Cardano founder Charles Hoskinson expanded his response to allegations that Input Output Global (IOG) misappropriated over 318 million ADA from unredeemed pre-sale wallets, calling the situation deeply personal and damaging.

In a May 18 post on X, Hoskinson reflected on the reputational toll of the allegations, noting that the incident has reshaped his view of his relationship with the Cardano community.

He added:

“For a decade, I’ve been on the front lines. To not be given the benefit of the doubt here without strong evidence to the contrary means I don’t have the connection I thought with some people.” 

Hoskinson added that following the release of an external audit, he intends to hand control of his social media account to a media team and scale back his direct engagement.

Legal pushback and audit plans

Hoskinson first responded to the allegations on May 7, saying that IOG may pursue legal action against those accusing him of redirecting unclaimed ADA from Cardano’s 2017 Token Generation Event. 

According to a social media thread by X user Masato Alexander, a December 2020 protocol update introduced a function that reassigned ADA from unredeemed UTxOs to Cardano’s reserves. 

Alexander alleged that the subsequent Move Instantaneous Rewards (MIR) transaction diverted these funds without transparency or notification to the original voucher holders.

Hoskinson countered that investors redeemed 99.8% of ADA vouchers. The remaining 0.2%, recovered under protocol rules after a seven-year window, was donated to Intersect, the Cardano industry coordination body. 

He added that an externally audited report would soon document the redemption history and crowdsale process. Hoskinson also said he would “send letters to the relevant parties demanding retractions and apologies.”

Alexander disputed the claim, citing a public statement by Intersect’s interim executive director that it received only $7 million in 2024, far less than the estimated $600 million value of the disputed ADA. He also criticized the lack of a detailed audit publicly tracing the fund flows.

Foundation and Emurgo address governance process

On May 19, the Cardano Foundation issued a statement distancing itself from the operational aspects of ADA voucher redemption after 2021. The statement added that while it received general updates, it did not provide detailed accounting. 

The foundation stated: 

“The effort to locate and support remaining voucher holders has been led by the IO team over the past four years.”

The foundation welcomed IOG’s pledge to release a third-party audit and recommended that it include all MIR transactions, balances, and any returns generated during fund administration.

Cardano’s commercial arm, Emurgo, also defended IOG’s efforts in a May 19 post. It said the seven-year redemption process involved multiple campaigns, third-party investigations in Japan, and Know Your Customer (KYC) verification.

Emurgo acknowledged:

“While the vast majority of the pre-sale ADA vouchers have been successfully redeemed, there was a small percentage that had gone unredeemed.”

The company added that the Shelley hard fork would have rendered unredeemed ADA unspendable, necessitating their movement to enable further redemptions.

The firm also expressed concern over “excessive, unwarranted FUD,” saying accusations based on limited facts caused unnecessary harm to the ecosystem. It echoed IOG’s call for an audit and urged the community to remain patient.

Mentioned in this article

Cardano has a deeply committed fan base, an academic approach, and a lot of work to do. Is Cardano still relevant?

I think it fair to say Cardano is an OG in the crypto space. Conceived in 2015 and launched shortly after, Cardano has grown to be (as of this writing) the fifth largest blockchain by market cap. XRP, Binance Smart Chain (BSC), Ethereum and Bitcoin lead Cardano, though Ethereum has a significant lead on all except for BTC.

Trouble is, market cap doesn’t really tell the story of a blockchain project. Both ETH and BSC have huge ecosystems, with tons of projects and protocols running on them. Likewise, both ETH and BSC dominate dollar denominated daily transaction volume with $1.89b and $251m respectively:

By contrast, Cardano has 16 protocols and a daily volume of around $2.2m. Tracing over to another commonly cited metric, in terms of total value locked (TVL), Cardano ranks 27th, with around $77m TVL. This is below a number of much lesser known names such as: Moonbeam, Canto, Waves, and Klaytn, and miles below ETH at $28.5b.

What’s love got to do, got to do with it?

Many will speak of the “first-mover” advantage, especially when comparing Cardano to Ethereum. It is true ETH enjoys a pretty substantial first-mover advantage across the programmable digital asset space, at least in terms of application development.

But, Cardano does have an early lead compared to most projects today in terms of community building. I think partly due to the longevity of the project, Cardano is listed on just about every major centralised exchange.

Add in decent staking rewards — which can often be done from those same centralised exchanges — and a dash of name recognition, and you get a project that is extraordinarily well positioned to wrangle a steady stream of new users.

And, once on-boarded, many of those new users discover the peer-review based, “slow and steady” wins the race ethos, and they become die-hard fans. This can partly be seen in Cardano’s social engagement (at least on Reddit), where they have nearly 700,000 subscribers:

Cardano Reddit subscribers:

By comparison Polygon, which has more than 10x the TVL of Cardano, only has 60,000 subscribers:

Polygon Reddit subscribers:

Moreover, ETH has a TVL that is 300x of Cardano, but only has 3x as many Reddit subs. Perhaps more importantly to the discussion at hand, they both have an equal number of active Reddit users at 2k each.

Cardano active Reddit users:

Ethereum active Reddit users:

What this means is, unlike most other major blockchain projects, including big daddy ETH, Cardano users and holders are very engaged. That engagement, coupled with a compelling ethos, and an iconic founder in Charles Hoskinson, and you get one of the most loyal fan bases in the digital asset space.

The big question is: should they be?

The future’s so bright, I gotta’ wear shades

As I’ve mentioned more times than I care to dwell on, almost the entirety of the digital asset space is driven by narratives. And, by narratives, I mean stories.

I don’t think it was always that way. In the beginning, with projects like Bitcoin, Ethereum, and Cardano, digital assets were driven by a vision. A vision of the future that looked different and better than the present.

The vision that created Bitcoin was one of a permissionless, immutable, decentralised monetary instrument. The vision of Ethereum was of a permissionless, decentralised, and programmable network.

In pursuit of that vision, Charles Hoskinson and Vitalek Buterin (and others) created Ethereum. Buterin wanted to move fast and break things. Hoskinson did not. One can debate the merits of moving fast and breaking things, but the result is clear:

It’s a pretty good way to make money.

Once the money starts flowing in, the vultures (ventures) are never far behind. When they get to the party, vision gets subsumed to the narrative. Being a true visionary is rare. Acting like a visionary, while spinning up a narrative to make money is not.

2022 was a shining example of what happens when the vision dies and the narratives begin. What we got was a dumpster fire of hype, an explosion of trash projects, and then a catastrophic implosion of real and imagined wealth.

No one can say where the digital asset space would be today if Buterin et.al. had followed the lead and the ethos of Hoskinson, rather than the mantra of move fast and break things. I imagine crypto and digital assets would still be the purview of computer nerds and tech geeks.

And, far fewer people would have got rekt.

What is Cardano?

I realised I’ve gotten this far in and I still haven’t explained what Cardano actually is. Rather than spin up a rehash, I’m just going to ask a robot to explain it for me:

Please write a detailed technical explanation of cardano.

ChatGPT: Cardano is a blockchain platform that utilises a proof-of-stake consensus algorithm called Ouroboros. The platform was created by IOHK (Input Output Hong Kong) and is designed to be a more secure, scalable, and sustainable alternative to existing blockchain platforms.

One of the key features of Cardano is its use of a multi-layer architecture. The first layer, called the Cardano Settlement Layer (CSL), is responsible for handling the transfer of value on the blockchain. The second layer, called the Cardano Computation Layer (CCL), is responsible for handling smart contracts and other computational tasks. This separation of responsibilities allows for more efficient and flexible use of the blockchain.

Cardano uses a proof-of-stake consensus algorithm, which means that instead of using mining to validate transactions, it uses a system of “validators” who are chosen to validate transactions based on the amount of ADA (the native cryptocurrency of Cardano) they hold and are willing to stake. This allows for a more energy-efficient and decentralised system, as it eliminates the need for expensive mining equipment.

Another unique feature of Cardano is its use of a formal verification process for smart contract development. This means that developers must mathematically prove that their smart contracts will function as intended, providing an extra layer of security to the platform.

In summary, Cardano is a blockchain platform that utilises a proof-of-stake consensus algorithm, a multi-layer architecture and formal verification process for smart contract development to provide a more secure, scalable, and sustainable alternative to existing blockchain platforms.

That seems like a serviceable description.

Is Cardano still relevant?

Yes.

Throughout this article, I’ve deliberately stayed away from the usual tech-stack analysis. Cardano is unique because it is built on peer-review. Every upgrade, every milestone, just about every code commit has peer-reviewed research behind it.

If one desires to build a decentralised, permissionless, public digital infrastructure project, the most ethical, conscientious, and thoughtful way to do so is the one Charles Hoskinson chose for Cardano.

Or, it could all be marketing hype.

The fact of the matter is we, as retail investors, likely won’t have much insight into how well Cardano is progressing, or where it ends up. What is readily evident, is the development process is grindingly slow and methodical. For his part, Vitalek Buterin has said in a number of interviews that he disfavours the deep-dive, research-based approach.

The crux of Buterin’s argument is one that will be familiar to security researchers and fans of Nassim Nicholas Taleb alike: in any dynamic system, there are unknown unknowns. Meaning, one can try to account for everything, but they will always miss something.

And, that something might just bite you in the ass.

But, this is kind of like starting a business. As a budding entrepreneur, you won’t necessarily know what is going to be a problem until you face it. What most people who dream of starting a business do is to try and prevent any problem from interfering with their idea.

The trouble is, the potential problems are virtually limitless. It is impossible to account for every eventuality, especially if you have no experience. What usually ends up happening is, the would-be entrepreneur simply spins their wheels and never ends up doing anything.

And, one could make the argument that Cardano is heading in the same direction. They keep refining, and testing, and submitting to peer-review while nothing happens with the actual business. Meanwhile, chains like Ethereum, Cosmos, Fantom, Solana, and Polkadot are gaining valuable experience from having live systems in place.

In this regard, I think we could also distinguish the approach Cardano is taking. They are not building Cardano in a vacuum. They can see the issues chains like Ethereum are having in production. And, then they can use that knowledge to make sure it doesn’t happen to them.

So, in one sense, you could argue Cardano is trying to be too thorough. In another sense though, you could argue Cardano is getting the best of both worlds, while taking on substantially less risk.

Regardless of your take, it is clear Cardano is a functional blockchain that has seen steady development and improvement. There are some valid complaints from developers about the state of developing on Cardano. Whether the dev docs are insufficient, or the issues around writing in Haskell are a true barrier is hard to say.

But, there is also a less generous side that says the reason it’s hard to develop on Cardano is because you can’t just fork someone’s Solidity code, change some graphics around and go on the market looking for a moonshot. Meaning, it is far less attractive to “get rich quick” coders looking for an easy copy/pasta project.

At the end of the day, it’s all kind of irrelevant though. No one can predict the future. ETH could literally be a dead chain in two years. Likewise, Cardano could be the number one blockchain in the world in that same time. We cannot know which way the winds will blow.

Charles Hoskinson may well have the last laugh in a few years time. Or, he may go down in history as a mad tinkerer that never got off the ground. Regardless of the financial outcome, what is clear is that Hoskinson and Cardano are generating an impressive body of research around cryptography, consensus, scaling, and decentralisation.

That research is invaluable. Their research contribution alone is worth an investment into the Cardano project. Maybe that research won’t even be a direct benefit to Cardano, and it’s possible it could underpin a future project that makes Cardano, Ethereum and everything else obsolete.

But, that is precisely why it’s important. And, regardless of tokenomics, or investment returns, or Ethereum killers, that is why I think Cardano is relevant.

Conclusion

Some people deride Cardano as a newbie coin. And, whenever I introduce someone new to crypto, inevitably, they will come back with questions about Cardano within a few days or weeks.

Whether that is marketing, or a legitimate interest in a slow and steady approach, I can’t say. What I do know is, Cardano has made invaluable research contributions to the blockchain world. And, the people that invest in Cardano have done a wonderful thing by (knowingly or otherwise) paying for that research.

However, one of the nice things about holding Cardano is the staking rewards. You can buy a few thousand ADA on Coinbase or Kraken (or whatever), stake it and forget about it. And, for the crypto purists, there are a couple positive things to consider:

Cardano appears to be legitimately decentralised:

ADA is mostly held by the community, rather than VCs and insiders:

But, ADAs tokenomics are not great. It is a limited supply at 45 billion tokens, with about two-thirds (30 billion) in circulation right now. As such, it is inflationary until it hits the 45 billion mark. So, if you’re looking for a 100x GEM!!!, ADA probably isn’t it. In fact, it would have to capture almost the entirety of the Ethereum market cap just to 15x.

It could happen I suppose. But, I wouldn’t bet on it. What buying Cardano does do is to help fund incredibly valuable research that will undoubtedly help bring in the future that digital assets keep promising. It’s not a moon coin, it’s not a 100x gem, it’s probably not even going to make a meaningful return.

But it might! This is the digital asset space after all…

Outside of being a legitimately good person who is willingly participating in blockchain research, what I think Cardano is good for as an investor is setting and forgetting. Get a little bag, set the staking rewards to compound and come back in a few years.

Who knows, you might end up with a nice surprise.

These are just my opinions. I’m not a financial advisor, this isn’t financial advice, and always DYOR. Following any of these ideas might cause you to lose all of your money. I am 100% serious about that. I like tinkering with this stuff, but I’m on record acting like a total baboon. Invest accordingly.

Until next time, be safe, be smart and be sure to tie the camel.

Ethereum netflows seem to be negative across all exchanges right now, as exchange reserves continue their downward trend.

Ethereum Reserves On A Downtrend

As pointed out by a CryptoQuant post, ETH reserves continue with a downward trajectory. The all exchange netflows are also very red.

The Ethereum all exchanges reserve is an indicator that shows the total number of coins held in wallets of all exchanges.

When the metric goes up in value, it means more investors have their ETH on exchanges for selling, altcoins purchasing, or margin trading.

Here is how the Ethereum all exchanges reserve looks like at the moment:

ETH all exchanges reserve continues to fall down

 

The above chart makes it clear that Ethereum all exchanges reserve has been continuing its downtrend since the past few months.

The latest downward curve seems to show quite a sharp trajectory. A decrease in the exchange reserves should mean there isn’t much selling pressure in the market. If this steep downtrend continues, the price could go up.

The other indicator of interest is the Ethereum all exchanges netflow. The netflow is defined as just the difference between the exchange inflows and the exchange outflows.

The exchange inflows is the value of the ETH being sent into exchange wallets from personal addresses. While outflows are the opposite.

Related Reading | Ethereum Whales Go On Buying Spree, Top 10 Addresses Now Own 20% Of All ETH

All Exchanges Netflow = Inflows – Outflows

Below is a chart that shows the latest trends in the value of the ETH all exchanges netflow.

ETH all exchanges netflow shows deep red

As the graph shows, the last few days show negative all exchanges netflow for Ethereum. This means more investors are sending their ETH to personal wallets from exchange wallets than the other way around.

Related Reading | TA: Ethereum (ETH) Recovery Faces Hurdles, Why Bears Remain In Control

When the value of the indicator goes up, it means investors want to sell of their crypto. On the other hand, a decrease like what’s happening right now should mean there isn’t much selling pressure.

ETH Price

Ethereum is down more than 12% in the past week as the crypto’s value floats just under $1.9k. Compared to one month ago, the price is 27% less.

Here is how the price chart looks like over the last 6 months:

Ethereum price seems to on a downward trend | Source: ETHUSD on TradingView

ETH’s value has been going down since sometime now, with no sign of recovery. It’s unclear whether the market is bearish or not right now. If the exchange netflows are anything to go by, a deep negative trend could mean the price might go up soon.

Featured image from Pexels.com, charts from TradingView.com, CryptoQuant