Cardano founder Charles Hoskinson has responded to community criticism regarding his proposal to convert 140 million ADA tokens into the USDM stablecoin.
Proposal to Convert ADA to USDM
Charles Hoskinson's proposal to convert 140 million ADA tokens from the ecosystem treasury into the USDM stablecoin aims to address stablecoin liquidity shortages within Cardano’s DeFi ecosystem. Hoskinson argues that this conversion could yield annual returns of 5-10%, strengthening participation in DeFi without market disruption. He pointed out that strategies involving over-the-counter trades and time-weighted average prices could minimize price volatility.
Community Representatives' Concerns
Decentralized Representative “Whale” expressed doubts regarding the market impact of such a large conversion, claiming it could lead to unsustainable selling pressure. While acknowledging potential long-term benefits for DeFi development, he emphasized the risks associated with large-scale token conversions that might trigger front-running and depress ADA’s value. As an alternative solution, he suggested minting crypto-backed stablecoins like ObyUSD for liquidity enhancement.
Stablecoin Metrics Comparison
Hoskinson cited a comparison of stablecoin metrics, indicating that Cardano’s current ratio of stablecoin market cap to total value locked stands at 9.65%, significantly lower than Ethereum (195.3%) and Solana (127.4%). This discrepancy highlights the limited utility of stablecoins within Cardano’s ecosystem and suggests a need for improvement through increased stablecoin circulation.
Hoskinson remains confident in the growth potential of Cardano DeFi, believing that the treasury conversion can be effectively managed to enhance stablecoin liquidity and support overall ecosystem development.
