EMURGO, one of Cardano’s three founding entities, has announced a strategic partnership with Ibex, the corporate innovation arm of Antler, a leading early-stage investor. This initiative could benefit projects built on Cardano by providing external funding, meaning ADA from the treasury may not be used. It’s encouraging to see EMURGO fueling efforts to support the Cardano ecosystem. In this article, I will explore why the presence of VC funds is beneficial for Cardano, how it can complement Catalyst, and how it can help save ADA in the treasury.
Projects Have a Hard Time In a Bear Market
A bear market is a challenging period for many projects across all blockchain ecosystems, with numerous teams struggling to survive due to insufficient capital to complete their projects.
At the same time, completing projects can be challenging because they are built on evolving platforms. Necessary tools or libraries are often missing, requiring teams to either develop them independently or wait for their availability. Building decentralized applications is still in its infancy and is significantly more demanding than creating a traditional client-server application.
Until an application is deployed on Cardano and gains a solid base of loyal users, the team has no source of income. Projects are often funded through tokens minted and sold to community members or project fans. In a bear market, the market value of coins from all major blockchains can drop by 50% to 80%. The tokens of projects that haven’t yet delivered suffer similarly, if not more.
The team is compelled to sell some of their tokens, which drives the market value down and negatively impacts all holders. Volatility poses a significant challenge for builders, as they require stability over a longer time horizon, typically spanning several years.
A team may have a great idea and vision, but without the capital for implementation, completing the project is often impossible. If projects aren’t completed, the entire ecosystem suffers.
Cardano needs Dapps
Cardano’s success depends on the utilities it offers to users. Cardano itself is a basic layer providing fundamental functionalities like transaction sending, script execution, staking, and decentralization. The real value lies in what third-party teams build on this layer.
Cardano can secure funding for teams through Catalyst, but the budget is limited, and the community decides which projects to support. Not all deserving projects receive funding, and Catalyst cannot be the sole support source for projects built on Cardano.
Some projects with the potential to deliver real-world use cases may require relatively large funding compared to the Catalyst budget. In the latest rounds, Catalyst was subsidized with 50M ADA, supporting around 1,000 projects.
The community will control the Cardano treasury, and there are tendencies to use ADA from the treasury as VC capital controlled by a third party. This is not advisable. Part of the treasury budget can support projects with a significant ecosystem impact, but investing in unfinished projects is always risky.
I can envision the community voting to fund the deployment of USDC or USDT on Cardano. Such a project would likely deserve support from the treasury due to its potential positive impact, as many users want these established stablecoins on Cardano. However, I can’t think of another project that would similarly justify withdrawing ADA from the treasury.
Why Do We Need EMURGO?
EMURGO’s partnership with Antler’s Ibex is excellent news, as it addresses several issues simultaneously. Teams seeking external funding now have a chance to obtain it, reducing the need to use ADA from the treasury for the same purpose. It also eliminates the need to use ADA to pay a team to seek investment opportunities in the Cardano ecosystem.
Additionally, the team would likely receive financial support in fiat currency, enabling more effective budget planning.
Building a better reputation among VC funds and introducing Cardano as an investment opportunity is beneficial. EMURGO has achieved this, and we can only hope this is not the last announcement of this kind.
If projects can be completed through funding, new users will join, enhancing the network effect. This will attract attention, especially from other investors. More applications will be built, bringing in even more new users. It’s essential to kickstart this spiral of success.
Building Cardano required immense time, human, and financial resources. Scalability still needs improvement, which is the last major hurdle for Cardano’s global success. After that, continuous improvement and perfection will be necessary.
However, this is just the first crucial step. The second step involves building applications and services, which require funding. The three founding entities can and should assist in securing this funding.
We must commend EMURGO for their newly established partnership and wish them continued success.