- Cardano redirected roughly 70 million ADA from its treasury to fund the Midnight privacy network, triggering backlash from holders.
- Critics argue the move weakens Cardano’s core ecosystem while offering no clear value capture for ADA.
- Supporters see it as a long-term strategic bet, but questions around alignment and execution remain unresolved.
Cardano has made a move that’s stirring up real tension inside its community, and not in a quiet way. Around 70 million ADA has been pulled from the treasury to fund infrastructure for Midnight, a separate privacy-focused Layer-1 network. At today’s prices, that’s roughly $25.7 million redirected away from Cardano’s main ecosystem, and a lot of holders are asking why.
The decision was brought back into the spotlight by analyst Aixbit, and the reaction was immediate. For some, this feels like long-term strategy. For others, it looks like Cardano paying to build something outside its own house while the lights inside are still flickering.
Treasury funds move outside the core chain
Aixbit’s core argument is simple, and uncomfortable. Cardano, after more than seven years of development, is now using its treasury to help build another chain because its own network hasn’t attracted enough real users. Midnight may share philosophical ties with Cardano, but structurally it’s a different network, with its own roadmap, its own token mechanics, and its own future.
That separation matters. Treasury funds come from ADA holders, and those funds are supposed to strengthen Cardano itself, whether that’s through better tooling, stronger incentives, or ecosystem growth. Sending that capital to a separate Layer-1 raises a fair question, one that still hasn’t been clearly answered: what exactly do ADA holders get back?
Right now, the benefit feels more implied than defined.
Midnight gets the infrastructure, ADA gets the bill
The way this is structured places the cost firmly on ADA holders, while the upside remains fuzzy. Midnight succeeding does not automatically mean ADA accrues value. Unless there are explicit links like revenue sharing, fee capture, or direct utility flowing back to ADA, holders are essentially funding infrastructure for a different chain.
That’s why the criticism is sticking. The same $25.7 million could have gone toward strengthening Cardano’s DeFi ecosystem, improving developer experience, or directly incentivizing users to stay on the base chain. Instead, it went elsewhere, and that choice is hard to ignore.
From the outside, it doesn’t look like expansion. It looks like capital being diverted during a moment when focus matters most.
The DeFi comparison makes it harder to defend
The timing only sharpens the debate. Cardano’s DeFi ecosystem is still lagging far behind peers. Sui, for example, now holds roughly 4.5 times more DeFi TVL while operating at about one-third of Cardano’s market cap. That contrast hurts, because it highlights how quickly newer chains are converting momentum into usage.
Against that backdrop, funding an external privacy chain feels less like bold vision and more like a workaround for stalled adoption. Instead of fixing what isn’t clicking on the base layer, Cardano appears to be betting on something adjacent.
For critics, that’s not diversification. It’s an admission that the core chain still hasn’t found its footing.
A strategic bet or a deeper problem?
Supporters of the move argue that Midnight expands Cardano’s reach into privacy and compliance-focused use cases. In theory, that could attract institutions and developers who need regulated privacy solutions. On paper, it makes sense.
But strategy only works if alignment is tight. If Midnight thrives while Cardano remains underused, ADA holders are left subsidizing growth they don’t directly benefit from. Without clear mechanisms tying Midnight’s success back to ADA, the base layer risks being weakened, not reinforced.
That’s where Aixbit’s criticism really lands. Using treasury funds to build another Layer-1 only works if Cardano clearly wins alongside it. At the moment, that win looks speculative at best.
Confidence versus credibility
Cardano has never lacked ambition, that part has always been clear. What it’s struggled with is momentum.
This decision adds to the perception that the ecosystem is searching for relevance instead of compounding it naturally. Long-term investors can live with slow progress. What’s harder to accept is diluted focus and unclear value transfer.
Until Cardano clearly explains how ADA holders benefit directly from funding Midnight, skepticism isn’t going away. Treasury funds aren’t abstract numbers. They belong to the network.
And right now, many holders are questioning whether that money is being spent where it actually counts.
