Cardano governance depends on sustained, informed, and high-integrity participation from governance actors and stakeholders. However, there is currently no structured and data-driven framework for determining how these contributions should be incentivized, measured, or supported over time.

This creates several risks, and early governance data already shows reasons for concern. During Cardano’s first year of on-chain governance, the number of active DReps declined in every 12-epoch period. At the same time, voting power became increasingly concentrated: the DRep Gini coefficient increased from 0.92 to 0.94, and between 11-16 DReps represent 51% of voting power [6]. The State of Governance research also identified an “incentive deficit” as one of five major structural barriers to effective governance. Sustainability concerns extend beyond DReps: one Constitutional Committee consortium retired due to lack of compensation [6]. Yet incentives also create risks of their own. Poorly designed mechanisms could reward surface-level activity, reinforce existing voting-power concentration, encourage gaming, or spend treasury resources without creating meaningful governance value.

Without a clear incentive framework that defines objectives and measures of success, Cardano lacks a way to identify which of the 49 approaches and findings make sense and risks making compensation decisions reactively, politically, or inconsistently. The ecosystem needs a coordinated way to determine which governance problems are actually incentive-related, which behaviors and contributions create value, which metrics are reliable, which actor groups require different treatment, and which mechanisms can strengthen sustained participation without undermining decentralization, accountability, or governance integrity.

Solution

The Governance Incentives Framework will create a structured, evidence-based approach for designing, testing, and evaluating governance incentives in Cardano. The framework is important because it defines the methodology and what should be achieved for governance incentives. Individual incentive models define specific reward mechanisms developed and tested within that framework.

We have mapped the existing landscape of governance incentive work. This will help avoid duplicated work and create a shared understanding of what already exists, what is missing, and where different initiatives can collaborate. The project will then define actor-specific incentive problems and distinguish between different types of contribution to establish a clear scope and a detailed roadmap toward a sustainable incentives framework.

Using governance activity data, community feedback, and expert input, the project will develop and simulate incentive models. These models will be assessed not only by whether they increase participation, but also by whether they support decentralization, reduce concentration risks, improve accountability, and avoid reward gaming, shallow compliance behavior, and other unintended effects. The modeling approach will build on both formal reward-scheme research and process-first Cardano-specific analysis [7, 8].

Where relevant, the project will reproduce and evaluate existing governance reward models, including the behavioral and cost assumptions developed in Reward Schemes and Committee Sizes in Proof of Stake Governance [7]. The project will test how well these assumptions transfer to Cardano’s live governance environment

A public website with information, dashboard and dataset will make the work transparent, educational and easier for the community to understand and review. In addition, a dedicated controlled incentive pilot work package will fund one clearly defined, controlled incentive experiment.

The final result will be a complete Governance Incentives Framework, including public research and community feedback reports, structured governance activity data, a public dashboard, documented incentive models and formula outputs, findings from controlled incentive pilot testing, and a clearly defined implementation pathway for future governance incentive mechanisms in Cardano. The project will produce and submit a Governance Incentives Framework CIP, supported by the project’s research, governance data, incentive models, community feedback, and controlled testing findings.

Strategic Alignment

The framework aligns primarily with Cardano 2030 Pillar 3 — Governance [5], and secondarily with Pillar 5 — Ecosystem Sustainability & Resilience and Pillar 1 — Infrastructure & Research Excellence.

Primary Alignment: Pillar 3 — Governance

Alignment with G.1 — Incentivized & Accessible Governance

Governance participation can depend on contributors having sufficient time, financial security, or institutional support. The project will evaluate how incentives can sustain broader participation while preserving accountability, decentralization, and governance integrity.

Alignment with G.2 — Turnout-Aware Voting with Delegator Safeguard

Higher activity or turnout will not be treated as sufficient evidence of success. Mechanisms will also be evaluated for participation quality, reward distribution, concentration, gaming risk, and effects on delegators to avoid rewarding superficial activity or reinforcing dominant actors.

Secondary Alignment: Pillar 5 — Ecosystem Sustainability & Resilience

By examining incentives for sustained participation across different actor types, the framework aims to reduce burnout, attrition, and dependence on highly resourced contributors, strengthening long-term governance resilience.

Secondary Alignment: Pillar 1 — Infrastructure & Research Excellence

Governance research, structured datasets, monitoring infrastructure, incentive models, and a public dashboard will create reusable evidence and infrastructure for future governance design and monitoring.

Milestones and Deliverables

The project will be delivered over 12 months through seven staged milestones. The work moves from discovery and framework design into data collection, modeling, community validation, dashboarding, controlled testing, and culminates in a submitted Governance Incentives Framework CIP and a practical governance integration pathway. Each milestone produces reviewable outputs that will be documented publicly.

Milestone 1: Initial Setup and Discovery

Estimated duration: Month 1–2

Establish the project foundation, review existing work, map related governance incentive initiatives, and define the initial problem space.

Key deliverables

• Project kickoff and internal coordination structure.
• Initial project roadmap and delivery plan.
• Initial governance incentives initiative map.
• Review summary of relevant prior work.
• Initial incentive-design problem framing.
• Initial actor and contribution landscape.
• Initial community engagement plan.
• Public communication channels and feedback process.
• Public-facing website including basic information and question submission form.

Acceptance criteria

• Governance Incentives Mapping Document finalized and filtered to the most relevant initiatives, research, and approaches.
• Discovery outputs sufficient to define the initial incentive-design scope and roadmap for Milestone 2.
• Public feedback channels operational.

Milestone 2: Framework and Parameter Definition

Estimated duration: Month 3–4

Develop the preliminary Governance Incentives Framework and define the initial categories of governance behaviors, parameters, risks, and incentive design constraints.

Key deliverables

• Preliminary Governance Incentives Framework draft with supporting rationale.
• Initial actor-specific incentive analysis.
• State-of-the-Art Evidence Review synthesizing the relevant scientific and Cardano-specific evidence base for governance incentive design.
• Initial parameter landscape for governance contributions and behaviors.
• Initial risk and anti-gaming framework.
• Initial governance integration considerations.
• First structured community feedback sessions or open discussions.
• Updated initiative map based on community input and related work.
• Early requirements for data collection and monitoring.
• Produce a report assessing possible technical pathways for delivering rewards, including protocol-level and smart-contract-based approaches.
• Controlled incentive pilot testing plan, including a predefined experimental duration.
• Measurement and reporting plan.

Acceptance criteria

• Preliminary framework completed, clearly distinguishing governance actor groups and incentive contexts.
• Initial parameter categories and key incentive-design risks documented without locking in final formulas.
• Community feedback documented and routed into relevant work packages.
• State-of-the-Art Evidence Review completed and 10+ research questions submitted to researchers.
• Pilot testing plan completed, with the intended middle-out basis and material pre-launch changes documented publicly.

Milestone 3: Community Engagement and Data Collection Start

Estimated duration: Month 5–6

Begin governance activity monitoring and deepen community validation of the framework assumptions. The middle-out pilot is an early controlled test of one existing mechanism and does not prejudge the project’s final incentive-model selection; its findings will inform the later comparison, refinement, and validation of multiple candidate mechanisms.

Key deliverables

• Initial governance data collection infrastructure.
• First working version of monitoring scripts or data pipelines.
• Initial structured governance activity dataset.
• Public update on framework progress and open questions.
• Community feedback sessions focused on incentive risks, actor-specific needs, possible parameters, anti-concentration concerns, and relationship to existing initiatives.
• Updated framework assumptions based on early data and feedback.
• Documentation of data sources, limitations, and reliability considerations.
• Apply the finalized pilot specification.
• Pilot/Experiment started.

Acceptance criteria

• Governance data can be collected and structured, with sources and known limitations documented.
• Stakeholder feedback summarized and open modeling questions identified for the next milestone.
• Pilot script successfully tested and controlled middle-out pilot launched.

Milestone 4: Incentive Modeling and Simulation

Estimated duration: Month 7–8

Develop and test initial incentive models using collected data, community-validated assumptions, and relevant formal and process-first reward research [7, 8].

Key deliverables

• Initial incentive model designs.
• Simulation scenarios for different incentive mechanisms.
• Initial payment or reward calculation logic.
• Analysis of potential effects on participation, rationale quality, sustained engagement, reward distribution, voting-power concentration, gaming risks, and budget sustainability.
• Initial technical feasibility review.
• Community-facing explanation of early modeling assumptions.
• Updated risk and trade-off documentation.

Acceptance criteria

• At least one model or mechanism family documented and simulated, with assumptions clearly explained.
• Simulations cover intended effects and relevant failure modes, including concentration, gaming, and budget risks.
• Results shared in a form governance stakeholders can review.

Milestone 5: Dashboard, Public Review, and Model Refinement

Estimated duration: Month 9–10

Make the project’s data, assumptions, and model outputs easier to inspect, and refine the framework based on testing and feedback.

Key deliverables

• Initial dashboard or dashboard prototype.
• Visualizations of relevant governance activity data.
• Updated incentive model based on testing and feedback.
• Updated framework architecture.
• Public explanation of what the dashboard shows and does not show.
• Feedback cycle on dashboard usability, model interpretation, and incentive risks.
• Updated documentation of assumptions, limitations, and next steps.

Acceptance criteria

• Public-facing dashboard or prototype available with documented data, visualizations, and limitations.
• Stakeholder feedback on dashboard usability and model interpretation collected.
• Model and framework refined based on data, testing, and feedback.

Milestone 6: Final Validation

Estimated duration: Month 11

Finalize and validate the framework.

Key deliverables

• Final candidate incentive mechanism set.
• Final community feedback sessions.
• Final validation report covering the framework, model performance, pilot evidence, risks, and trade-offs.

Acceptance criteria

• Final validation report completed, covering framework performance, model evidence, pilot findings, risks, and trade-offs.
• Final community feedback, remaining risks, limitations, and unresolved questions documented.

Milestone 7: Final Report and Governance Integration Pathway

Estimated duration: Month 12

Conclude the project with final documentation, handover materials, and a practical pathway for future governance integration.

Key deliverables

• Final Governance Incentives Framework report.
• Final governance activity dataset.
• Final dashboard and documentation.
• Final candidate incentive models and formula documentation.
• Final controlled incentive pilot findings report.
• At least one publication-ready research paper completed and submitted to an appropriate peer-reviewed venue.
• Community feedback report.
• Completed and submitted Governance Incentives Framework CIP.
• Governance integration pathway identifying any complementary CPS, treasury-withdrawal, protocol, or governance-action routes required for implementation.
• Handover documentation for future maintainers, data auditors, reviewers, or governance bodies.
• Final financial and milestone report.
• Governance action submitted to DReps seeking approval of the completed Governance Incentives Framework and its recommended incentive-model pathway.

Acceptance criteria

• Final framework, report, dataset, dashboard, model documentation, and pilot findings publicly available.
• Final framework traces recommendations to research, data, modeling, community feedback, and pilot evidence.
• Governance Incentives Framework CIP completed, published, and submitted through the established CIP process.
• Governance integration pathway documented and governance action submitted to DReps for consideration.
• Final financial and delivery reporting completed according to administration and audit requirements.

Metrics and KPIs

1. Framework Development

Governance Incentives Mapping: Completed by end of Month 2

First Framework draft: by end of Month 4

2. Active Community Engagement (12 month period)

Unique Governance actors engaged: 50+

Public Workshops held: 10+

Feedback Documentation: Material stakeholder feedback documented and incorporated or addressed with rationale.

Public Progress Updates: 12 monthly public project updates published.

3. Modeling of Incentives

Parameter validation: 100% of parameters are available

Preliminary models archived & available: 100% (while website is maintained by us)

Simulation Scenarios: 50+ scenarios

Failure-Mode Testing Against: anti-gaming, anti-concentration, and budget constraints.

Developer Feedback: positive feasibility assessment

4. Data Engineering & Governance Monitoring

Monitoring service availability: ≥99%

Data processing and database update latency: <1 hour

Data Documentation: Published datasets include definitions, sources, methodology, and known limitations.

5. Website and Dashboard

Website & Dashboard Launch: On schedule (Milestones)

Amount of meaningful Dashboards created: 5+

Page Load Speed: <3 seconds

6. Administration

Timeline Adherence: 95%+ of deliverables finished on time

Milestones Reported: 100%

Risk Management: 100% of high and critical risks have an owner & mitigation plan.

Public Reporting: 12 monthly progress reports

7. Research (IOR dependency)

Research Question: 10+ research questions submitted

Research Output: 1+ publication-ready research paper completed and submitted for peer review

Experiment: pilot-related research questions addressed and findings documented

State-of-the-Art Evidence Review: completed and published by end of Month 4

8. Pilot

Pilot Findings Report: Pilot methodology, results, deviations, limitations, and implications published

Team / Track Record

In late 2024, Sebastian and Seomon met at the Cardano Tech Hackathon shortly before the Constitution Summit. There, they began examining Cardano governance incentives and developed an initial model for rewarding governance actors. A few months later, they stepped back to define the underlying problem more rigorously, resulting in CPS-0020 - Governance Stakeholder Incentivization [2]. They concluded that designing an effective incentive model for governance actors required a dedicated research and development effort rather than a side project. This proposal seeks the resources needed to undertake that work for the wider Cardano community.

Seomon:

• Cardano Builder (https://zkpoker.io)
• Civics Committee member - elected on a governance incentives platform; Governance Incentives Working Group Lead
• Cardano Ambassador
• Constitutional Alternate Delegate
• Successfully closed out 10+ Catalyst proposals

Sebastian Pereira:

• Led a project to design better citizen ID collection in Bolivia for the CAN (Comunidad Andina)
• Worked for the Bolivia Ministry of Planning as part of the Government Subsidy Department
• EMURGO Blockchain Instructor
• Copywriter on over 20 projects
• Co-creator of Cardano Smart developer bot
• Blockchain consultant
• Successfully closed out:
• Cardano Smart: AI assistant for documentation and on-chain/off-chain development - 170,000 ADA
• Smart Pack: parcels damage verification system on Cardano - 100,000 ADA
• Littlefish - Coordinating Action - 43,500 ADA

Cerkoryn - Consultant and Research Contributor:

As part of the Cardano Incentives Working Group, Cerkoryn has proposed multiple CIPs addressing stake-pool incentives. His paper, Beyond Binary Outcomes: A Process-First Reward Design for dRep Compensation [8], analyzes how alternative reward mechanisms may affect participation, decentralization, and reward concentration, and informs his contribution to this proposal.

Budget Summary

The proposal presents workstream-level allocations rather than every operational line item.

Budget area ADA

Conceptualization ₳445,000.00

Active Community Engagement ₳366,400.00

Modeling of Incentives ₳884,000.00

Data Engineering & Governance Monitoring ₳295,000.00

Website and Dashboard ₳253,333.33

Administration and Coordination ₳472,000.00

Science and Research ₳476,666.67

Pilot ₳333,333.33

Additional Costs (tooling, legal, and travel) ₳118,666.67

Contingency Reserve ₳437,328.00

Independent Audit and Oversight ₳126,239.00

Total ₳4,207,967.00

The detailed operational budget is maintained separately for audit, administration, and delivery management. This proposal presents only workstream-level allocations. The Website and Dashboard allocation covers 12 months of project delivery and six months of post-project maintenance.

Expected Value and Impact

The Governance Incentives Framework will create value by reducing uncertainty before Cardano adopts permanent governance incentive mechanisms. Rather than assuming that increased activity or compensation automatically improves governance, the project will provide the research, data, models, public review processes, and controlled testing needed to evaluate which mechanisms create value and which introduce new risks.

Reducing long-term incentive risk

This one-year R&D investment is intended to inform governance incentive mechanisms that could distribute substantial treasury funds for many years. Poorly designed incentives can create recurring costs without gaining substantial value by rewarding low-value activity, reinforcing concentration, encouraging gaming, excluding smaller actors, or requiring expensive redesign after implementation.

Better-informed governance decisions

The current 2026–27 Net Change Limit permits up to ₳350 million in treasury withdrawals over its applicable period. The ₳4.21 million project budget represents approximately 1.20% of that limit, illustrating the scale of this one-time R&D investment relative to the treasury resources that governance mechanisms can influence over time.

Reduced duplication and fragmentation

The project has already identified 49 related efforts, proposals, papers, tools, and initiatives. This will identify overlaps, gaps, and opportunities for coordination, therefore reducing the risk that the community funds duplicative work or develops incompatible approaches in parallel.

Reusable public infrastructure

Without shared infrastructure, every future governance-incentive proposal may need to pay again for data collection, metric definition, analysis, and visualization. The project will create reusable datasets, pipelines, metrics, models, and dashboard components that reduce the setup cost of later governance research and monitoring.

Tested incentive mechanisms

Candidate incentive mechanisms will be modeled and simulated against participation, reward distribution, voting-power concentration, gaming risks, budget sustainability, and other relevant criteria, informed by prior formal and Cardano-specific reward-design research [7, 8]. A controlled incentive pilot will provide practical evidence about at least one selected mechanism, subject to the project’s defined safeguards.

Implementation readiness and accountability

The project will translate its findings into a submitted Governance Incentives Framework CIP and a practical pathway covering governance, treasury, protocol, and implementation needs. Public datasets, model assumptions, milestone reporting, financial oversight, and refund conditions will allow the community to scrutinize both the recommendations and the use of funds.

Contributor sustainability

A better understanding of governance workloads, contribution types, and incentive requirements can help Cardano address burnout, attrition, inconsistent participation, and dependence on contributors with substantial personal or institutional resources.

Risks and Challenges

Risk Overview

The project faces potential risks across technical, organizational, community, and governance dimensions. This section lists some of the more likely risks, mitigation strategies and contingency plans.

1 Community Engagement

Risk: Low participation or skepticism limits project value. Probability: High | Impact: High

Mitigation: Monthly workshops, transparent documentation, continuous community engagement on different platforms (X, GitHub, YouTube, Cardano Forum, Intersect)

Contingency: Increase engagement activities, address concerns transparently, adjust communication strategy.

2 Governance Framework Changes

Risk: Framework changes invalidate recommendations. Probability: Medium | Impact: Medium

Mitigation: Monitor governance evolution, design flexible models, maintain leadership communication, plan updates.

Contingency: Develop alternative scenarios, update models if changes occur, extend timeline.

3 Technical Integration

Risk: Ledger integration faces technical obstacles. Probability: Low-Medium | Impact: Medium

Mitigation: Early developer engagement, technical planning, and architectural support.

Contingency: Develop alternative approaches, extend timeline, collaborate on protocol modifications.

4 Model Validation

Risk: Models may not accurately predict real-world participation patterns. Probability: Medium | Impact: High

Mitigation: Rigorous backtesting, sensitivity analysis, edge-case testing, expert review, Pilot program.

Contingency: Refine parameters, expand model complexity, extend validation timeline.

Administration / Audit / Oversight Support

The budget includes ₳126,239.00 for Administration / Audit / Oversight Support. This allocation represents 3% of the complete project budget, including the audit allocation itself.

This allocation supports proportional administration and required independent auditing connected to the treasury withdrawal process. The goal is to provide accountability without creating unnecessary administrative overhead for a grant-style governance R&D project.

Pilot / Controlled Experiment

The middle-out mechanism [8] will serve as an early controlled experiment, not as the project’s final incentive model. It will test how DReps respond to real financial incentives and whether predicted effects on participation, reward distribution, decentralization, and concentration persist when participants can adapt their behavior.

The pilot will examine sustained voting activity, which DRep types respond, strategic adaptation and gaming, and differences between observed reward distributions and model predictions. A script will apply the finalized pilot specification and distribute eligible ADA rewards with minimal technical overhead; findings will inform later comparison and refinement of candidate mechanisms.

The middle-out mechanism is the basis of the pilot. Before launch, parameters, safeguards, eligibility rules, and implementation details may be refined through research, simulation, technical testing, expert review, and community feedback; material changes will be documented publicly. Once launched, rules remain fixed except for predefined safety or termination conditions.

Contingency use

The proposal includes a 12% contingency reserve of ₳437,328.00 for justified unforeseen costs during the 12-month project.

The contingency reserve is not an unrestricted spending line. Any use of contingency funds will be documented through milestones or financial reporting to the auditors.

Refund Conditions

Unused restricted reserves, such as unused contingency or unused pilot funds, will be returned to the Cardano Treasury if they are not needed for the approved project scope. A final reconciliation will be published as part of the oversight reporting cycle. In the event of partial delivery or scope reduction, unspent funds associated with cancelled or reduced deliverables will be returned proportionally.

Input Output Research (IOR) includes research on governance incentives in its funded Cardano Vision 2026 proposal [9]. To avoid duplicating work already funded by the community, any overlapping research subjects will be coordinated with IOR. Where overlap makes a planned work package unnecessary, in whole or in part, the corresponding unused allocation will be returned to the Cardano Treasury.