Hi, this is Charles Hoskinson broadcasting live from warm, sunny Colorado. I wanted to make a video to provide an update about the pentad. There has been some Twitter conversation about reimbursements, among other things.
When the original pentad proposal came out before 1010, as people were coming together and thinking about this, the value of ADA was 83 cents or higher. So, at 70 million ADA, that's about 58 million dollars worth of money to work with. The current value of the pentad proposal, at the current price of ADA, is about 18 million dollars. The original idea of the pentad proposal being a pentad is that there was a midnight and a Cardano side, and we would use the negotiating power and capabilities of the Midnight Foundation to bundle these things and get a better price in aggregate for everything.
With the current funding level of the pentad, the cost of the integrations just for Cardano is greater than the value that was given for the integrations. This means that the Midnight Foundation now has to pay out of pocket for all of its integrations. It participated, worked hard, and negotiated for an end result of getting absolutely no subsidy or funding whatsoever for any of its integrations, which is greater than 10 million dollars.
The Midnight Foundation has also been negotiating with Fireblocks, and it's important for people to understand that there has been a collection of types of integrations with Fireblocks. Prior to all of this, there was a relationship between Iagon and Fireblocks, and they were negotiating with Fireblocks independent of the pentad. They didn't reach out to us and say, "Hey, we'd like to be part of this pentad and merge negotiations together." They reached an independent integration fee and then came and said, "Well, we'd like to be reimbursed even though it wasn't part of the original governance proposal and we weren't in the pentad."
In a time when there was 58 million dollars of value, it’s okay to try to find ways to get some more value to different actors, especially if they contributed to or helped a relationship along. However, it's important to understand that the negotiations they were conducting independent of the pentad were for a different type of integration with Fireblocks than the integration that the Midnight Foundation has been pursuing, which is much more intimate and expensive.
I understand that people want to go to Twitter, which is often the least productive channel, and talk about these things. Everyone in the pentad is at a loss. We did not make a profit, and the vast majority of the integrations will require out-of-pocket expenses from the Cardano Foundation, the Midnight Foundation, Input Output, Emurgo, and Intersect, along with long-term liabilities because many of these things required multi-year contracts. IOG is not a signer on any of these integrations and takes none of the liabilities. Their leadership seems to believe that they should still be reimbursed.
Prior statements I made were under different facts and circumstances, and I'm trying to set the record straight today. We, as an ecosystem, have to stop shooting ourselves in the foot and living in an age of endless drama. When people don't get what they want, they go to Twitter and complain about it. I myself left Twitter and now mostly run it through third parties and bots because I realized I wasn't part of the solution to that culture and was contributing to that bad culture. So, I took a step back and changed the way I was doing things.
The purpose of the pentad was a global reset on the concept of delegated executive authority to bring a group of actors together to try to figure out a way to push the ecosystem as a whole forward. And that's what we did. It took 84 days from when we signed the deal with Circle to when we had USDCX installed, activated, and turned on Cardano. It's already the number one stablecoin on Cardano.
There is a deep and detailed integration for layer zero, as there is for Pyth. We've gotten Dune Analytics and many other things inside the initial pentad. That is the advantage of coordinating in this way. It requires a lot of hard work and collaboration. When people hear things they don't like, if their attitude is to burn the whole house down, weaponize their community, and then go to Twitter to complain about it, that's not productive or helpful. It doesn't show a healthy ecosystem.
We have to work together if we want to get out of the mess we're in. If we want to see the MAUs, TVL, and transaction volume of Cardano increase, and we want to see Cardano's DeFi ecosystem thrive, there has to be good faith coordination. People have to accept that facts and circumstances change. We couldn't predict 1010 and the markets going from 83 cents down to 25 cents.
While the markets were good, I was one of the strongest advocates for a sovereign wealth fund for Cardano to divest a hundred million dollars worth of ADA and convert it into a stablecoin. Had we done that when I advocated for it, we would have done it at 80-cent ADA. We could have pre-purchased all the ADA sold at this current level and still had a huge slush fund of stablecoin liquidity to deploy in USDCX and augment our ecosystem. A variety of things happened that slowed down the decision-making for that, but that's an example of when we sometimes get in our own way.
Looking to the future for Tent Ed V2, there's a long list of Cardano applications on our network right now that absolutely need a strategic investment to get to the next level. If they don't get that investment, there's not a high probability they will survive more than 12 to 24 months. This is a great buying opportunity for us as an ecosystem. We can create a weighted index of all those things. The Cardano ecosystem can take ownership of its DApp and DeFi layer and make that property of the treasury. They can use those resources to get listed, continue building their roadmaps, and use commercially critical integrations to connect other ecosystems and bring in liquidity.
Here's the problem: there will be winners and losers in that process. If our attitude as an ecosystem is that people not in an index proposal immediately go and try to burn down the entire house and say everything about Cardano is corrupt and wrong, we're never going to move forward, and we're never going to reach a consensus. We have to make difficult decisions at 25-cent ADA. As an ecosystem with great promise, we have failed to deliver on the promises of our DeFi ecosystem. If we're going to make the case to VCs and external actors that Cardano should be their first choice, they have every right to ask if Cardano invests in itself and if Cardano as an ecosystem speaks with a unified voice.
We did that with the pentad for the first time in a long time. In 84 days, we went from signing a deal that took four years to make to having it on our network. That is the power of unification. To attack that structure of unification or to say it doesn't honor its commitments when it never made those commitments is misguided. No, me making a video does not commit the pentad. I'm not in charge of it. I'm a member of one of five voices that has to live with the reality that when it wanted to do it, it went from 58 million to today a value of 18 million. That's the reality, and we have to deal with the fact that there's a $40 million shortfall between when we wanted to do it and where we're at today. Every single member of the pentad has to accept that shortfall, meaning out-of-pocket commitments and obligations have to be made up.
External people not connected to that have no obligation or commitment. They should not simply be reimbursed. It's not a reasonable demand. If every single time we try to move forward with this mindset, we get caught up in drama, we'll run into the same problem we had with the Cardano sovereign wealth fund. It was a great opportunity. We would have made three times our money already and been able to fully reimburse the treasury and have a bunch of stablecoins to play with. But because we couldn't converge for a variety of reasons, we're here today.
We need to move with one voice, with urgency, and we have to accept that there's much to do. We can't rely on the infrastructure of Cardano being pristine and awesome to be our competitive differentiator. In any ecosystem, not only do you have infrastructure, but you also have utility and experiences. If you don't have great experiences and utility, you have useless infrastructure.
I'm a big believer in extended UTXO, liquid non-custodial staking, and the fact that Leios has solved the blockchain trilemma. I believe in that, and I think it's a massive competitive differentiator. But that has to be matched with a DApp and DeFi ecosystem that's competitive and offers experiences that are comparable to or greater than those of other chains. If it's not matched with those things, we are not competitive as an ecosystem.
The purpose of the pentad is to figure out a path together where we can get these things done using the Cardano treasury and the Cardano ecosystem. But that's a two-way relationship. It can't just be a collection of organizations sitting up in the clouds mandating down. It's also the Cardano ecosystem engaging and figuring out how to communicate about what we need as core utilities and experiences. We have to ask ourselves what advantages our infrastructure provides to everyone.
We have a great infrastructural advantage for Bitcoin DeFi. We have a program called Pogen that we've been working on for a while to implement Bitcoin DeFi, led by Omar Hussein. We have a great program with Midnight to add privacy, selective disclosure, and much better abstraction primitives for cross-chain transactions, as well as for account abstraction to improve user experience and safety, ultimately bringing privacy to the masses. That's a competitive differentiator. If Cardano embraces these differentiators, we can deliver utilities and experiences to market that Ethereum and Solana do not have, which will be the basis for our growth in TVL, user base, and transaction volume.
But we have to be willing to embrace that and work together. Pentad V1 built the roads. We now have highways connecting us to the Circle network. Soon, we'll have highways connecting us to the layer zero network. We have tier one oracles integrated, and we're now recognized by analytic sites. An increasingly larger number of custodians are working with us, as evidenced by the fact that Midnight can now be listed and has been listed on tier one exchanges as the first Cardano native asset.
That's awesome. If millions of users want to come in, they can use those highways, but they have to have a reason to drive on them. There has to be something unique, compelling, and differentiating to drive on those highways. That's what the next iteration is about. But we can't build that iteration if there's relentless dissonance and an attitude that the minute someone can't get what they want, they go and burn the whole house down. It's not an ecosystem worth investing in, and it's not one where people will want to come.
As we close out Pentad V1 and finish the final integrations, I'm very proud of the other four core entities we worked with: Phil from Emurgo, Jack from Intersect, Frederik Gregaard from the Cardano Foundation, and Femi Sayed from the Midnight Foundation. They acted to the best of their abilities in incredibly challenging situations and often faced fundamentally unfair negotiations. We could get there for most actors, but some were just too unreasonable about what they wanted. For the most part, Cardano is now connected to the entire cryptocurrency ecosystem, and we can reap great rewards from that.
The next stage is for us as an ecosystem to come together, reset, and be realistic and reasonable. The Cardano ecosystem's treasury should take ownership in a weighted index of the Cardano DApps and DeFi layer so that all of you as ADA holders have a vested interest in the DeFi ecosystem. It's not an either/or; it's an "and." We're together. Once we take that investment, we all work together to make that 10x our ecosystem in terms of monthly active users, total locked value, and transaction volume.
The DApp and DeFi ecosystem of Cardano can grow and thrive, providing strong reasons for people to transition from Solana, Ethereum, Bitcoin, and other ecosystems into the Cardano ecosystem. What I do as an infrastructure person at Input Output, along with our infrastructure partners like Intersect, Pragma, and the other node builders, is ensure that the infrastructure is ready for all those people to come and visit. Someone has to manage the power, ensure the sewage gets done, and make sure those roads can handle the traffic. That's what Ouroboros Leios is about, which solves the blockchain trilemma. That's what Hydra is about. That's what Paris is about. We need to ensure that all those things are in place, and we have to figure out how to make that work sustainably and in a decentralized way across the ecosystem.
It's a tremendous challenge. Just because your infrastructure can support it doesn't mean people will utilize it. The next level up is using that delegated executive function to figure out how we put all these pieces together for everyone everywhere so that we can elevate this ecosystem to the next level. I don't think there's any reason we can't do that.
Our biggest unique selling proposition is our governance system. Ethereum doesn't have this. Bitcoin doesn't have this. We can debate, but once a vote is taken, it becomes the official position of the Cardano ecosystem. There's no way to do this with Bitcoin as they tackle quantum resistance. There's no way to do this with Ethereum as they navigate an increasingly complex roadmap where a single founder is trying to keep it all together with a small group of entities, and no one is ever quite happy with it. But there is a way to do this with Cardano.
You spoke last year in the fastest and one of the most unanimous votes we had in the Cardano ecosystem, a supermajority, that you wanted these commercially critical integrations. You didn't ask the whole ecosystem to do it; you asked five entities to figure it out. We made it happen to the best of our abilities within the budget allotted. Those entities will now come together with more people to figure out how to create a weighted index of the most valuable utilities and experiences to get the Cardano DeFi ecosystem where it needs to go.
It's a complicated question with many moving pieces, and it's much more controversial than it was before because it's not just a pass-fail. There's an implicit endorsement or lack thereof of certain ventures. But it's the only way we can get this ecosystem where it needs to go because there's no capital coming in from VCs. There simply isn't enough investment at the TVL level, transaction volume, or revenue of the DeFi ecosystem to sustain growth in that direction. The treasury has to be engaged as a lender of last resort to create this. But it's not a gift, a bailout, or a grant; it's a strategic investment as an ecosystem.
If we do this and bet right as an ecosystem, all those things in the weighted index can grow tremendously, creating a huge return just like the sovereign wealth fund could have done if we had acted decisively. It's a choice we have to make. In my opinion, as a member of the ecosystem, we should embrace it. It's not my decision. The power of an on-chain governance system is that you, the holder of ADA, ultimately get to decide. If we decide not to go in that direction, you can propose your own way. If enough people get on board, it will get done. That is the power of decentralization and decentralized governance.
We all, to the best of our abilities, get to make the case for where we think we should go and how we should get there. All we ask is that after a decision is made, we disagree and commit if we were on the losing side. That's how we move forward. If we're unable to do that, we have every right to complain, but we're not being productive. No one wants to be on a boat where half the people say, "I never really wanted to go there anyway," and complain the entire trip. Anytime something bad comes up, they say, "See, I told you so." It doesn't solve the problem.
Once the ecosystem has made a decision, each of us, whether we agreed with it or not, has to find a way to work together to achieve the intended goal and outcome. Decisions being made are to help Cardano grow and thrive. They're not made in a way that only if you win should you care about Cardano growing and thriving. If you're a member of this community, you have no incentive to cut off your nose to spite your face. If you lose, you can say, "You know what? Let's push forward."
I've lost many arguments, and I had to set aside my disagreements and frustrations about the past and say, "Let's completely reset the working relationship and find a way to work together." After we did that, 84 days after signing a deal, we had Circle on the network. That's the power of disagreeing and committing. I'm not asking people to do things that I'm not personally willing to do myself or have done myself.
If we want to thrive and grow as an ecosystem, this is the attitude and mentality we must have. If we want to show the rest of the cryptocurrency space that we are fundamentally different, we must demonstrate that through how our governance works. Cardano has a massive treasury, and it is the largest DAO by population and voting of any in the entire cryptocurrency space. It's the only one of the top 10 that has a governance system this sophisticated and capable. It's useless if we don't use it correctly.
Part of using it correctly is being decisive about our goals. We are exiting the era of infrastructural differentiation. Our competitors do a lot of great stuff. While we can argue that we're better, no consumer will adopt Cardano because its infrastructure has some intrinsic superiority over everything else. It's not a primary concern for the retail holder. Where differentiation will come is in the experiences and utilities. What do you do, how do you do it, and for whom? That is where the differentiation will arise.
Part of the pentad was to turn on everything so we could start the process of asking that question. The next stage is to supercharge the utilities and experiences so we can do it well. If we do that and speak with one voice, even if people don't get exactly what they want, they will be willing to go along with it to see if we can make it happen. As one ecosystem, we can leapfrog all these others and grow dramatically.
If we're unable to do that, it's not just a localized problem. It tells us that governance has failed in Cardano and that the great experiment of decentralized governance is not competitive compared to centralized governance. Effectively, it would mean that dictators are better than democracy. I don't want to believe that. I think the wisdom of the crowds is intrinsically superior.
We've all fought and invested our time, effort, and money for years to reach a point where we have the right to run this experiment and verify its truth: that decentralization is better than centralization. There's no greater example than what's happening this year in 2026. We don't have an infrastructure
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