Reality behind Cardano Treasury and recent Drama

追加: 2026-05-25

[00:00:00]During bear markets, ADA's price tends to enter into a death spiral in regards to the treasury spending. And today we're going to talk about it because recently it has become a really hot topic. What's happening in Cardano at this moment, you'll probably see a lot of debates because Input Output, which is one of the founding entities around Cardano, submitted nine proposals. And there's also Input Output Research that has their very own uh proposal for Cardano Vision 2026, which includes research regarding quantum resistance and layers, which are really important subjects. And out of the nine proposals and this proposal, I think so far four has been approved and we don't know about the rest of them.

[00:00:50]And that is raising really important questions.

[00:00:53]And what Charles recently said is if the research is not funded, then the whole label of science coin, because Cardano is, you know, as a blockchain it is research driven, it is peer-reviewed, and the ADA, it's labeled science coin, that goes away because you no longer have that research lab. Because if the proposal is not approved, that lab is forced to shut down, layoffs will happen, scientists will leave.

[00:01:28]And that brings a really important question.

[00:01:31]What happens if D-reps say yes, and what happens if they say no?

[00:01:37]And that's how we are entering into this death spiral. So, what happens here is these founding entities, they put out proposals for development, for upgrades, for marketing.

[00:01:51]And D-reps have the option to either vote yes and approve it, in which case the ADA token is released and it's used to fund those operations, or they can say no, in which case the development or upgrade or integration or marketing, it doesn't happen.

[00:02:08]In both cases, let's talk about it. If the DRep say yes, and they reach the 67% threshold, and the proposal is approved, what happens is ADA is sold to fund the operation. In which case, the sell pressure increases, and the when the sell pressure increases, ADA price drops.

[00:02:30]Now, if the DReps say no, and disapprove the proposal, in which case ADA token is not released, so there's no sell pressure, but you don't get development, you don't get upgrades, and because of this, I mean, let's talk about it. If the research stops, if the research labs is forced to shut down, that will be a really big hit towards sentiment around Cardano. And what will happen is the sentiment will drop. Sentiment will drop. ADA price will drop. So, during bear market, especially at a time when the ADA price is almost at its lowest, whether you say yes or no, in both cases, ADA price drops. Because when these proposals are accepted, those things, in most cases, they do get delivered. Let's talk about Project Catalyst V1, the critical integration budget that was approved.

[00:03:27]And there were five things that were you know, that were promised in the proposal to be integrated.

[00:03:33]Three of them are integrated. Three integrations are done. We have the USDC X, we have the Pyth network, we have the Dune Analytics, we have the Layer Zero that is somewhat integrated. I mean, the deal has been signed, it's just not integrated yet, but it is in the pipeline. And there's one last one that was for Cardano and wallets that hasn't happened yet. But, I mean, you can say that four out of five, if we are being optimistic, four out of five integrations that did happen. But, did we get USD CX liquidity? We didn't.

[00:04:08]The development is indeed there. It's just that during the market that we are in at the moment, it's not able to generate results. And the price moves not because of these developments, but because of usage, because of actual value that, you know, enters Cardano by actual capital and liquidity. And that doesn't happen.

[00:04:28]So, what happens is Ada token is sold, development happens, it doesn't generate results. When it doesn't generate results, all you're left with is the sell pressure that drops the price. Now, here's what's happening and how we are entering into this death spiral.

[00:04:42]When the price drops, DRep's become more inclined to reject future proposals. And as they reject future proposals, development upgrades doesn't happen, sentiment drops, Ada price drops further. When Ada price drops further, more DRep's become inclined to reject proposals.

[00:05:04]And the same thing happens. And that is the death spiral that we are currently in.

[00:05:10]Whether you say yes or no, they both end up, you know, with Ada price dropping further.

[00:05:16]Now, this is just for the current market, the bear market that we are in.

[00:05:21]It doesn't happen when we are at when we have a higher valuation for Ada price. I mean, we didn't have midnight. We didn't have Pyth Oracles. We didn't have USD CX, its tier one stablecoin. We didn't have it.

[00:05:36]And still, we were able to get a TVL of $700 million.

[00:05:41]So, that was because of the market. Now, because we're going to have all these interoperability, all these bridges for you know, to different chains. Now we have I mean, obviously we have a lot more development, a lot more integrations, a lot more partnerships.

[00:05:57]Obviously, when the market improves, we are going to get a higher TVL. And that is actually when all these developments that happens, they are able to generate result. They cannot realistically generate result in the market that we are in.

[00:06:14]Every chain at this moment, it's bleeding. And it has been bleeding for some time. Take a look at Ethereum. Take a look at Solana. Take a look at Binance Smart Chain. If you just talk about the the chain fees, um Ethereum was generating around 800 to 900 million dollars a year.

[00:06:33]Solana was generating around 700 million dollars a year. And Binance Smart Chain, BNB, it was in the same range.

[00:06:40]And that was you know, these figures were of last year.

[00:06:45]And this year, the fees has dropped five times.

[00:06:50]So, it's not just Cardano. It's every other chain. The sentiment is low on every chain that we have. And that sentiment, of course, has a huge impact on these proposals. DApps are more inclined on rejecting proposals, which I mean, I get the idea there. You don't want more sell pressure. But you cannot stop development. Cardano is not developed as a hype chain.

[00:07:18]It's not built to attract, you know, paper hands. It's not built for meme coins.

[00:07:26]It's built for serious use, for real-world adoption, for institutional use cases, for real-world asset tokenizations. It's built for banks and governments and institutes to use. And we actually have a lot of these use cases already. We have farmers in India using it. We have governments that are using it, you know, for digital identity. So, we already have a lot of these use cases, but the thing is it takes time. What Cardano has been developing, it will take time for it to generate these results. So, if there's any suggestion that I have, it's do not stop important development. We have Pogen, I think the proposal for it is also live. We have Leos. We have research regarding Leos and the quantum resistance.

[00:08:15]It should not stop.

[00:08:17]Um four out of nine proposals, they are approved. I'm not sure about the remaining, but that is where I stand. Of course, you also have to reject proposals because if you accept every proposal, we're going to hit NCL again.

[00:08:31]We already hit NCL in the previous cycle. Now, let's talk about the important thing.

[00:08:39]How much Ada is there in the treasury?

[00:08:43]And how long can we sustain spending from treasury before it all stops, before the treasury and the reserve that is funding the treasury it is depleted completely?

[00:08:57]So, for this, let's move forward to a new board. So, right now, we have 1.6 billion Ada in the treasury.

[00:09:08]And this treasury is funded by the reserve, which is 6.3 billion Ada. These are tokens outside of the circulating supply.

[00:09:20]And every epoch, that is every 5 days, 0.3% of this treasury is unlocked.

[00:09:30]And that, you know, 0.3% is used for staking rewards and also for treasury. So, here's how it goes.

[00:09:41]It gets divided into two. So, 0.3% let's write it here. 0.3% gets unlocked.

[00:09:47]80% of this 0.3% it goes towards staking rewards.

[00:09:53]And the remaining 20% goes to the treasury.

[00:09:59]And every year there is almost 70 epochs almost 300 as of this moment about 300 or 310 million era goes from the reserve towards the treasury. So, three almost let's round it up 300 million era goes from reserve to the treasury. Now, over time as the amount of era in the reserves are getting reduced, which they are getting reduced somewhat drastically. They were at around 7.5 billion era I think last year and now they're sitting at about 6.3 billion.

[00:10:35]Now, as the amount of era in the reserve is getting reduced, this 0.3% that is used for staking rewards and also to fund the treasury, of course, it's getting reduced as well. So, as of this moment if you talk about last year, almost 310 million era were funded by the reserves towards the treasury. And we have this concept of NCL.

[00:11:00]So, NCL is basically net change limit, which is a cap on how much you can spend from the treasury in a specific period of time. And that specific period of time is usually set to 12 months, which is almost 70 epochs.

[00:11:18]And that means in 12 months or in 1 year you can only withdraw 350 million era from the treasury.

[00:11:27]And in the last cycle, which was over a few epochs ago.

[00:11:33]We reached this NCL.

[00:11:36]That means 350 million ADA were used or withdrawn from the treasury.

[00:11:44]Now, here's what's happening. The reserve is funding treasury with almost 300 million ADA per year and we're spending 350 million ADA in a year from the treasury. So, we are in a 50 million deficit.

[00:11:59]And of course, this has to change. Now, the problem is in the previous years, when ADA was at $1, this NCL, 350 million ADA, it was worth 350 million dollars. But right now, ADA is priced at 0.25 dollars.

[00:12:19]So, now this 350 million ADA is worth a lot less. So, when the ADA price is higher, less amount of ADA is used from the treasury.

[00:12:32]But of course, from the last year, the price has dropped almost 80%. So, on one hand, the price has dropped 80% and because the price has dropped 80%, the spending from the treasury has increased in terms of ADA, which is increasing the sell pressure. Now, one side note here is the treasury is funded by two things, from the reserve and also from the fees.

[00:12:58]But the fees at this moment is so minute, it's so less that it contributes 0. I think 0.2% to the treasury. So, 99.8% it comes from the reserve and 0.02% come from the fees because I mean, at this moment, the fees is way too less. The chain generated 3.4 million dollars in fees in last year, and so far we have generated almost $334,000 in 2026. And if we continue with this pace, we may not even make it to $1 million in fees in 2026. Now, here's a few solutions to fix this problem of entering this death spiral.

[00:13:48]So, you have the NCL, the net change limit, which we reached last year. So, we used the entire NCL of 350 million era in the previous year, and in the previous year, the average price of era was around 50 cents. It was The highest were at about 80 cents, and the lowest were of course at 25 cents, but the average came out at about 50 cents.

[00:14:15]And at 50 cents, we were able to use the entire NCL.

[00:14:19]And if you continue with the same pace, especially when the price is half of what it was from the average of previous year, of course this NCL is now worth much less than it was last year, which means you're more likely to hit this way sooner than before.

[00:14:35]Now, the same NCL of $350 million at $3 per era, that is about more than $1 billion.

[00:14:45]And you are essentially able to spend maybe $1 billion of the entire NCL in a year when era is priced more than $3. And at that time, of course it is going to create a sell pressure, but at the same time the market is strong that the buy pressure is able to counter most of the sell pressure. Of course, you don't have to spend the $1 billion plus, but I mean, it won't have much effect on the era price because the buy pressure is able to counter the sell pressure that is caused by it.

[00:15:18]And this is the time when you need to push major upgrades, major development that requires a lot of the budget. And this is something that the reps cannot do much about. This comes down to the FEs, the founding entities, Cardano Foundation, Input Output, Midnight Foundation, Intersect, and the last one is Emurgo. It comes down to them to push these major, you know, um upgrades and integrations and marketing at a time when ADA is priced much higher. And this very same NCL of 350 million at $1 per ADA is about 350 million dollars. And currently, the NCL at $0.25 um per ADA is about 175 million dollars.

[00:16:01]And right now, we require a higher budget to keep operations funded. So, here's my first suggestion.

[00:16:09]And that is to the FEs, the founding entities, to push major upgrades that requires a lot of funding at a time when ADA is priced higher.

[00:16:18]And focus on, more on, you know, sustaining the price at bear market. And don't push major upgrades that a lot that require a lot of budget at a time when ADA is already priced lower. Because you've seen what happens.

[00:16:33]Even if upgrades are really essential, let's talk about Leos. It's really essential. The throughput is going to increase 60 to 65 times. And it has been talked about for for some time now. It's a really important upgrade. Um but in the in the current stage that we are in, where it should be increasing people's, you know, hope and sentiment and narrative, just the treasury spending is bringing the sentiment down.

[00:16:58]So, I think it's not the right time to push forward with this. Uh I mean, there's not much that we can do at this moment. We just have to go forward with it. But for future upgrades that are major, do it at a time when we, you know, when ADA is priced much higher.

[00:17:12]Now, there's one more thing here. Right now, we are using the treasury in the in really wrong ways.

[00:17:21]So, projects are taking funds from the treasury and they have no intention and they essentially don't have to return anything to the treasury. The only thing that they have to return is if there's a portion of the budget that isn't used, that returns to the treasury.

[00:17:39]But, they're not obliged to generate revenue and then return the funds that they took from the treasury.

[00:17:47]So, currently the treasury is being used as the sole funder, you know, for these projects and it's not getting anything back. And that's something that has to change. Projects should use the treasury as a seed capital. They should use it as a catalytic uh capital. They should use it as a matching capital in a way that you take some funds from the treasury.

[00:18:17]Using that capital, you attract investors.

[00:18:21]Take money from the investors. Develop the project. Generate the revenue and then return it to the treasury.

[00:18:31]And we have seen we have a proposal similar proposal for it. I think that's the Pogen that is promising something similar. And then we have the Draper Dragon that used it in a similar way.

[00:18:43]All we have to do is push forward with this as the new standard.

[00:18:49]Right now, the treasury is used to fund these projects with no hopes of revenue coming back to the treasury and that is not sustainable at all because as we have seen before, we are in a deficit. We are spending more from the treasury than the treasury is receiving from the reserve in a year.

[00:19:09]And if we continue down this road with this pace, of course, the treasury will be depleted. And at some point the reserve has to be depleted. Um because we have a limited supply. There's There was almost 7.5 billion ADA in the in in the reserve. Now we have 6.5 billion ADA in reserve. And as the reserve is depleted, of course, there will be no more funding from the reserve to the treasury. And as we discussed before, 99.8% of the treasury funds, they come from reserve. And once the reserve is gone or it's or it's, you know, it's reduced to an amount that cannot sustain the treasury, at that point the development will rely solely on the fees and revenue that is generated by the Cardano chain, which, as we have seen, it's not looking good.

[00:20:11]Uh last year we generated $3.4 million.

[00:20:14]This year we will hardly make it to $1 million. So So what we have to do is use this time to develop Cardano and make sure that in future years the fees that the chain generate should be ample to fund all the developments.

[00:20:36]And uh I mean, we still have a lot of time left for it, but that is the reality of Cardano's treasury and reserve and what is currently happening.

[00:20:46]Um and that's my take. I gave my suggestions for what can be done about it. So, yeah, I think that's that's all from my part.

[00:20:55]Uh let me know your thoughts in the comment section, and I'll see you guys in the next video shortly. So, stay tuned.