Cardano founder Charles Hoskinson has commented on the governance dispute surrounding Liqwid, arguing that insiders connected to the protocol should stand aside from any re-voting on the disputed asset allocation and let token holders decide whether previous public commitments should be honored. His intervention is important because it hits a familiar pressure point in DeFi governance: whether a DAO vote is truly legitimate when institutional insiders vote on an outcome that directly benefits them.
In a live broadcast from Wyoming, Hoskinson said he generally avoids participating in the DeFi layer of the Cardano ecosystem unless there is a broader community mandate. But he said Liqwid’s situation had turned into a more serious trust issue following October assurances that “100% of assets in smart contracts” allocated to the protocol would be returned to their “rightful owners.”
The dispute centers around a large pool of Midnight’s NIGHT tokens tied to Liqwid’s ADA marketplace. Public administration materials indicate the total allocation is approximately 18.81 million nights, which is worth just under $1 million at current market prices. This helps explain why the vote has attracted so much attention: the controversy is not over a token governance gesture, but rather over the handling of a seven-figure cryptocurrency allocation that users say should have been returned in full.
Cardano founder urges vote on Liqwid for second time
According to Hoskinson, the team subsequently ran into an administrative and legal problem within the DAO structure itself. “I believe that this team did not have, according to the DAO’s user agreement, the legal authorization to do this,” he said. “He somehow violated the terms of how things were set up.” Even granting that point, he said the more troubling issue was how the matter was handled next.
The solution he proposed was clear and direct: repeat the vote, but on narrower and cleaner terms. “If you have to go to the DAO to vote, you need to do two things,” Hoskinson said. “First and foremost, insiders have to step back if they are going to directly benefit from governance measures of this kind. Second, the question should have been: Should we honor our marketing commitments, yes or no?”
This framing goes to the heart of his criticism. According to Hoskinson, users deposited funds into the relevant smart contracts on the basis of respecting previous commitments. “Commitments were already made, people put money into contracts understanding those terms and conditions, and they had no reason to believe such things would be breached,” he said. “The people who are confident and the people who are in a position to maintain this type of program, frankly, have to do a little bit better.”
Hoskinson returned again and again to legality, not just procedure. He said that decentralized independent organizations do not derive their credibility from the mere presence of voting. They derive this from broad participation and confidence that the process is not controlled by a small group of insiders. “Decentralized, autonomous organizations require legitimacy, and legitimacy comes from participation,” he said. “If the belief is that participation is only controlled by a small group of insiders, then there is no way forward for a decentralized autonomous organization (DAO) to gain governance legitimacy.”
His recommendation was for insiders associated with the Protocol’s core entities to publicly declare their holdings, recuse themselves, and allow only the holders of these entities to vote on whether the October commitments should be honored. If yes, then you should simply follow the protocol. If the answer is no, the community could move to a second-stage discussion of alternative allocations.
Hoskinson was equally clear about the risks if that didn’t happen. He said he had no special powers to reverse the outcome, no control over the assets actually distributed in the smart contracts, and no formal authority over the Cardano ecosystem. But he warned that perception alone could do lasting damage.
“I believe this violation of the public’s trust, or at least perception, will severely harm the viability of the protocol, and Liqwid’s ability to grow and thrive in the future,” he said. “Simply put, if people can’t trust what the basic calculations say, and when votes are made, people don’t trust those votes, it creates a reality where people will simply move on to other options.”
In general, if the questioner wants to restore credibility, the way is still open, he said. But it goes through detection, rejection and clean voting.
At press time, Cardano was trading at $0.29.
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