOG also reached out to the best engineering teams at companies such as Well-Typed, Tweag, and Runtime Verification, for people like Duncan Coutts, and Edsko de Vries, whose work includes the hard fork combinator discussed later. IOG (IOHK) feature prominently on Google Scholar, many of whom are professors or have professor-level citations, such as Dionysis Zindros, Kevin Hammond among many others.

IOG uses formal methods to implement rigorous security in theory and in development. All of IOG’s research papers go through some form of peer review. The goal is always to eventually implement high assurance code, using the same techniques one would see with the Shinkansen,⁷¹ or in aircraft engines, where system failure results in human death. These techniques are applied to IOG’s protocols, engineering and development, to garner a high level of trust in the quality of the code to avoid such debacles as the DAO attack, the Parity Wallet hack or the Solana Wormhole hack.⁷²

IOG chose one of the most scientifically oriented programming languages, Haskell,⁷³ in use and stress-tested since the 1980s. Prof Phil Wadler,⁷⁴ one of the creators of Haskell, led Plutus⁷⁵ development alongside Manuel Chakravarty, Prof Elias Koutsoupias and Prof Simon Thompson. IOG has funded research and development at the Blockchain Technology Lab at Edinburgh University as well as University of Athens, Tokyo Institute of Technology, Stanford University, and the University of Wyoming. Plutus and Marlowe⁷⁶ were launched at PlutusFest in December 2018 by this cutting-edge research team.

Cardano Timeline

Sep 2015 Crowdsale funded development and treasury
Aug 2017 Ouroboros paper accepted at Crypto 17⁷⁷
Sep 2017 Byron release
Dec 2018 Launch of Plutus and Marlowe at PlutusFest
Dec 2018 Sidechains paper⁷⁸ published
Dec 2019 Shelley Incentivized Testnet (ITN)⁷⁹
Mar 2020 Byron Reboot, first Hard Fork Combinator event
July 2020 Shelley release (decentralization)
Mar 2021 Full decentralization (d=0)
Sep 2021 Goguen release (smart contracts, Plutus V1)
Sep 2022 Vasil release (Plutus V2)
Nov 2022 Launch of Age of Voltaire at ScotFest
Feb 2023 'Valentine' hard fork
2024 Chang hard fork (scheduled)

Note that there was no white paper in all this time, instead IOG focused on building on principles. In the next chapter we’ll delve into more technical details and explain Cardano’s roadmap and naming scheme.

Hoskinson often laments at being introduced as a former co-founder of Ethereum. He prefers to be known for his work at IOG:⁸⁰

I have six (in 2021) years of history at IOG, and I have six months of history at Ethereum. What’s so disheartening is that Ethereum is the big project and Cardano isn't quite there yet, so Ethereum is what everybody knows me for. So they only had six months of data, where I had limited ability to influence and control things, and I was just one brick in the wall amongst many, and then at IOG, I've been the CEO, the big guy, so I've had the ability at my company to demonstrate what a vision would look like.

…and a lot of people often ask well what would have happened with Ethereum had you stayed? So we've already run that experiment. It would look a lot like Cardano, so how we built Cardano, the approach we took, that's exactly what Ethereum would look like. Similarly, they asked what would have happened to Ethereum had Gavin Wood had more say. Well, we already ran that experiment, we have PolkaDot.

Footnotes

1. ‘A brief (and fascinating) history of money’, britannica.com/story/a-brief-and-fascinating-history-of-money ↩

2. A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a link to a previous block, a timestamp and transaction data. By design, blockchains are inherently resistant to modification of the data. A blockchain is ‘an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.’ ↩

3. Bitcoin (BTC) is a cryptocurrency and a payment system that uses a public distributed ledger called a blockchain. Invented by a single (or potentially a group) under the Satoshi Nakamoto alias. On 31 October 2008, Bitcoin was introduced to a cryptography mailing list and released as open-source software in 2009. There have been various claims and speculation concerning the identity of Nakamoto, none of which has been confirmed. The system is peer-to-peer, so transactions take place between users directly, without an intermediary. These transactions are verified by network nodes and recorded in the blockchain, which uses bitcoin as its unit of account. ↩

4. A cypherpunk is any activist advocating widespread use of strong cryptography and privacy-enhancing technologies as a route to social and political change. Originally communicating through the cypherpunks email list, informal groups aimed to achieve privacy and security through proactive use of cryptography. Cypherpunks have been engaged in an active movement since the late 1980s. ↩

5. Satoshi Nakamoto (2008) ‘Bitcoin: A Peer-to-Peer Electronic Cash System’, bitcoin.org/bitcoin.pdf ↩

6. A genesis block is the first block of a block chain. The genesis block is almost always hardcoded into the software of the applications that utilize its block chain. It is a special case in that it does not reference a previous block. ↩

7. Bitcoin Source Code Walkthrough, drnealaggarwal.info/bitcoin-source-code-walkthrough/ ↩

8. Bitcoin’s logo, decrypt.co/43923/bitcoins-logo-the-story-of-the-big-orange-b ↩

9. Sound money is money that is not liable to sudden appreciation or depreciation in value. ↩

10. Price discovery is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers. ↩

11. Non-fungible token (NFT). Such a token proves ownership of a digital item in the same way that people own crypto coins. However, unlike crypto coins, which are identical and worth the same, an NFT is unique. A craze started with the Christie’s auction of Everydays: the First 5,000 Days, a collage of 5,000 digital pieces on March 11, 2021. Mike Winkelmann, known as Beeple, created the digital art and made an NFT of it. Bidding started at $100. It sold for $69.3m. Ten days later, Twitter co-founder Jack Dorsey sold an NFT of the first tweet for 1,630.5 ether ($2.9m) and donated the proceeds to charity. NFT became the Collins Dictionary’s word of the year for 2021. However, when the buyer of Dorsey’s NFT tried to sell it a year later, the highest bid was just $6,800. Ultimately, the value of an NFT is determined solely by what someone is willing to pay for it. ↩

12. ‘Five biggest bitcoin transactions in history’, cryptovantage.com/news/here-are-the-5-biggest-bitcoin-transactions-in-history/ ↩

13. Decentralization is the process by which the activities of an organization, particularly those regarding planning and decision making, are distributed or delegated away from a central, authoritative location or group. ↩

14. Web3 (also known as Web 3.0) is an idea for a new iteration of the World Wide Web which incorporates concepts such as decentralization, blockchain technologies, and token-based economics ↩

15. The Edinburgh Decentralization Index, ed.ac.uk/informatics/blockchain/edi ↩

16. Addressing Blockchain's Hidden Trade-Off, youtube.com/watch?v=FSByg_sdjaM ↩

17. Fiat money has been defined variously as: Any money declared by a government to be legal tender State-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard Intrinsically valueless money used as money because of government decree An intrinsically useless object that serves as a medium of exchange, also known as fiduciary money. ↩

18. In economics, hyperinflation quickly erodes the real value of a local currency as the prices of all goods rise. This causes people to minimize their holdings in that currency as they switch to more stable foreign currencies (hard currency). ↩

19. Distributed ledger technology (DLT) is a protocol or database that is consensually shared and synchronized across many sites, institutions, or geographies, accessible by many people, and enables the secure functioning of a decentralized digital database. ↩

20. A consensus protocol is a fault-tolerant mechanism that is used in blockchain systems to achieve the necessary agreement on a single data value or a single state of the network among distributed processes or multi-agent systems, such as with cryptocurrencies. ↩

21. Book.io Whitepaper, book.io/wp-content/uploads/2023/06/Book.io-Whitepaper-2.0.pdf ↩

22. Decentralized identifiers (DIDs) are a type of identifier that enables verifiable, decentralized digital identity. A DID refers to any subject (such as a person, organization, thing, data model or abstract entity) as determined by the controller of the DID. In contrast to typical, federated identifiers, DIDs have been designed so that they may be decoupled from centralized registries, identity providers, and certificate authorities. ↩

23. DID document: a set of data describing the DID subject, including mechanisms, such as cryptographic public keys, that the DID subject or a DID delegate can use to authenticate itself and prove its association with the DID. A DID document might have one or more different representations. ↩

24. Charles Hoskinson on How did Ron Paul inspire you, youtube.com/watch?v=jqiLVxSAt8w ↩

25. Slot Leader Episode 1: Interview with Charles Hoskinson, youtube.com/watch?v=YT0PXYBEnuE, Charles Hoskinson: The Future of Blockchain in Africa, youtube.com/watch?v=m3eSEPrJ-1A ↩

26. Open-source software (OSS) is software in which source code is released under a license in which the copyright holder grants users the rights to study, change, and distribute the software to anyone and for any purpose. ↩

27. Slush pool, slushpool.com/home/ ↩

28. Cypriot Financial Crisis, theatlantic.com/business/archive/2013/03/everything-you-need-to-know-about-the-cyprus-bank-disaster/274096/ ↩

29. Charles Hoskinson and Brian Göss, ‘Bitcoin or how I learned to stop worrying and love crypto’, udemy.com/course/bitcoin-or-how-i-learned-to-stop-worrying-and-love-crypto/ ↩

30. Programmability is the capability within hardware and software to change; to accept a new set of instructions that alter its behavior. Programmability generally refers to program logic (business rules), but it also refers to designing the user interface, which includes the choices of menus, buttons and dialogs ↩

31. Ethereum is a decentralized, open source blockchain with smart contract functionality. Ether is the native cryptocurrency of the platform. Ethereum was conceived in 2013 by programmer Vitalik Buterin. Additional founders of Ethereum included Gavin Wood, Charles Hoskinson, Anthony Di Iorio and Joseph Lubin. ↩

32. Bitfund, crunchbase.com/person/xiaolai-li ↩

33. Project Invictus, bitcointalk.org/index.php?topic=229315.0 ↩

34. Stablecoins are cryptocurrencies designed to minimize the volatility of its price, relative to some ‘stable’ asset or a basket of assets. A stablecoin can be pegged to another cryptocurrency, fiat money, or to exchange-traded commodities. Stablecoins redeemable in currency, commodities, or fiat money are said to be backed, whereas those tied to an algorithm are referred to as seigniorage-style (not backed) ↩

35. Decentralized Exchanges (DEX) are peer-to-peer (p2p) online services that allow direct cryptocurrency transactions between interested parties. ErgoDEX and WingRiders are just two of many on Cardano. ↩

36. Mt Gox was a bitcoin exchange based in Tokyo. Launched in 2010, three years later it was handling 70% of all bitcoin transactions worldwide. In February 2014 Mt Gox suspended trading, closed its website and exchange service, and filed for bankruptcy protection from creditors. In April 2014, the company began liquidation proceedings ↩

37. Cardano, Crypto Toxicity, & Institutional Collapse, youtu.be/5-vsuU-OIhI?t=1405 ↩

38. Dan Larimer, iq.wiki/wiki/dan-larimer ↩

39. The History of BitShares, how.bitshares.works/en/master/technology/history_bitshares.html ↩

40. Colored coins are a class of methods for associating real-world assets with addresses on the Bitcoin network. Examples could be a deed for a house, stocks, bonds or futures. ↩

41. Omni (formerly Mastercoin) is a digital currency and communications protocol built on the bitcoin blockchain. It is one of several efforts to enable complex financial functions in a cryptocurrency. ↩

42. Charles Hoskinson Interview ‘Ivan on Tech’, youtu.be/dWW_RRgAxKI?t=3500 ↩

43. A maximalist is a person who holds extreme views and is not prepared to compromise. ↩

44. Non-Interactive Proofs of Proof-of-Work (NIPoPoWs) are short stand-alone strings that a computer program can inspect to verify that an event happened on a proof-of-work-based blockchain without connecting to the blockchain network and without downloading all block headers. For example, these proofs can illustrate that a cryptocurrency payment was made. ↩

45. Proof of stake (PoS) is a type of algorithm by which a cryptocurrency blockchain network aims to achieve consensus. In PoS-based cryptocurrencies the creator of the next block is chosen via various combinations of random selection and funds committed (ie, the stake). In contrast, the algorithm of proof-of-work-based (PoW) cryptocurrencies such as bitcoin uses mining; that is, the solving of computationally intensive puzzles to validate transactions and create blocks. ↩

46. Bitcoin Alliance Canada, coindesk.com/bitcoin-alliance-launches-canada ↩

47. The Erica Show EP9 - Charles Hoskinson, youtu.be/l35h0xW47-Y?t=904 ↩

48. Initial coin offering (ICO) is a means of crowdfunding via use of cryptocurrency, which can be a source of capital for start-up companies and open-source software projects. In an ICO, a percentage of the newly issued cryptocurrency is sold to investors in exchange for legal tender or other cryptocurrencies such as bitcoin or ether. ↩

49. A smart contract is a computer protocol intended to facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts were first proposed by Nick Szabo in 1996. Proponents of smart contracts claim that many kinds of contractual clauses may be made partially or fully self-executing, self-enforcing, or both. The aim with smart contracts is to provide security that is superior to traditional contract law and to reduce other transaction costs associated with contracting. ↩

50. A Founders' Agreement is a contract that a company's founders enter into that governs their business relationships. The Agreement lays out the rights, responsibilities, liabilities, and obligations of each founder ↩

51. Hard fork: a total overhaul of the network’s protocol, resulting in a shift in operational flow from one model to another. Cardano has a unique mechanism, called the hard fork combinator, for executing hard forks with minimal disruption. See Chapter 4. ↩

52. Bitcoin Cash is a cryptocurrency created in mid-2017. A group of developers wanting to increase Bitcoin's block size limit prepared a code change. The change, called a hard fork, took effect in August 2017 and the cryptocurrency split in two. At the time of the fork anyone owning bitcoin was also in possession of the same number of Bitcoin Cash units. ↩

53. Crypto tokens are digital assets that are built on a cryptocurrency blockchain. A blockchain is a digital ledger that stores information in blocks that are linked. This information can be transaction records or full-fledged programs that operate on the blockchain, which are called smart contracts. The ‘coin’ of a cryptocurrency is a token. In effect, it’s the digital code defining each fraction, which can be owned, bought and sold. ↩

54. The DAO was a decentralized autonomous organization (DAO) that was launched in 2016 on Ethereum. After raising $150 million USD worth of ether (ETH) through a token sale, The DAO was hacked due to vulnerabilities in its code base. ↩

55. Charles Hoskinson on leaving Ethereum, youtube.com/watch?v=AWSI78nh6jc ↩

56. Polkadot is a blockchain network being built to enable Web3, a decentralized and fair internet where users control their personal data and markets prosper from network efficiency and security. Polkadot is the flagship project of the Web3 Foundation ↩

57. Cardano, crypto toxicity, & institutional collapse, youtu.be/5-vsuU-OIhI?t=21 ↩

58. The future will be decentralized | Charles Hoskinson | TEDxBermuda, youtube.com/watch?v=97ufCT6lQcY ↩

59. Cardano Foundation and the Ecosystem with Frederik Gregaard, youtube.com/watch?v=6TCAbR6aIk0 ↩

60. Cardano Academy, academy.cardanofoundation.org/ ↩

61. EMURGO - the way forward, youtube.com/watch?v=KhJVvRiupJU ↩

62. A crowdsale is a type of crowdfunding that issues tokens that are stored on the user's device. The tokens can function like a share of stock and be bought and sold ("equity tokens"), or they can pay for services when the service is up and running ("user tokens") ↩

63. Cardano CrowdSale, nasdaq.com/articles/iohk-launches-cardano-blockchain-ada-now-trading-on-bittrex-2017-10-02 ↩

64. The Erica show EP9 - Charles Hoskinson, CEO of Input Output, youtu.be/l35h0xW47-Y?t=611 ↩

65. In computer science, formal methods are a particular kind of mathematically based techniques for the specification, development and verification of software and hardware systems. The use of formal methods for software and hardware design is motivated by the expectation that, as in other engineering disciplines, performing appropriate mathematical analysis can contribute to the reliability and robustness of a design. ↩

66. Ethereum 2.0 is a new version of the Ethereum blockchain that will switch to a proof of stake consensus mechanism, moving from the original, existing proof of work mechanism. ↩

67. Crypto Twitter is a term to describe the Twitter subculture and community that surrounds the topics of blockchain and cryptocurrency. ↩

68. The tragedy of the commons is a situation in a shared-resource system where individual users, acting independently according to their own self-interest, behave contrary to the common good of all users, by depleting or spoiling that resource through their collective action ↩

69. Prof. Aggelos Kiayias, iohk.io/en/team/aggelos-kiayias ↩

70. A Sidechain is a blockchain that runs in parallel to the main blockchain. Tokens can be transferred and synchronized between the main chain and the sidechain ↩

71. The Shinkansen is a high-speed railway in Japan. Initially, it was built to connect distant Japanese regions with Tokyo, the capital, to aid economic growth and development ↩

72. Solana’s Wormhole Hack Post-Mortem Analysis, extropy-io.medium.com/solanas-wormhole-hack-post-mortem-analysis-3b68b9e88e13 ↩

73. Haskell is a general-purpose, statically typed, purely functional programming language with type inference and lazy evaluation. Designed for teaching, research and industrial applications, Haskell has pioneered a number of programming language features ↩

74. Prof Phil Wadler, iohk.io/en/team/philip-wadler ↩

75. Plutus is a suite of programming tools for creating Cardano smart contracts ↩

76. Marlowe is a programming language created specifically for the creation of financial smart contracts. It is restricted to financial applications and is intended for finance professionals rather than programmers ↩

77. Crypto 17, iacr.org/conferences/crypto2017/ ↩

78. Gazi1, Kiayias, Zindros (2018), ‘Proof-of-Stake Sidechains’, eprint.iacr.org/2018/1239.pdf ↩

79. Dynal Patel, ‘Incentivized Testnet: what is it and how to get involved’, iohk.io/en/blog/posts/2019/10/24/incentivized-testnet-what-is-it-and-how-to-get-involved ↩

80. Charles Hoskinson on leaving Ethereum, youtube.com/watch?v=AWSI78nh6jc ↩