Cardano Creator Aims to Combat Crypto's 'Three Evils' Through Midnight Network Infrastructure
Let's Take Down the Demons of Crypto
In a fiery speech at Consensus 2025, Charles Hoskinson, founder of Cardano and CEO of IOG, laid out what he sees as the three biggest threats to the crypto industry's success: privacy, economic fragmentation, and what he calls "Ponzonomics." Here's how he plans to vanquish these demons.
The Demon of Privacy
"The number one demon is privacy," Hoskinson stated, praising the industry's ability to create permanent, immutable public ledgers. But he cautioned against overdoing it. He used stablecoins like USDT and USDC as examples, where every transaction is transparently visible. According to him, this is like living in a "panopticon of financial surveillance." He questions whether users truly want all their financial, medical, or personal activity to be permanently etched into public ledgers.
To combat this, IOG developed Midnight over the past six years and spun it out into its own engineering subsidiary, Shielded. The new coordinating entity, the Midnight Foundation, is led by Fahmy Syed. Midnight uses zero-knowledge cryptography and a cooperative tokenomics model to ensure privacy. This allows for confidential smart contracts that enable selective disclosure of sensitive data, addressing concerns about the permanent public visibility of transactions on traditional blockchains.
The Demon of Economic Fragmentation
Hoskinson argued that any viable infrastructure must accommodate network effects and interoperability, leading him to the second demon: the adversarial mindset that commonly infects crypto economics. Rather than trying to supplant dominant ecosystems like Ethereum or Solana, Midnight is designed to integrate with them. It talks to numerous blockchains, including Solana, Ethereum, Avalanche, Cardano, and more, allowing developers to pay transaction fees in the native currencies of their respective chains, without migrating assets or liquidity.
The Demon of Ponzonomics
Hoskinson is critical of the crypto industry's reliance on tokenomics that enrich insiders and early investors instead of building sustainable infrastructure. He stated, "We didn't do a VC raise... Instead of doing an ICO or venture capital, I'll just spend my own money, build it, release it, finish, and do an airdrop." The upcoming airdrop will target users across eight major chains, reaching 37 million wallets.
Midnight, with its emphasis on privacy, cross-chain cooperation, and anti-speculative economics, is a challenge to the winner-take-all mentality of many Web3 projects. It seeks to serve as connective tissue, not a replacement organ.
Beyond technical design and economic structure, Hoskinson emphasized that the future of any blockchain protocol hinges on community and ideology. He believes that the survival of projects like Dogecoin and Bitcoin stems not from technical superiority but from strong, enduring communities. Cardano, with its on-chain treasury and commitment to community-driven governance, is a prime example.
Midnight, with its cooperative tokenomics design and emphasis on privacy, cross-chain cooperation, and sustainable economics, is the culmination of these ideological pillars. Hoskinson declared, "It's really exciting... We can now have supply chains, secure voting systems, health care record systems, financial systems... where you, your accountant, your CFO, your organization gets to see one set of books, but then the world sees another. But you preserve everything that makes cryptocurrency special: the auditability, the verifiability, the provability."
At press time, Cardano traded at $0.78.
Enrichment Data:The Midnight network, a privacy-focused sidechain developed by IOG, aims to tackle significant challenges in the crypto industry: privacy, economic fragmentation, and "Ponzonomics." Here's how it addresses these issues:
Privacy
Midnight utilizes zero-knowledge cryptography and a cooperative tokenomics model. This approach enables confidential smart contracts and selective disclosure of sensitive data, addressing concerns about the permanent public visibility of transactions on traditional blockchains. The use of a shielded resource called DUST facilitates transactions without exposing metadata or wallet details, offering enhanced privacy protection.
Economic Fragmentation
Midnight aims to integrate with multiple blockchain ecosystems, promoting interoperability. It allows developers to pay transaction fees using native chain tokens, eliminating the need for asset migration between chains. This cooperative model fosters cross-chain integration without enforcing ideological alignment, helping to bridge the fragmented crypto landscape.
Ponzonomics
To combat "Ponzonomics," Midnight introduces a cooperative tokenomics design. This model uses a public utility token called NIGHT for governance and rewards, while DUST powers transactions in a way that is renewable, non-transferable, and decays over time. This unique model aims to create a sustainable, economically robust network that is less susceptible to exploitation.
In addressing the challenges within the cryptocurrency industry, the Midnight network, a sidechain developed by IOG, leverages zero-knowledge cryptography and cooperative tokenomics to ensure privacy by enabling confidential smart contracts and selective disclosure of sensitive data.
Embracing interoperability to combat economic fragmentation, Midnight allows developers to pay transaction fees using native chain tokens, promoting cross-chain cooperation without ideological alignment. This fosters integration across the fragmented crypto landscape.
To combat "Ponzonomics", Midnight introduces a cooperative tokenomics design, using a public utility token called NIGHT for governance and rewards, and a renewable, non-transferable, and decaying DUST for transactions, aiming to create a sustainable, economically robust network less susceptible to exploitation.
