The Cardano blockchain, created by Ethereum co-Founder Charles Hoskinson, is undergoing a battle over management of the nonprofit foundation which is part of the organizational structure that oversees Cardano’s development and community engagement.
The Cardano Foundation, or Cardano Stiftung as it’s officially known in Switzerland, is one of three entities which currently manages the Cardano project development. The other bodies are IOHK, a company created by Hoskinson in 2015 based in Hong Kong, and Emurgo, a company founded in Japan in 2017 to steward commercial development on the Cardano blockchain.
At the heart of the complaints, made by Hoskinson and IOHK against the Cardano Foundation, are allegations of a “lack of performance” with 8 specific counts. These complaints include but are not limited to matters such as: lack of a strategic vision, no public accountability, lack of financial transparency, internal governance problems, and material misrepresentations made by the Foundation’s council and board chairman, Michael Parson.
In a wide-ranging interview with Crypto Insider, Hoskinson said if the Cardano Foundation doesn’t perform duties for the community, such as exchange listings, “it means I have to do it, Emurgo has to do it. I wasn’t hired to do it and I have to spend money out of my own pocket, millions of dollars. This was their job, they didn’t do it.”
Hoskinson also said that if the Cardano Foundation council members have fear over the current regulatory environment they should “resign” and be replaced with individuals who are willing to take on the associated risk. “People have put their money into this ecosystem, they have expectations of professionalism, they have expectations of delivery,” he added.
Cardano Foundation Performance
According to Hoskinson’s public letter of complaint, the Cardano Foundation was “created to promote the Cardano protocol, to grow and inform our community and address the needs of the community.” None of those broad goals have been accomplished over the past 2 years according to Hoskinson, and “there has been no clear indication of improvement, despite many fruitless attempts and approaches to the Foundation’s chairman and council to change this.”
To rectify the situation, Hoskinson has called for the Cardano Foundation to voluntarily submit to Swiss authorities so a full public audit of operations can be conducted to assuage community concerns.
The letter concludes with a plan by IOHK and Emurgo to essentially bypass the Cardano Foundation and begin taking over all functions that the foundation was intended to perform. Hoskinson points out that having three separate entities was intended to allow for redundancy in the management structure so Cardano wouldn’t be threatened by a single point of organizational failure.
The crux of the letter is that unless the Cardano Foundation submits to these demands, and undergoes a thorough audit, IOHK and EMRUGO will shut the foundation out and work to replace it with a “decentralized autonomous organization” governed on the Cardano blockchain, but that could take some time.
There is no official response yet from the Cardano Foundation, or members of the council, since the release of Hoskinson’s public letter on Oct. 12.
The Cardano Foundation troubles are eerily reminiscent of troubles encountered by the Tezos project in 2017; When the Swiss foundation set up to administer the ICO and steward the Tezos blockchain development suffered from a similar lack of accountability and accomplishments in relation to the foundation’s objectives. In October of last year, it was revealed that Arthur Breitman, Creator of the Tezos project, had privately sent a letter of complaint to Johann Gevers, head of the Tezos Foundation, alleging similar complaints of financial mismanagement, lack of transparency and general inaction. Very much in line with Hoskinson’s complaints against the Cardano Foundation.
At the time, Hoskinson took to social media, namely Reddit, where he lashed out at Tezos saying, “It’s unbelievable to me that so much money can go into a structure and there were so little checks and balances put into place to manage things post-funding.”
Hoskinson addressed the situation and questions about similarities to Tezos and said the circumstances couldn’t be more different. “With all due respect,” Hoskinson said, when asked by Crypto Insider, “these are apples to oranges.”
Hoskinson went on to state that since Tezos relied on a single organization to shepherd development, the crippling problems in 2017 could have derailed the entire project. In the case of Cardano’s organizational structure, the Cardano Foundation is one of three bodies with separate mission statements in supporting the project.
“In our case, the foundation’s a value-add to the ecosystem where it has a collection of duties and responsibilities that are for the community, but whether it does these things or not, it doesn’t stop development,” Hoskinson explained. “Because of the triumvirate structure, we had resiliency, so if it fails, two other entities can step in and fill in for it.”
Hoskinson Battles Breitman(s)
After the Cardano Foundation letter went public, the issue spilled over to Twitter where Kathleen Breitman, Tezos co-Founder, and wife of Arthur Breitman, responded to a tweet about how no one seems to have gotten the Swiss Foundation organization quite right yet.
Kathleen answered saying, “not according to Charles [Hoskinson] in January, when he was more than happy to quarterback with little knowledge about TF and shit on Arthur.” Kathleen’s tweet included a link to a tweet from Hoskinson where he chastised Arthur Breitman for not sitting on the Tezos Foundation board similar to the way Vitalik Buterin sits on the Ethereum Foundation board.
Charles responded to Kathleen pointing out the differences between the Cardano and Tezos foundations: “There is a big difference here and it’s simple. I got paid up front and we built in redundancies in case one of the parties failed to deliver. Don’t even think to compare your structuring with ours.”
That attack didn’t sit well with Arthur who pointed out that funding paid from the Tezos Foundation to the Breitman’s was to be delayed until after a successful launch of the Tezos network. “I chose not be paid upfront, and you called that ‘greedy’”, Arthur responded, also adding a dig at Cardano in the process: “Tezos actually delivered a live proof of stake network, something Cardano has yet to do.”
Arthur continued, “I wish you best of luck with the Sfitfung, but your behavior during our ordeal was despicable and cowardly.”
The exchange finally ended when Hoskinson accused the Breitman’s of using the Tezos Foundation to avoid U.S. securities law: “You taking 250 million dollars into an unsuitable structure to try to evade us securities laws was despicable and cowardly.” He also pointed out that Tezos and the Breitman’s still face lawsuits stemming from the delays and mismanagement in 2017.
When asked for comment on his exchange with Hoskinson, Arthur Breitman provided a brief statement: “Cardano is a cool project with a great community, I wish them the best through this snag.”
In response to Arthur’s comment, Hoskinson said, “I like Arthur, and I like his wife, they’re not bad people.” He went to add that “they have some cool, interesting ideas,” and that Tezos has some similarities to Cardano, but sometimes competitive nature takes hold between the projects.
Hoskinson’s main message to the Cardano community is that whatever happens with the outcome of his public letter, and the fate of the Cardano Foundation, this incident will not derail or stymie development of the project in any way. “Nothing has materially changed,” he said, “we just published a letter to let the community know that we support them as much as the guardians do.” The “guardians” referred to by Hoskinson is a community-formed group known as the “Guardians of Cardano” which was conceived to give the community a stronger voice in matters such as this.
Hoskinson assured Cardano supporters and investors that “if the foundation can’t do it, we’ll do it” within IOHK and Emurgo, the two other organizations created to oversee Cardano’s development and business partnerships.