- Charles Hoskinson addresses the increasing demand for USDC.
- The Cardano Founder expressed concerns about exposing the network to centralization by integrating asset-backed stablecoins.
- Hoskinson asserts that users should be able to participate in markets without the fear of exclusion, warning that integrating USDC could compromise decentralization.
Calls for a fiat-backed stablecoin on Cardano have reached unprecedented levels, with the community passionately requesting the integration of USDC into the network. Members are highlighting several potential benefits of having a major stablecoin and how it could transform the network’s DeFi scene for the better.
However, as demand for USDC grows, Cardano Founder Charles Hoskinson’s concerns have also begun to surface, particularly regarding centralization and the potential risks of surrendering too much power.
Hoskinson Uneasy Over Asset-Back Stablecoins
In a recent video titled ‘Legacy is Eating Crypto,’ Charles Hoskinson expressed concerns about the growing demand for USDC, warning that it could invite centralization into Cardano. Hoskinson began by asserting that asset-backed stablecoins were ‘problematic.’
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Expanding on his view, Hoskinson noted that while stablecoins only represented 10% of the crypto market cap, USDT and USDC dominated on-chain volumes with a 70% transaction volume share.
Expressing his apprehension, the crypto pundit highlighted the regulatory risks of asset-backed stablecoins, noting they were regulated entities. This meant they were subject to laws and regulations that could affect holders if issuers were required to comply with local policies. With USDC and USDT, holders are, for the most part, subject to what the US government says.
Additionally, Hoskinson raised concerns about the potential divisiveness of asset-backed stablecoins in the event of blockchain forks, highlighting their influence over network decisions. The Cardano founder added that algorithmic stablecoins were not subject to these issues.
Hoskinson Defends Algorithmic Stablecoins
Despite previous skepticism and ridicule directed towards the Cardano Founder for his support of algorithmic stablecoins, particularly in light of events such as the Terra Luna collapse and the challenges faced by other algorithmic stablecoins, Charles Hoskinson reiterated their compatibility with cryptocurrencies.
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Hoskinson explained that algorithmic stablecoins were more compatible with the crypto industry since it took crypto assets to create other crypto assets. He further justified that the custody and algorithms governing algorithmic stablecoins are entirely managed on-chain, unlike asset-backed stablecoins.
The crypto pundit also emphasized that algorithmic stablecoins lack the power to influence and divide since users can participate in on-chain voting processes to determine if they want the stablecoin on chain A or chain B in case of a hard fork.
While voicing his concerns about centralization, Hoskinson also addressed the recent surge in the popularity of spot Bitcoin ETFs.
Hoksinson Criticizes Bitcoin ETFs
The Cardano Founder asserted that large institutional players like BlackRock and Fidelity have recently gobbled up significant amounts of Bitcoin, cautioning their dominance could lead to concentration of power in the crypto industry, with a few players controlling a large portion of the market.
Highlighting the surge in centralization, Hoskinson remarked,
"The community is starting to invite the vampires… It's my job to express concerns and let people know that when these entities enter, they gain a lot of power and influence."
Extrapolating the rise in centralization, the Cardano Founder emphasized that major players could soon dictate users’ level of transactional privacy, custodial standards, listing criteria, and governance, ultimately determining which chains are considered legitimate.
He further noted that these institutions could also decide which chain gets liquidity and which doesn’t. The crypto pundit warned that if protocols were not worthy, according to these players, they could end up like Monero, which recently got delisted across modern exchanges.
Charles Hoskinson concluded that users should be able to participate in markets without fear of censorship and exclusion. He stressed that decentralization was essential to cryptocurrencies and should not be handed over to legacy actors.
On the Flipside
- A prominent crypto data aggregator recently sparked controversy by asserting that the lack of a solid stablecoin option on Cardano meant no meaningful DeFi occurred.
- USD-backed Cardano native stablecoin Mehen is scheduled to launch in March 2024.
- Charles Hoksinson shared in July 2023 that Cardano, in its current guise, couldn’t facilitate USDC and the issuer’s demands.
Why This Matters
Cardano’s DeFi sector currently boasts over $390 million in total value locked, ranking 14th on the leaderboard. Cardano’s success has been achieved organically despite the absence of a major stablecoin issuer like USDC or USDT on the network.
While Charles Hoskinson expresses concerns about exposing the network to potential centralization, given their influence in the market and the DeFi scene, the lack of a solid stablecoin option could impede the network’s growth, especially when compared to other chains that readily embrace and thrive by incorporating USDC and USDT into their ecosystems.
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