Decrease Treasury Tax from 20% to 10%
7 of 7 committee members voted
- Cardano Atlantic Council07e0eb70…5bdeYesResigned · term ends epoch 580Rationale
We find this governance action to be Constitutional.
We find this governance action, as proposed, to be constitutional.
The proposal meets the requirements of the Cardano Constitution, Article III, Section 5: Participatory Governance
- ✅ The proposal follows a legible standard.
- ✅ The proposal provides at least the minimum required rationale
- ✅ The on-chain content of the proposal matches the off-chain content
- ✅ The proposal has undergone technical review and scrutiny and has not been found to endanger the security, functionality, performance, or long-term sustainability of the Cardano Blockchain.
- ✅ The proposal addresses its expected impact on the Cardano Blockchain ecosystem.
The proposal meets the requirements of the Cardano Constitution, Appendix I, Section 2.2: Economic Parameters, Treasury Cut
- TC-01: ✅ The treasuryCut is not below 0.1
- TC-02: ✅ The treasuryCut does not exceed 0.3
- TC-03: ✅ The treasuryCut is not negative
- TC-04: ✅ The treasuryCut does not exceed 1.0
- TC-05: ✅ The treasuryCut has never been changed
- Cardano Japan Council (ICC)4012cab5…0755YesExpired · term ends epoch 580Rationale unavailable
- Cardano Foundation6796d87d…c280NoExpired · term ends epoch 580Rationale unavailable
- Eastern Cardano Council2ea7a78e…10ecNoExpired · term ends epoch 580Rationale
We have determined that this Protocol Parameter Change governance action is unconstitutional.
The specific parameter guardrails under APPENDIX I, Section 2.2 of the Cardano Constitution that require consideration for the governance action with ID "941502b0aa104c...84f5#0" and title "Decrease Treasury Tax from 20% to 10%", are TC-01, TC-02, TC-03, TC-04 and TC-05.
The value proposed in this governance action meets the criteria in these guardrails.
However, APPENDIX I, Section 2.6 of the Cardano Constitution states that "A specific reversion/recovery plan must be produced for each parameter change. This plan must include: Which parameters need to change and in which ways in order to return to the previous state (or a similar state)".
A simple interpretation of this requirement could mean that a "reversion plan" in this case, only needs to describe reverting the treasuryCut back to its current value. We however interpreted this requirement to mean that the plan must also consider how to revert any secondary effects of the change, to "return to the previous state".
Further, ARTICLE III, Section 5, Paragraph 3 of the Cardano Constitution states ""Hard Fork Initiation" and "Protocol Parameter Change" governance actions shall undergo sufficient technical review and scrutiny as mandated by the Guardrails to ensure that the governance action does not endanger the security, functionality, performance or long-term sustainability of the Cardano Blockchain."
Our assessment of the information provided with this governance action, found it did not "undergo sufficient technical review and scrutiny" to ensure it does not "endanger" the "long-term sustainability of the Cardano Blockchain."
Finally, ARTICLE III, Section 5, Paragraph 1 of the Cardano Constitution states that "Sufficient rationale shall be provided to justify the requested change to the Cardano Blockchain." While ARTICLE III, Section 5, Paragraph 4 states "All owners of ada shall have the right to ensure that the process for participating in, submitting and voting on on-chain governance actions is open and transparent and is protected from undue influence and manipulation."
It has been argued that some of the information regarding the change to staking rewards in the rationale for this governance action is inaccurate and therefore potentially misleading. This may at best contravene the requirement for "sufficient rationale" or at worst mean voters are not "protected from undue influence and manipulation."
We acknowledge and appreciate the intention of this governance action - namely, to validate parameters that were originally set by the founding entities without direct community approval. Now that we have transitioned to a liquid democracy, it is reasonable to revisit these foundational decisions. However, we believe that the above excerpts from the Cardano Constitution are in place to ensure that such revisions are held to the same level of research and rigour that was originally applied when setting these parameters. Governance decisions should not be based on sentiment or ideological preferences regarding taxation but rather be grounded in a thorough, research-driven approach that has been part of the Cardano ecosystem since its inception.
By way of a split decision we find this governance action Unconstitutional.
- Emurgodc2b0706…89b8NoExpired · term ends epoch 580Rationale unavailable
- Input | Output3c9ebce6…1e4cNoExpired · term ends epoch 580Rationale
The Governance Action “Decrease Treasury Tax from 20% to 10%” lacks one constitutional requirement: a reversion plan. While the intended outcome of the action falls within the guardrails for the corresponding parameter and represents a contribution to Cardano’s governance made in good faith, it fails to conform to the procedural standards essential to robust governance processes which should not be overlooked. For this reason, IO finds it unconstitutional.
The proposal to decrease the treasuryCut parameter from 20% to 10% falls within the corresponding guardrails TC-01 and TC-02 (Appendix I, Section 2.2).
However, per Appendix I, Section 2.6, a reversion plan is required for all parameter changes. While the constitution does not specify what party must provide the reversion plan, operational rigor in a decentralized environment requires that the reversion plan be included with the corresponding Governance Action when submitted. Because the Governance Action does not include a reversion plan, it is unconstitutional.
We hope the ecosystem will adopt a standard for the kind of reversion plan that parameter changes should include to account for the complex effects of such changes on the Cardano blockchain and ecosystem, ensuring that there is always a path back from unacceptable contingencies, however unlikely they may seem for any given proposal.
The IO team is encouraged to see a governance action on an important economic parameter, accompanied with substantive argumentation, framed and funded by members of the Cardano ecosystem. We hope that this event will move the needle on the discussion of the treasuryCut parameter, along with the refinement of standards of procedural rigor for Parameter Change governance actions in general.
- Intersect Constitutional Council85c47dd4…bf64NoExpired · term ends epoch 580Rationale
The Intersect Constitutional Council votes that the treauryCut parameter change governance action 941502b0aa104c...84f5#0 to be unconstitutional, with a vote split of 4-3.
In order to clear up any ambiguity, it should be noted that the parameter in question has 3 different names depending on where it is found. It is tau in the Shelley Genesis file, treasury_growth_rate in db-sync and treasuryCut in cardano-cli and the Constitution Guardrails. This rationale will hereby reference treasuryCut throughout, although the Council raises the question of whether these multiple naming conventions should be standardised for proposals going forward in order to reduce ambiguity for less technically inclined ada holders looking to vote on such actions in the future (and also bring them in-line with the approach taken in the Constitution Appendix I Section 1.2).
The governance action proposes a change to the economic parameter treasuryCut, namely a reduction from 20% to 10%.
The two main objections from those voting unconstitutional were the absence of a recovery/reversion plan in the proposal and potentially misleading staking APY figures quoted as part of the mathematical justification of the proposal.
Appendix I Section 2.6 of the Constitution states that, “A specific recovery/reversion plan must be produced for each parameter change” and although it could be argued that we simply revert the treasuryCut parameter setting if required, the fact is that it voids a specific requirement laid out in the Constitution as part of the parameter change process. The wording does not differentiate between categories of parameter change, it says “each parameter change”. The Constitution outlines the governance process and procedures must be followed where mandated, to begin making allowances on the first governance action reviewed under this new Constitution could set a precedent that begins to undermine the governance process and the role of the Constitution going forward.
Secondly, the proposal assumes a baseline staking APY of 4%, proposing that the change could lead to an increase to 4.5% in its mathematical justification section. However, this can be considered to be misleading and as it fails to acknowledge that staking APY is now nearer an average of 2.8% when evaluating some of the most saturated pools over the past 6 months on AdaStat. This would result in a more realistic increase to around 3.15%. It has been argued that misleading numbers like this could violate Article III Section 5, where voting should be “protected from undue influence and manipulation.” It was considered that voters could be led to thinking that they are voting for higher staking returns that are in contrast to the reality.
It should be noted that those voting the proposal to be unconstitutional in its current form agreed that, should these two issues be rectified and the proposal resubmitted then they would most likely consider it to be Constitutional.
The close nature of the discussions surrounding this governance action proposal is reflected in the narrow vote split of 4-3 on the side of unconstitutional. The Council has discussed a wide range of topics but has ultimately tried to keep the final decision making process focussed solely on its remit of determining constitutionality when put up against the Constitution document and refrained from, as much as possible, diverging into evaluating broader economic impacts on the treasury. Members wishing to present those arguments are encouraged to do so in their capacity as DReps, rather than as members of the ICC.