Charles Hoskinson, co-founder of Cardano and Ethereum, in a recent video published on his personal account X, stated that he is concerned about the growing influence of legacy systems from traditional finance on the crypto world.
In particular, the American computer scientist and entrepreneur is concerned about the expanding dominance of the famous collateral-backed stablecoins, which cover the largest share of trading volume on crypto exchange platforms.
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Summary
Cardano: Hoskinson warns the crypto sector about the influence of legacy systems
Charles Hoskinson, a historical figure in the crypto sector for his contributions as co-founder of the Cardano and Ethereum blockchains, recently expressed his concern about the widespread influence of legacy systems on the cryptographic world.
In a video dated February 12 titled “Legacy is Eating Crypto,” published by Hoskinson himself, the computer scientist spoke about the need for the crypto community to reject the threats of centralized systems typical of traditional finance.
In detail, he pointed the finger at the sector of stablecoins covered by guarantees, such as USDT and USDC, which are taking a dominant position in the digital asset market.
The founder of Cardano has emphasized how although stablecoins represent only about 10% in value of the total market capitalization of the entire crypto industry, these absolutely dominate the volume of on-chain transactions, covering about 70% of the total market share.
As literally described by himself, the influence of these resources takes on greater importance compared to that of BTC and ETH.
“So, from a cryptographic point of view, Ethereum and Bitcoin take a back seat compared to USDC and USDT“.
Stablecoins, as Hoskinson argues, are centralized by central control imposed by various international jurisdictions, and could have a negative impact on the future of cryptocurrencies.
This centralized influence could indeed dictate the direction of DeFi economies, undermining the decentralized essence on which the sector itself is based.
Hoskinson proposes as an alternative solution the so-called algorithmic stablecoins, governed by on-chain algorithms and free from the influence of central authority, being more in line with the decentralized ethics of crypto.
The problem for this kind of resources is that, having a past stained by the downfall of the algorithmic stablecoin UST, they are now struggling to gain the trust of investors and are generally considered “very risky”.
This concern of the host Cardano is added to that related to the influence dictated by the arrival of Exchange Traded Funds (ETF) bitcoin spot on Wall Street.
The new Fund Managers who are offering exposure to bitcoin to their clients could further centralize a sector that is increasingly moving in this direction, with the latest regulations in the USA and Europe pushing for a move away from open source and anonymity (see cases Tornado Cash and Monero).
The essence of Hoskinson’s message is therefore a general warning against the potential slide of the cryptocurrency sector towards centralization and control by pre-existing financial entities.
At the end of the video where he expressed his thoughts, he closes with an emblematic phrase:
“You should be able to participate in markets without fear of censorship and exclusion. This is the foundation of the revolution that cryptocurrencies are, and none of this means anything if we hand over all these things to legacy actors.”
The state of the Cardano market in 2024
While Charles Hoskinson is concerned about the risks arising from the influence of legacy systems in the crypto world, his Cardano blockchain is growing at a very fast pace but still lags far behind the rest of the sector.
According to a recent study by the web3 research company Messari, Cardano’s TVL in Q4 2023 increased by 166% compared to the previous quarter, recording a +693% on an annual basis.
The locked capitals within the network remain very small compared to the rest of the resources present on Ethereum, Tron, Solana, BSC, Arbitrum, etc.
Cardano is in fact ranked 14th on the list of chains with the highest TVL, with a total value of 384 million dollars, even lower than that of the layer-2 Base.
The value of ADA has increased by 127.2% on a quarterly basis, surpassing the overall increase of the cryptocurrency market by 53.8%, but still remaining significantly overshadowed compared to the price action of Bitcoin.
We notice that compared to a year ago, the ADA/BTC ratio is lower by about 28%, while the ADA/ETH ratio is depreciating by 14%.
The development of recent technological innovations is helping Cardano to stand out in the strong competition of cryptocurrencies, where the influence of external investors is strongly felt.
The recent specifications released for the Midnight sidechain and the evolution of infrastructures like SanchoNet, Hydra, and Mithril are well received by the Cardano crypto community but do not solve the gap between the DeFi of other chains and that of the Hoskinson network.
The development of decentralized applications on Cardano is indeed very behind compared to the rest of the sector.
However, the decentralized network records encouraging signals from the point of view of average daily transactions, which have increased by 10.9% on a quarterly basis, giving a glimmer of hope for the future.
The metric of active addresses is also constantly growing from last year, suggesting that experienced users are increasing and could multiply over time.
Overall, the Transactions/Active Addresses ratio for the fourth quarter, equal to 1.60, increased by 9.2% on a quarterly basis and by 45.0% on an annual basis.
