There has been debate within the Cardano community about the proposition to burn $500 million worth of ADA tokens held in the Cardano Treasury.
As the platform enters the Voltaire era with on-chain governance, questions about how best to manage the treasury funds have taken center stage. The idea to burn the ADA tokens has triggered a discussion, with Charles Hoskinson, Cardano’s founder, holding a firm stance against the idea.
The proposition to burn ADA tokens from the treasury originated with the goal of reducing the token supply and possibly boosting its market value.
Advocates of token burns argue that decreasing the available supply could increase scarcity, potentially driving demand and boosting ADA’s price, which at the time of writing hovers around $0.3166.
However, many prominent voices in the Cardano ecosystem oppose this move, seeing it as short-sighted and potentially harmful.
Hoskinson’s Take on the Burn Proposal
Charles Hoskinson has voiced strong objections to the proposal, emphasizing that burning ADA from the treasury would essentially be taking resources away from the community.
He highlighted that the treasury funds are not arbitrarily pre-minted tokens but are instead accumulated through a tax on block production and transactions.
For those advocating burning the funds of the treasury, understand that the treasury isn’t some pile of preprinted tokens that came for nowhere. It was aggregated from a tax on block production and transactions.
The entire treasury comes from people building blocks and economic…
— Charles Hoskinson (@IOHK_Charles) September 5, 2024
Hoskinson pointed out that the treasury is built from the efforts and activities of everyone involved in the Cardano ecosystem, particularly ADA holders and SPOs. In his view, burning these funds would amount to theft from these contributors.
When questions on why this was not set up before the transition to on-chain governance emerged, Hoskinson stressed that he does not have the authority to make a definitive decision on such matters.
The newly implemented on-chain governance allows the Cardano community to make these types of decisions through democratic means. While he strongly opposes the idea of burning the tokens, Hoskinson emphasized that the community should debate and vote on this proposal.
The Cardano founder noted that one of the goals of a community-written constitution is to allow discussions on these significant issues and decide collectively how to handle them.
Cardano Community Reactions
The broader Cardano community has had mixed reactions to the burn proposal, with many expressing skepticism about its long-term benefits.
Some, like DRep Jaromir Tesar, have publicly stated their opposition to the idea, warning that burning ADA would be a mistake. Tesar argued that while burning tokens might have a short-term effect on ADA’s price, the long-term impact would likely be minimal.
As a DRep, I firmly oppose burning ADA coins.
Some have suggested burning $ADA coins from the Treasury, but that would be a terrible mistake.
Approximately 3.3% of the total ADA supply is in the treasury.
Burning a small amount of these coins might have a short-term impact on… pic.twitter.com/LcGHbmIyMv
— Cardano YOD₳ (@JaromirTesar) September 5, 2024
He also raised concerns about the opportunity cost, suggesting that the 1.5 billion ADA in the treasury could be better used to fund projects and initiatives that benefit the ecosystem.
Other community members have proposed alternative ideas. Szilágyi Gábor, a software developer and community member, suggested that rather than burning the tokens, a portion of the treasury could be locked for a period of one to two years.
This would give the community time to better understand and adapt to the on-chain governance process, minimizing the risk of making rushed or poorly informed decisions.
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