Proposal to Decrease Cardano Treasury Tax from 20% to 5%
A proposal has been made to reduce the Cardano treasury tax from 20% to its original rate of 5%. This change is being suggested by a user named SmaugPool, who is a developer on the Cardano platform. However, before this proposal can be implemented, it must first be approved through a community voting process. Currently, the effective treasury tax stands at nearly 33%, which is much higher than the initial rate.
According to estimates from developers, around 30 million ADA is added to the treasury each month, bringing the total amount to approximately 1.39 billion as of November 7th.
The Role of the Cardano Treasury
The Cardano treasury serves as a source of funding for ecosystem development and maintenance. It also supports community-led projects through initiatives like Project Catalyst, with management overseen by the non-profit organization, the Cardano Foundation.
An initiative to drop the treasury rate by 25% to 5% was proposed by Earn Coin Pool, a stake pool operator (SPO) on Cardano. This Protocol Change Proposal (PCP) aims to adjust parameters within the Cardano network and requires approval before implementation due to its public nature.
Potential Impact on Stake Pool Operators and ADA Prices
If this proposal is approved, it could lead to more SPOs joining the network. These entities are responsible for verifying and securing the blockchain and are rewarded with ADA for their efforts. Currently, there are over 3,100 SPOs in Cardano who can validate transactions and receive block rewards without any minimum stake requirement.
With the current treasury tax set at 20%, only 80% of transaction fees go towards rewarding SPOs while the remaining 20% is deposited into the treasury. The total amount in the treasury continues to rise with each epoch as more transactions are processed within the network.
As of now, ADA is trading near its July 2023 highs but remains below $0.40. If the community votes in favor of reducing the treasury rate, it may increase demand for ADA as more users engage in on-chain transactions.
Hot Take: Potential Impact of Reduced Treasury Rate on ADA
If the proposal to reduce the Cardano treasury tax from 20% to 5% is approved, it could lead to increased participation from stake pool operators and potentially drive up demand for ADA as more users transact on-chain. This change has implications for both network dynamics and token economics within the Cardano ecosystem.
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