Blockchain’s future hinges on privacy and identity, says Charles Hoskinson

The next frontier isn’t money. It’s identity and computational privacy

The strength of distributed ledger systems lies in their ability to evolve while preserving decentralization, trust, and security. Ethereum illustrates how adaptive architectures can absorb regulatory shifts and rising complexity, turning friction into resilience.

Speaking exclusively to Fast Company Middle East, Charles Hoskinson, co-founder of Ethereum and founder of Cardano, frames that growth as proof that collaboration matters more than winner-takes-all dynamics.

He sees computational privacy and verifiable identity as the next frontiers. In an increasingly complex ecosystem, success hinges on understanding what makes innovation truly enduring.

DESIGNING ENDURING SYSTEMS

Successful innovation, for Hoskinson, depends on context, use case, and application. “The real test is whether the system has all the right DNA and conditions so that, if left to evolve over five, ten, or fifteen years, it moves in the right direction,” he says. Cryptocurrencies and blockchain are complex adaptive systems: once the initial state is set, the network begins to self-evolve. Unlike traditional tech companies, where perpetual stewardship drives each new version, blockchain ecosystems are shaped by independent participants. “You do your best to put the initial conditions in place,” Hoskinson notes, “but at the end of the day, it’s going to do its own thing.”

These ecosystems grow organically, guided by community participation. Initiatives range from cross-chain experiments to deep explorations of platforms like Cardano, yet the broader network remains vibrant and resilient. Hoskinson emphasizes that the founding principles of decentralization, utility, and long-term resilience must endure. Metrics such as TVL, transaction volume, and active users offer signals of growth, pointing toward systems that could eventually become integral to economic, social, and technological frameworks.

He stresses that this evolution may span decades and does not require the founder’s constant presence. Much like the early internet, which Vint Cerf and Bob Kahn built without foreseeing the emergence of Google or Amazon, cryptocurrencies evolve in ways beyond any one person’s control. Recognizing which elements can be guided and which must be left to self-organize is essential to designing systems that endure and remain impactful over time.

BALANCING DECENTRALIZATION WITH REGULATORY REALITIES

Decentralization and regulation rarely align neatly. Blockchain operates on a fundamentally global scale, and attempts to impose top-down rules often prove futile. As Hoskinson notes, “Years ago, in 19th-century America, one state legislature tried to define pi as equal to three,” highlighting the absurdity of expecting strict control over self-evolving systems. No nation-state can fully control protocols built on decentralized architectures.

Regulation tends to matter most where people or institutions interact with blockchain, securitizing assets, custodying cryptocurrencies, or using wallets. The underlying protocols remain largely beyond control. “You can’t regulate the free flow of information on the internet,” he observes, pointing out that attempts to govern internet traffic over decades showed how damaging strict oversight can be. Money, voice, and information inherently seek freedom; regulation works best by managing the consequences of that freedom rather than constraining the system itself.

Attempts to regulate protocols themselves are fraught. Trying to do so, Hoskinson warns, is “the road to hell.” Protocols aren’t obliged to comply, restrictions can be weaponized, and no single nation can control a global system. National laws do not automatically bind other countries, and decentralized networks continue to grow and evolve despite localized pressure, demonstrating resilience and adaptability.

Compliance challenges such as identity verification and transaction monitoring remain significant. Automating these processes with AI, what Hoskinson calls “algorithmic law,” offers a more productive path than manual oversight. This approach shifts the conversation from limiting cryptocurrency to creating scalable, technology-driven solutions. Blockchain has grown from zero to 50 million users, providing a model of sound money.

Unlike traditional monetary systems, which surged unsustainably in the 2010s, younger investors are already moving toward stable alternatives, with older ones following through structured products. Governments can no longer control underlying protocols, making regulation of on- and off-ramps, exchanges, and securitization the most meaningful way to guide activity without interfering with decentralization.

MISUNDERSTOOD DECENTRALIZATION

Policymakers often fundamentally misunderstand decentralization, treating blockchain as a centralized product with a single company or issuer speaking for the entire system. “They believe that just by bullying or attacking that company, they can somehow compel it to change the nature of the protocol,” Hoskinson explains. He likens this to targeting gravity itself: “It’s like picking a company and saying, ‘This is the gravity company, and if we yell at them enough, they’ll change gravity so we can all fly.’ It’s absurd.”

Regulators often miss how blockchain is reshaping money. “Growing up, there was a notion of money. Our grandparents had a notion, and their grandparents had a notion,” he says, tracing its evolution from commodity money to gold-backed currency and fiat. “What is ‘good money’? Do you have to have the nation-state you live in control of your money?” In Argentina, roughly $100 billion of a $700 billion economy is already in cryptocurrencies. If trends continue, most Argentinians could use private money by decade’s end, gaining broader access to real estate and economic opportunities.

This decoupling of the state from money and separating personal wealth from centralized institutions is a profound shift. Historically, governments inserted themselves into gold-backed money through debasement, inflation, and other measures to fund wars or luxuries, often at the middle class’s expense.

Hoskinson notes inflation’s long-term effect: Cryptocurrencies, he suggests, expose these flaws and offer an alternative. Much of the tension with governments, he explains, stems from a lack of understanding. Any fundamental shift, like money, could reshape social contracts, governance, and national stability. Innovations such as cryptocurrencies or central bank digital currencies inevitably respond to these pressures, providing a more resilient financial framework.

“We want to run our own financial system with self-custody,” Hoskinson says. “We don’t want banks controlling everything. We want zero-fee transactions. Credit markets should be market-based. And we want the ability to securitize assets, intellectual property, or small businesses, without an investment bank.”

Hoskinson notes that regulators often appear out of touch. While they claim to protect people, they point to failures like Bernie Madoff or FTX. Yet when these centralized, regulated systems collapse, crypto is blamed, even though the technology itself is not at fault.

Embracing monetary change can spur exponential economic growth. Dubai and Abu Dhabi, he notes, have seen cryptocurrency businesses grow 500% in four years thanks to welcoming policies. The lesson, he concludes, is clear: fighting decentralized protocols simply doesn’t work.

ALL EYES ON THE MIDDLE EAST

Hoskinson points to the Middle East’s proactive embrace of blockchain as a magnet for innovators. At global forums like the World Governance Forum and the Web Summit, he recalls Dubai’s bold pitch: “Come to Dubai. We want to increase blockchain businesses by 500 percent.” Authorities went beyond words, inviting entrepreneurs to sit with VARA in Dubai or the ADGM in Abu Dhabi to co-create regulations, allowing rapid progress without sacrificing societal safeguards. This willingness to collaborate, he notes, contrasts sharply with other regions where regulation often acts as a barrier rather than a bridge.

He sees the region as a global hub for entrepreneurs. With China repeatedly banning cryptocurrencies and Europe imposing heavy regulations, innovators need a welcoming environment. “You go to the Middle East, and they welcome you with open arms. You get to keep the majority of the fruits of your labor,” he says. Such supportive policies, he adds, create fertile ground for innovation, but they also come with the responsibility of maintaining a forward-looking vision. “But now they have to populate it. The only way to get people to come is by not getting in the way of them being themselves,” he notes, highlighting the importance of freedom and flexibility for growth.

Hoskinson also points to a potential challenge: as the U.S. becomes more pro-crypto, retaining scaling companies could be harder. Dubai and Abu Dhabi are excellent for starting and funding ventures, he says, but scaling to the size of global players like Coinbase may still require entering U.S. markets, where gateways such as Genesis and Clarity provide deeper pools of capital and stronger legal frameworks. Even so, he stresses that this doesn’t diminish the Middle East’s role as a critical launchpad for innovation.

At the same time, he adds, the U.S. is not the only model. Countries like Finland, Switzerland, and Singapore have also opened doors to innovators, showing that different paths exist for building globally competitive companies.

THE PHILOSOPHY OF DEFI

Hoskinson frames decentralized finance as more than a technical breakthrough. It’s a philosophy. Too often, he argues, Web3 is seen as just another financial product. “At the end of the day, financial products tend to become fungible and soulless,” he says. “It doesn’t matter if you’re selling potato chips or computer chips, as long as you’re selling ‘chips.’”

DeFi, he stresses, is different. “It can have humanitarian components, deep philosophical components, and they’re highly blendable,” he explains. In the Cardano ecosystem, some financial tools are designed to combine social impact with economic design, showing that DeFi can serve broader purposes beyond profit.

He likens DeFi to the periodic table of finance: each activity is an atom, and like chemistry, they can be combined into limitless molecules. On Wall Street, a handful of insiders decide which structures reach the market, producing only a few yearly. With DeFi, anyone can innovate, creating thousands of new options. “It can scale from multinational, BlackRock-level products all the way down to four neighbors forming a micro-cooperative,” Hoskinson says. “The same rails support all of it. There’s a universality behind it.”

This openness naturally drives what he calls the “smart cow effect.” If one participant discovers a new design, the innovation spreads across the ecosystem within 18 to 36 months. Unlike Wall Street, where strategies are secretive, DeFi democratizes experimentation, allowing everyday people to adopt and improve ideas.

Regulatory technology illustrates this principle. “You just write software to fix it,” he says. With real-time audit and control structures, failures can be detected and corrected automatically. He recalls the first major DeFi setback, the 2016 DAO hack, which cost $150 million. At the time, many declared DeFi, governance, and Ethereum dead. Yet the industry not only survived, it’s now 100 times larger, with exponentially more sophisticated governance, regulatory, and control structures.

“That’s the magic and promise of DeFi,” Hoskinson says: rapid evolution, democratization, scalability from small to large, and composability, turning five or ten molecules into thousands of innovative new ones.

THE AGE OF AGENTIC AI

AI and blockchain are often seen as separate revolutions, one reshaping intelligence, the other trust. But Charles Hoskinson describes them as cousins. “Blockchain is precise, resource-intensive, and built as a replicated system with a single source of truth. AI, particularly agentic AI, is data-intensive and non-deterministic,” he says. Their intersection lies in governance: both are non-human systems shaped by collective intelligence and human incentives, and regulation remains a key challenge.

Blockchain can track AI training data and ensure contributors are compensated. “Blockchain can help manage AI royalties, tracking where training data comes from and ensuring contributors are compensated,” Hoskinson explains. It can also power distributed AI training using incentivized networks, and decentralized governance models like DAOs could guide AI alignment.

AI, in turn, makes blockchain more approachable. “Even someone with no prior knowledge of cryptography or wallets can learn about Bitcoin in an afternoon with a capable AI companion,” he notes. AI also acts as a safeguard, spotting scams or market anomalies that might slip past human oversight.

When combined, AI and blockchain can coordinate distributed agents resilient to failures or bad actors. “AI orchestration using proprietary agents, personality vectors, and retrieval-augmented generation models can be enhanced with zero-knowledge cryptography and privacy-preserving technology,” he says. Blockchain provides security, governance, and coordination, while AI adds accessibility, interpretability, and protection, pointing to more secure, scalable, and human-centered systems.

THE LAST MILE OF INNOVATION

Hoskinson delivers a hard truth about blockchain: it isn’t primarily about money, tokens, or asset appreciation. At its core, it’s about designing systems where people who don’t trust each other can still engage and collaborate. Yet, the industry’s fixation on tokenization and market performance has fueled a competitive mindset that rewards fighting over building.

The bigger challenge, Hoskinson warns, will emerge once regulation stabilizes. Blockchain’s fiercest competitors won’t be banks but the tech giants: Apple, Google, Microsoft, Meta, and others. With billions of users and near-total control over the devices and platforms people rely on daily, these companies already shape global interaction, regardless of background, language, or geography.

Looking ahead, Hoskinson sees computational privacy and identity as blockchain’s next great leap. He has seen three generations of cryptocurrency: Bitcoin as the first, smart contracts as the second, and scalability, interoperability, and governance as the third. The fourth, he explains, is about computational privacy and selective disclosure. “It’s the last mile because it bridges the legacy world and DeFi,” he says.

Every system has a private side, whether a McDonald’s cash register, an HR dispute, or a multinational trade deal. Cryptocurrencies primarily handle the public, while the private side remains centralized and vulnerable. When a single party controls it, like some stablecoin issuers, the very premise of decentralization is undermined.

Computational privacy is the solution. “That’s why we built Midnight,” Hoskinson notes, adding that dozens of other teams are pursuing the same challenge. The stakes are enormous: trillions of dollars in tokenized real-world assets depend on securely blending transparency with confidentiality.

Hoskinson goes further: computational privacy could be the key to running a nation-state on cryptocurrency. Economic, political, and social systems have public and private layers—transactions, identity verification, and other sensitive data. Integrating these securely represents the frontier of blockchain innovation. “It’s the hardest mile because the technology is so complex, but once we achieve it, traditional finance and DeFi merge into a unified system,” he explains.

Yet, the industry risks self-sabotage. The bigger threat isn’t governments or banks, but the gravitational pull of Big Tech. Companies like Apple or Google, armed with engineering talent, cryptography expertise, and the ability to roll out wallets to billions overnight, could overwhelm smaller blockchain projects. “Imagine if they integrate cryptocurrency wallets into their platforms, it’s a massive competitive advantage,” Hoskinson says.

For the community, moving beyond rivalries and token tribalism is critical. Maximalism and short-term obsession with token prices have weakened the industry’s core character. Its true strength lies in principles that tech giants cannot replicate: decentralization, resilience, censorship resistance, and self-sovereign identity. “Success comes when those values are embraced widely, even by people who don’t care about crypto for its own sake,” he adds.

ABOUT THE AUTHOR

Karrishma Modhy is the Managing Editor at Fast Company Middle East. She enjoys all things tech and business and is fascinated with space travel. In her spare time, she's hooked to 90s retro music and enjoys video games. Previously, she was the Managing Editor at Mashable Middle East & India.

Source: https://fastcompanyme.com/impact/blockchains-future-hinges-on-privacy-and-identity-says-charles-hoskinson/