The Cardano treasury holds 1.5 billion ADA, valued at around $513 million, sparking a new proposal in the Cardano community. The proposal suggests burning the ADA to lower the circulating supply. In the cryptocurrency world, reducing supply often leads to an increase in the value of remaining tokens. This strategy has been widely adopted by other projects and has gained popularity.
Big Pey, a key figure in the Cardano community, brought up the idea that the Cardano treasury ADA could be put to a vote for a burn. His post quickly caught attention, especially as it pointed out that the Cardano community now has the power to vote on this decision through its governance system. Many supporters of this proposed ADA burn argue that it could boost ADA’s price by cutting down its supply.
Charles Hoskinson Warns Against ADA Burn, Advocates for Ecosystem Growth
Although token burns are popular, Charles Hoskinson has openly opposed the idea. In fact, the Cardano founder expressed his concerns, stating that burning ADA from the treasury would harm the ecosystem. According to Hoskinson, the funds were gathered from block production and transaction fees, meaning burning them would take away crucial resources from developers and stakeholders who actively contribute to the network.
In a social media post, Hoskinson explained that the ADA in the treasury isn’t just “extra” tokens but the result of economic activity and hard work. In addition, he stressed that burning these tokens would hurt those who have built and supported the Cardano ecosystem. Certainly, his message resonated with others who believe the treasury should be used to promote further growth within the network.
“For those advocating burning the funds of the treasury, understand that the treasury isn’t some pile of preprinted tokens that came from nowhere. It was aggregated from a tax on block production and transactions,”
Charles Hoskinson stated, highlighting the value of the treasury for ongoing development.
DRep Jaromir Tesar Calls Burn a Mistake, Suggests Alternative Uses
Moreover, other members of the Cardano community, including DRep Jaromir Tesar, also oppose the ADA burn proposal. Tesar called the potential burn a “terrible mistake.” He argues that instead of burning the ADA, the funds should support Cardano’s governance and development. Additionally, Tesar suggests using the treasury to provide liquidity for decentralized finance (DeFi) applications, fund developers through Catalyst, or invest in marketing efforts to attract more users to the network.
“Burning a small amount of these coins might have a short-term impact on ADA’s price, but the long-term effect would be negligible,”
said Tesar. He, along with Charles Hoskinson, is pushing for more constructive uses of the ADA to ensure the network continues to grow.
Cardano Community to Decide ADA Burn Through Governance Vote
Notably, the Cardano governance system lets community members vote on major proposals, including the ADA burn. Specifically, this governance model gives Decentralized Representatives (DReps) the power to vote on key issues like treasury use, network changes, and ADA burns. ADA holders choose DReps by staking their tokens, entrusting them to represent the Cardano community.
Although Hoskinson and Tesar oppose the burn, they don’t have the final say. The community will ultimately make the decision through a governance vote, deciding how to manage the treasury in the future. This vote will mark a significant milestone for Cardano governance, highlighting the community’s ability to make important financial decisions.
