Charles Hoskinson, the founder of Cardano, has put forth a proposal to convert $100 million worth of $ADA from the project's treasury into stablecoins and Bitcoin. This strategic move aims to enhance liquidity and accelerate the growth of Cardano's decentralized finance (DeFi) ecosystem.
The Need for Change
Cardano's current stablecoin-to-DeFi ratio stands at under 10%, with approximately $33 million in stablecoins and $330 million in total value locked (TVL). This is significantly lower than its competitors, Ethereum and Solana, which boast ratios of 190% and 110%, respectively. Hoskinson believes that diversifying the treasury holdings can help bridge this gap.
Proposal Details
Conversion Amount: $100 million worth of ADA
Asset Allocation: A blend of stablecoins (USDM, USDA, and ADA-backed stablecoin synthetics like IUSD) and Bitcoin to support Bitcoin DeFi
Goal: Achieve a stablecoin-to-TVL ratio of at least 33% to 40% in the DeFi ecosystem
Rationale and Benefits
Hoskinson argues that this move will not significantly impact the ADA market, given the project's daily trading volume. He estimates that the sale could be absorbed within 30 to 90 days using various mechanisms. The proposal also includes plans for yield-generating instruments and potential governance structures, such as an elected board to manage the sovereign wealth fund.
Potential Outcomes
Increased Liquidity: Boost Cardano's DeFi ecosystem and attract broader participation
Yield Generation: Earn 5-10% annual returns, potentially generating $5 million to $10 million worth of ADA
Attracting Venture Capital: Potential investment from top venture capitalists like a16z and Pantera Capital
What's Next?
Formal discussions about the proposal are expected to begin at the upcoming Rare Evo event, with implementation potentially occurring before year-end. This move reflects a broader trend in the crypto industry, where projects are exploring treasury diversification and yield generation strategies.