ADA Holders Foot the Bill as Cardano Bets Treasury on Midnight Network

Cardano has taken a controversial step that is already dividing its community. Roughly 70 million ADA has been withdrawn from the treasury to fund infrastructure for the Midnight network, a separate privacy-focused Layer-1. At current prices, that translates to about $25.7 million redirected away from Cardano’s core ecosystem. The move was highlighted by analyst Aixbit, and the criticism landed hard.

• Treasury Funds Move Outside the Core Chain
• Midnight Gets the Infrastructure, ADA Gets the Bill
• The DeFi Comparison Makes It Worse
• A Strategic Bet or a Structural Failure?
• Confidence vs. Credibility

Treasury Funds Move Outside the Core Chain According to Aixbit, Cardano is effectively paying to build another chain because its own network failed to attract enough users after seven years of development. Midnight may be linked to Cardano at a narrative level, but it is still a distinct network with its own roadmap, token dynamics, and growth path. That distinction matters. Treasury funds come from ADA holders. Those funds are meant to strengthen Cardano itself, whether through developer incentives, ecosystem growth, or infrastructure improvements. Redirecting them to an external network raises an obvious question: what do ADA holders get in return? So far, the answer is unclear.

Source: X/@aixbt_agent

Midnight Gets the Infrastructure, ADA Gets the Bill The funding decision places the cost squarely on ADA holders while the upside remains abstract. Midnight’s success does not automatically translate into value capture for ADA unless explicit mechanisms are introduced. Without that, Cardano holders are financing infrastructure for a separate Layer-1 with no guaranteed benefit flowing back. Aixbit’s framing was blunt, but the concern is valid. If Midnight needed $25.7 million to get off the ground, that capital could have been deployed to strengthen Cardano’s DeFi stack, improve tooling, or attract users directly to the base chain. Instead, it went elsewhere. The DeFi Comparison Makes It Worse The timing adds fuel to the criticism. Cardano’s DeFi ecosystem continues to lag badly relative to peers. Sui, for example, now holds roughly 4.5 times higher DeFi TVL while sitting at around one-third of Cardano’s market cap. That comparison is hard to ignore. It suggests that capital efficiency and user adoption are happening faster on newer chains, while Cardano is still struggling to convert long-term development into real usage. Against that backdrop, spending treasury funds on an external privacy chain looks less like expansion and more like an admission of stalled progress. A Strategic Bet or a Structural Failure? Supporters argue that Midnight extends Cardano’s vision into privacy and cross-chain interoperability. In theory, that could attract institutions and developers who need compliant privacy solutions. The problem is execution and alignment. If Midnight becomes successful but Cardano remains underused, ADA holders are left subsidizing growth elsewhere. Without clear revenue sharing, fee capture, or utility links back to ADA, the strategy weakens the base layer rather than strengthening it. Aixbit’s critique cuts to the core of that issue. Building “someone else’s” Layer-1 with treasury funds only makes sense if Cardano clearly benefits. Right now, that benefit looks speculative at best. Confidence vs. Credibility Cardano has never lacked ambition. It has lacked momentum. This decision reinforces the perception that the ecosystem is searching for relevance rather than building it organically. Investors can tolerate slow progress. What they struggle with is dilution of focus and unclear value transfer. Until Cardano explains how ADA holders directly benefit from funding Midnight, skepticism will remain justified. Treasury money is not abstract. It belongs to the network. And right now, many holders are asking whether that money is being spent in the right place. Read also: Analyst Warns Cardano (ADA) Pullback Isn’t Over Yet