Charles Hoskinson has identified the problematic situation of stablecoins on Cardano as a significant obstacle to decentralized finance (DeFi) activity on the network. To address the liquidity shortage of stablecoins, the founder has presented an ambitious plan, although critics point out potential drawbacks.
While recent metrics for Cardano have been positive, Hoskinson claims that the data for the network's stablecoins remains disappointing. In a post on X, the founder of Cardano revealed that the ratio between the market capitalization of stablecoins and the total TVL (total value locked) of DeFi is significantly lower than that of other blockchains.
Ethereum and Solana have ratios of 195% and 125%, respectively, while Cardano's is only 9.65%. According to Hoskinson, this indicates a severe liquidity shortage in stablecoins, which negatively impacts DeFi activity on the network.
Hoskinson argues that a possible solution would be to convert 140 million ADA into stablecoins from a portion of the Cardano Treasury. His proposal involves converting ADA into USDM, Cardano's stablecoin backed by fiat currency, to "fill a significant gap in the ecosystem."
Recently, USDM partnered with Lace Wallet in an effort to become the dominant stablecoin on the network amid growing interest in Bitcoin DeFi.
"What is sinking Cardano is the situation of our stablecoin," said Hoskinson. "This would start to solve it."
Hoskinson adds that the measure will generate additional non-inflationary revenue for the Treasury while simultaneously improving its overall treasury.
Follow me for more analysis and news, give it a thumbs up 👍 and share, that would help me a lot to keep growing.