Cardano’s founder, Charles Hoskinson, weighed in on the governance controversy surrounding Liqwid, saying that insiders bound by the regulation should refrain from any voting on disputed asset distributions and let token holders decide whether prior public obligations should be respected. His intervention is important because it mitigates a common point of pressure in DeFi governance: whether the DAO vote is legitimate if internal founders are likely to vote for an outcome that directly benefits them.
In a live broadcast from Wyoming, Hoskinson said he generally avoids getting involved in the DeFi layer of Cardano’s ecosystem unless there is a broad public mandate. But he said Liqwid’s situation had reached a critical credibility issue after October’s announcement that “100% of the assets in smart contracts” allocated to the deal would be returned “to their owners”.
The dispute centers on a large pool of Midnight’s NIGHT tokens that are linked to Liqwid’s ADA market. Public administration services show a total share of approximately 18.81 million NIGHT, at current market prices they are worth just under $1 million. That helps explain why the vote has attracted so much attention: the dispute is not over a symbolic act of governance, but over the handling of a seven-figure crypto stake that users say should have been returned in full.
Cardano Founder Urges Second Liqwid Vote
According to Hoskinson, the team later ran into administrative and legal trouble within the DAO structure itself. “I think that team didn’t have, according to their DAO’s user agreement, the legal authorization to do that,” he said. “In some ways it violated the terms of how they set things up.” Even acknowledging that point, he said, what worried him the most was how the issue was handled.
His proposed fix was straightforward: restore the vote, but in narrow and clean terms. “If you have to go to the DAO to vote, two things have to be done,” Hoskinson said. “First, those with inside information should step down if they are going to be the direct beneficiaries of an executive action of this nature. Second, the question should be, should we honor our marketing obligations, yes or no?”
That frame goes to the heart of his criticism. According to Hoskinson, users put money into the appropriate smart contracts with the understanding that prior commitments will be honored. “Commitments had been made, people put money into contracts understanding those terms and conditions and they had no reason to believe that things like this would be broken,” he said. “People in a position of trust and people in a position to maintain this kind of software, frankly speaking should be a little better.”
Hoskinson repeatedly returned to legality, not mere procedure. DAOs, he said, do not gain credibility from the mere presence of a vote. They get it from broad participation and confidence that the process is not skewed by a small group of insiders. “DAOs need legitimacy and legitimacy comes from participation,” he said. “If the belief is that participation is controlled by a small group of insiders, there is no way forward for the DAO to be administratively legitimate.”
His recommendation was that insiders related to the main organizations of the protocol publicly declare that they have them, withdraw, and allow the authorities to vote only on whether the October commitments should be respected. If the answer is yes, the protocol should simply follow. If the answer is no, the community can move on to the second stage discussion about other assignments.
Hoskinson was equally clear about the stakes if that doesn’t happen. He said he has no special power to reverse the result, no control over assets already distributed in smart contracts, and no legal authority over the Cardano ecosystem. But he warned that sight alone can do lasting damage.
“It is my belief that this violation of public trust or your opinion will seriously damage the ability of the protocol, Liqwid’s ability to grow and prosper in the future,” he said. “Simply put, if people can’t trust what important accounts say and when votes are taken, people don’t trust those votes, it creates a reality where people will just move on to other options.”
All in all, if Liqwid wants to regain credibility, he argued, the road is still open. But it goes with disclosure, withdrawal and a clean vote.
At press time, Cardano traded at $0.29.
The featured image was created with DALL.E, a chart from TradingView.com
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