Charles Hoskinson, the founder of Cardano, has proposed a bold new plan: a decentralized sovereign wealth fund for the Cardano network. He envisions a fund worth at least $1 billion, actively managed and diversified beyond just ADA (Cardano’s cryptocurrency).
The Current Situation and the Vision
Currently, Cardano’s treasury holds about 1.7 billion ADA, roughly $1.2 billion. While significant, Hoskinson argues it’s underutilized. It’s essentially a static pool, with no mechanisms for generating returns. His vision is to transform this into a dynamic, yield-generating fund.
The plan starts with converting around $100 million worth of ADA into a mix of stablecoins and Bitcoin. This would be done gradually to avoid significantly impacting market prices. The goal is to use this initial investment to generate returns through various DeFi (decentralized finance) strategies.
Addressing Cardano’s Liquidity
A key reason for this proposal is Cardano’s relatively low liquidity compared to other networks like Ethereum and Solana. It has a much smaller amount of stablecoins, hindering user experience and attracting listings on smaller exchanges. The proposed fund aims to address this.
Fund Structure and Governance
Hoskinson envisions a professionally managed fund, overseen by an elected board. This would be structured similarly to successful sovereign wealth funds like Norway’s. The fund would generate yield through various means, including on-chain money markets, real-world asset protocols, and Bitcoin DeFi. These returns would then be used to buy more ADA, creating a compounding effect.
The governance model is still being worked out. Hoskinson hopes to finalize the proposal by August for community discussion, considering options like quadratic voting and multiple administrator regimes to ensure transparency and accountability.
Expanding Beyond ADA
The plan goes beyond simply managing ADA. The upcoming Midnight sidechain, with its own token, will necessitate a multi-asset portfolio. Hoskinson also suggests Cardano could become a DeFi hub for other cryptocurrencies like Bitcoin and XRP, generating additional revenue for the fund.
Addressing Concerns
Some critics worry that selling $100 million in ADA could negatively impact the market. Hoskinson counters that Cardano’s daily trading volume is far higher, and large transactions regularly occur through over-the-counter (OTC) channels.
The Bigger Picture
Hoskinson sees this as a crucial step in Cardano’s maturation. He believes that as a significant blockchain network, Cardano should manage its resources like a sovereign entity. The ultimate goal is to grow the fund to over $1 billion within five to ten years, boosting the overall value of ADA.