In this Digital CxO Leadership Insights series video, Mike Vizard interviews Dirk Hohndel, the chief open source officer for Cardano Foundation, about blockchain.
Mike Vizard: Hey folks. Welcome to the latest Digital CxO videocast. I’m your host Mike Vizard. Today, we’re with Dirk Hohndel, who’s the chief open source officer for an outfit called Cardano Foundation. They’re working on the blockchain, as they say. Dirk, welcome to the show.
Dirk Hohndel: Thanks Mike. Good to talk to you.
Mike Vizard: So, I don’t think a lot of people know who you guys are, so maybe you could just get started with an explanation of what is the mission for Cardano Foundation and how does it relate to open source?
Dirk Hohndel: So the Cardano Foundation is engaged in the development and the ecosystem around the Cardano blockchain, which is one of many, many blockchain technologies that everyone loves to be excited about. But in my mind, a blockchain technology that actually has quite a few differentiators compared to the others. It’s a proof of stake blockchain. It’s research based; it’s written in a way that makes it provably correct. The code actually works. It’s been super stable. It has a lot of these features that people love to talk about, but not a lot of people have actually been able to implement, including smart contracts and a lot more in the layer two of a blockchain.
How this all relates to open source? So, well, that’s an interesting question. That’s kind of what I’m going to do over the next few years, I hope. Very typically, what you see is that companies release the sources of their products of their projects under an open source license, which is a wonderful first step to creating an open source community. But it’s just that, it’s just a first step. And if you want to actually have open source development with an open governance, with a model that inspires trust and kind of implements that vision of a decentralized future where you don’t have single points of control in your ecosystem, it takes a lot more than just releasing your sources. You actually need to build this community. You need to bring people together. You need to give them an ability to influence how the software is developed; what the features are. And the Cardano ecosystem has done a lot of this before. So there is a process: the Cardano improvement process, which sort of sifts through which innovation is brought into the Cardano ecosystem.
But one of the goals of why the Cardano Foundation hired me is to turn this much more into a large thriving third party contributory, open source community. And that’s what I’m here to do. And I’m on week three, so bear with me if on some of these things, I’m still a little iffy on the details.
Mike Vizard: We also hear a lot about Web3, and the connection to blockchain is kind of driving this next generation of the web as at work. What does that kind of look like in your mind at this point? Because I think most people have it in their head that the Web is this kind of Web 2.0 centralized construct. So what’s a decentralized construct going to look like?
Dirk Hohndel: Well, so this is one of those interesting areas where I will tell you, I understand the technology, I hear a lot of the ideas and a lot of the enthusiasm, but I don’t have a clear vision today where I think Web3, whatever that is, will end up landing for all of us, because I’m always skeptical of the people who say I have the solution. Now you explain your problem to me, and I’ll tell you how I’ll fix it, because I actually like to start with a problem and then figure out what is the right solution for it. So I’m not the person who will pitch to you the future of a decentralized web, because I don’t know the answers. I don’t know actually all the questions.
Mike Vizard: Do you at least think that maybe blockchains will play a larger role in changing the way we conduct transactions in this exciting world of digital business transformation that we’re all in, and maybe that’s the place to start?
Dirk Hohndel: Yeah, so that I very much believe in. Again, it’s not a pass here. It’s not an it solves all problems in the world, but it solves some very fundamental problems, I think. And what blockchains can give you is the immutable record of transaction without having to have a central source of trust. So, if you look at how transactions work today, we have that bank that is the central source of trust. And that then talks to the two parties in a transaction and makes sure that the transaction actually happens; that goods and money change hands, and everyone is happy at the end and they just take, you know, a small fee. And if you do a transaction between, let’s say the United States and a country in Southeast Asia, that small fee can be 25% of the value. And the time it takes to do this transaction can be four days, four business days or a week.
And you look at this and you go, we can do better than this. We can do near instantaneous transaction. We can do orders of magnitudes, smaller cost for all of this, so we can improve the way these transactions work. And we can do that without loss of reliability, loss of trust, loss of the ability to actually ensure that the transactions happen so that the technology allows you to change something that in my mind today is pretty broken. But again, I don’t think this technology solves all problems. I’m very aware that this technology brings up new problems, but it’s one of those things where someone invented a new way to do something, and the way is hopefully better. And now we need to find how this fits into our models; how we can use this to make the world a better place, right?
Mike Vizard: Do you think we’ll see maybe the emergence of private coins that are used by vertical industries to facilitate a particular set of transactions amongst themselves using a blockchain platform, because they don’t really need to interact with the banks to do that when it’s a very well defined, well known partner network? So we can just kind of privately conduct some transactions, and then everybody can cash out in whatever country they’re in at the end of it.
Dirk Hohndel: Yeah. So, I think this is one of those value propositions. What I talked about first was, you know, a permission list, global blockchain. This is what the Cardano foundation has been doing, but you can use that same technology to create these private permissioned environments where you now say we are this subgroup. We have a different set of trust rules between ourselves. We transact all of this business for a day, or for a week, or whatever your time period is. And then at the end we turn whatever token, whatever utility token we used, to calculate our transactions. We convert this back into fiat currency. This is something that is actually happening today. And this is something that certainly is one of the interesting use cases here, especially if you have a vertically integrated environment where you already have very tight business relationships, and you can avoid the delays and the cost of a traditional banking transactions.
And oh, by the way, completely not blockchain related. You already see this when, when Apple is trying to do their own credit card or when now Amazon is rumored to do their own credit card right there. This idea of cutting out the banks, cutting out the middle man to reduce the friction and the overhead cost. And this is a technology situation where you don’t need to be a multitrillion dollar company that can create its own bank. Any company can create the technology stack that now allows them to do that. So that’s where the transformational part of this comes in.
Mike Vizard: Do you think multiple blockchain platforms will flourish or will there ultimately be a consolidation around a small number? Cause I look around the landscape today, and it seems like there’s quite a few.
Dirk Hohndel: There’s a lot around. Yes. so you look at innovative times in the industry, and if you look at how spurts of new technology comes out, it’s very typically chaotic and diverse; and a ton of new ideas come out, and a ton of new technologies are launched. And then, over time, it narrows down to fewer, more mature, successful choices. I think part of the nature of what drives the blockchain industry, what drives the people behind these technologies is that desire for decentralization, and the desire for localized control will push against a lot of the centralization. So I don’t think we will end up like in the phone space where you have Android or iOS. Those are your two choices. I think we will have more choices. But I don’t think we will have tens of thousands of them, because that creates so many interoperability problems and so many acceptance problems.
One of the things that we and the Cardano Foundation are looking at is this whole idea of interoperability. How do you build bridges between different blockchains? How are you able to move transactions from here to there? How do you create a digital identity that allows you to identify yourself to people on two different chains so that you can have trusted transactions across both of them? How can you create that without creating a centralized entity that now suddenly again has control? So there are a lot of interesting, both social and technical challenges that I think are ahead of us, and that we hopefully have some good ideas to address.
Mike Vizard: Do you think there’s some work to be done still in the area of standards? If I look back at Web 2.0, one of the things that drove it was we created this series of de facto standards, at least that everybody seemed to subscribe to. Will the same thing, play out with blockchain and Web3?
Dirk Hohndel: Well you’re asking all the hard questions aren’t you? Standards are incredibly important in order to be able to inter-operate, especially to interoperate in highly diverse environments. And the good things about standards is there are so many to choose from. There are so many jokes about how standardization tends to work. And so I think we will see a, a whittling down to fewer implementations. But what we will generally see is not traditional standardization. So we go through the _____ standards and create actual standards. We will much more see implementation based standards.
If you look at a lot of what has happened in the open source space in the last two decades, where standards would define by creating implementation, releasing them under an open source license and people agreeing on that implementation as the way they do things. So I think open source will play a huge role in driving that standardization without having a single body that will then define a fixed set of rules that everyone will need to follow.
I often compare this as at the one end, you have like the telco space, right? You want to be able to use your phone in any country that you go to. So the standards, how a 5G transmission is initiated, how data is transferred, how it’s encoded, how billing is done, all of this needs to be very, very rigid because of the way you interact with it. On the other end, you have something like, how do you interact with the Linux desktop? You know, there are hundreds of different Linux distributions, and every single one is slightly different, has a slightly different user experience. Has the menus a little different, has that a little different. So you have this massive diversity that is still based on a very shared infrastructure of sources and knowledge. And in this spectrum, somewhere on that spectrum, I expect Web3 to land as well, where some things will be more regimented because for interoperability they will have to be the same for everyone, and everything else will be giving people the opportunity to innovate and to bring new ideas into the space, and to do interesting spins on something that already exists.
We see so much innovation in this space. So many people every day come with a new idea, and there is this, this mantra and brainstorming that says there are no bad ideas. I beg to differ. There are a lot of bad ideas. And I think a lot of the ideas that that currently are being put out there are actually questionable, but there are also a ton of really, really good ideas. And that’s what I’m excited about.
Mike Vizard: You kind of alluded to this earlier, but there are concerns about the way blockchain might be able to scale. There’s people critical of the amount of compute that is generated and the impact that this is going to have on carbon emissions, and all this other stuff. So are these problems to be solved, and that’s kind of part of the opportunity and the challenge?
Dirk Hohndel: Yeah, so absolutely. I am deeply skeptical of proof of work blockchains. Obviously some of the best known blockchains are based on the idea of proof of work, which means that you have to do some very, very energy intensive expensive computations in order to prove that you’re worthy to write the next block into the chain. And you you’ve seen at this point, Bitcoin alone is one per mill of the energy consumption of this planet. That seems completely insane to me. The Cardano blockchain is the proof of state blockchain that works very differently and is inherently far more energy efficient.
There is a lot of other challenges in this space where people are very skeptical and where people do a lot of strong arguments to show, oh, this is evil stuff. And a lot of this reminds me of the newspaper articles from the beginning of the 20th century in London newspapers when they talk about how these self-driving vehicles are the devil and will never catch on because truly a gentleman wants to sit in a horse drawn carriage. And a lot of that, that just, oh, you know, don’t you dare touch my status quo. Here are all the reasons why your innovation is never going to work. I think that has repeated itself through history and that’s what we are seeing right now. We see a lot of very aggressively naïve criticism of the blockchain technology that isn’t born out by fact.
So there’s, there’s truth on both sides of this. And the challenge for us as an industry are to find ways to actually come to good solutions and create technology that makes a difference and is useful for the people who are trying to build a business around it. And that will be at the end of the day, how we see what is successful, and who can create an environment where the large enterprises in this world, where the banks in this world, where the individual app vendors in this world, where the people needing that service are saying, “Oh, I’m going to use that because this does what I need.” And that’s going to be the proof at the end of the day that says, here’s a technology that makes a difference versus here’s a cool idea, but it never went anywhere.
Mike Vizard: So what’s your best advice to folks who just kind of sit back and wait for this to develop some more, because it’s really in the realm of the heavy duty coders and those folks, or should organizations of all types start maybe dabbling in this space a little bit, because it’s one of those things where you got to be in it to win it someday.
Dirk Hohndel: I think it is really important for companies to start building an opinion and a technology stack around blockchain technology that takes advantage of the strength of this technology. The ability to have a permissionless immutable ledger that allows you to do transactions at arm’s length, without a middleman taking a cut. That is a value proposition that is hugely influential and a lot of interest to a lot of industries. I can draw you pictures in pretty much any industry in the way they transact their business, where you can see that you can optimize, accelerate and improve the trust in these transactions, improve the transparency; how people can see that you actually are doing the right thing using blockchain technology. So I think if you are a company with an IT based business, which today is what, 95 plus percent of all companies, you have to start building an opinion. You have to start experimenting with this and understanding how it affects your business, because waiting until somebody else figures it out and suddenly is in an environment where they can execute faster, execute cheaper, execute more reliable than you; any of those three, all of those three, that will be a huge technology disadvantage for your company. So I think this is definitely the time to get engaged. That doesn’t mean you need to suddenly change your business and do everything blockchain based. That will be foolish, but it’s something that you need to be engaged in, and you need to monitor it. You have an opinion, and you need to start experimenting with it.
Mike Vizard: All right. Hey Dirk, thanks for being on the show.
Dirk Hohndel: My pleasure. Thanks for having me.
Mike Vizard: All right. And thank you all for watching this latest episode of the Digital CxO videocast. You can find this episode on digitalcxo.com, along with all our other episodes. We invite you to check them out. In the meantime, never stop experimenting.