Cardano is weighing a proposal that could allocate 120 million ADA, valued at approximately $19.2 million, to increase its decentralized finance (DeFi) total value locked (TVL) by $200 million over the next year. While the initiative aims to advance Cardano’s DeFi ecosystem, some analysts caution that financial incentives alone may not address the network’s deeper challenges.
Alpha Growth’s PRIME proposal and phased funding safeguards
Crypto commentator Linda recently explored the PRIME proposal, developed by Alpha Growth, which seeks to enhance liquidity, develop DeFi products, and attract longer-term capital beyond short-lived incentive schemes. Cardano currently holds about $90 million in DeFi TVL and $45 million in stablecoins.
Alpha Growth’s strategy begins with a comprehensive audit covering 20 to 25 DeFi categories. This would be followed by a public gap analysis to identify specific ecosystem weaknesses. Only after these assessments would the actual incentive programs and capital deployment start.
The proposal’s structure includes key safeguards. The transition to the critical third phase, where most funds would be distributed, requires approval from a five-member operating group featuring representatives from Blink Labs, CoinseLion, Midgard Labs, Input Output, and Tweag. If this panel does not agree to proceed, roughly 90 million ADA will remain untouched in the treasury.
Linda highlighted her support for the safeguard: “I personally really, really like that safeguard.”
The preliminary budget allocates $5.6 million to ecosystem grants, $4.3 million for liquidity provider incentives, and $2.4 million for marketing, events, and partnerships. Alpha Growth would receive a $1.7 million fixed management fee, with as much as $4.6 million additionally tied to performance milestones. Remaining funds are designated for audits and compliance expenses.
| Budget Item | Planned Allocation |
|---|---|
| Ecosystem grants | $5.6 million |
| Liquidity incentives | $4.3 million |
| Marketing & partnerships | $2.4 million |
| Alpha Growth fixed fee | $1.7 million |
| Performance-based fee | Up to $4.6 million |
| Audits & compliance | Remaining funds |
Before any spending can occur, Cardano governance may need to lift its Net Change Limit—the treasury cap for funding cycles—from 350 million ADA to 500 million ADA. Linda argued that the current ceiling leaves insufficient room to accommodate the proposed initiative.
Mini dictionary: Alpha Growth, a blockchain consulting firm, develops strategies for DeFi project growth and helps optimize liquidity and capital efficiency for emerging crypto ecosystems.
Key adoption barriers and the debate over incentives
Alpha Growth’s analysis points to Cardano’s fragmented and inefficient liquidity as a primary DeFi obstacle. The proposal claims that increasing “organic APR”—returns based on genuine transaction activity rather than external incentives—will help retain capital and users.
Linda, however, expressed skepticism about the effectiveness of such incentives. She noted that despite past campaigns offering high, relatively low-risk yields, Cardano has struggled to achieve broad DeFi adoption. She believes the network needs a unique “killer app” to persuade users to overcome operational hurdles such as new wallets, cross-chain bridges, and unfamiliar DeFi interfaces.
“We don’t just need competitive APRs. We need something that only exists on Cardano”—an application compelling enough to offset onboarding friction, Linda stated.
Additional headwinds include the lack of native USDC stablecoin support; Cardano currently relies on bridged USDCX, which Linda argued may not deliver the trust, liquidity depth, or integrations that users expect. She also cited slower settlement times and less responsive liquidation processes compared to other leading chains.
Alpha Growth’s proposal essentially represents a test case for whether Cardano can cultivate a robust, sustainable DeFi environment. Should efforts fall short of significantly boosting on-chain activity, Linda suggested that Cardano might need to shift focus toward real-world financial infrastructure—a core vision that shaped the project’s initial development.
