Reforming Treasury Governance
On-chain changes
Informational action. No on-chain effect; the vote signals opinion only.
Abstract
Treasury governance should enable strategic alignment and facilitate decision-making. However, treasury governance within the Cardano ecosystem is in a poor state. First, there is a funding impasse. Second, while being pivotal for Cardano's stability and growth, treasury governance is only indirectly addressed and barely supported by the existing governance system. This governance info action sketches basic ideas for reforming treasury governance and introduces them into public discussion. The goal is to provide an impetus for improving the treasury governance process and to outline guardrails for strategic direction. An implementation will require further refinements and amendments to the current process as well as the constitution. All members of the Cardano ecosystem are encouraged to collaborate in reforming treasury governance into a productive process that enables stability and growth.
Motivation & rationale
In its current form, Cardano governance and voting on treasury withdrawals have revealed significant dysfunctionalities. In particular, treasury withdrawal actions from different, but likewise important domains have led to a perceived competition for scarce resources. This opened the door to hostility and detrimental conflict within the community and has invited toxicity. There now is ill will and strife that harm the Cardano ecosystem, endangering its existence. Cardano faces a gridlock over treasury spending between different positions and coalitions in the governance system. And while treasury governance is crucial for the Cardano ecosystem, there is a lack of guardrails and structures that could provide the process with a strategic direction.
Therefore, the following ideas are presented for discussion. These basic ideas may freely be adopted, extended or modified for concrete implementation which is beyond scope here. All members of the Cardano ecosystem - institutions/organizations, SPOs, DReps and other individuals - are encouraged to work together on solutions for improving treasury governance.
Basic Propositions
[a] Treasury governance is pivotal for the Cardano ecosystem, its growth and stability: The process of treasury governance must provide a clear direction, a coherent strategy and a specific roadmap.
[b] Treasury governance in the sense of [a] has to be explicitly addressed and supported by the governance system and the constitution.
[c] The NCL must not be treated as “potential overall budget” with the alternative of simply saving everything instead: The NCL is at best a vague initial approximation for the concept of a "budget". Only having the NCL (and a collection of incoherent treasury withdrawals) is not enough for effective treasury governance.
[d] There has to be a dedicated budget for investing. The budget must include the strategic direction and the roadmap.
[e] A thematic budget structure must make clear that various important domains exist side by side. None of these domains can be deferred in favor of another.
[f] No isolated treasury withdrawals for individual projects must be put on a vote against one another. See [e] and [g] for further explanation.
[g] DReps have to vote on dedicated and balanced budgets, not on the funding of individual projects. This is also necessary to mitigate the burden of directly comparing individual proposals which is cognitively inefficient. Few DReps are experts in even a single domain, hardly any are competent in multiple domains - therefore an expert commission is proposed under [i].
[h] A strategic entity has to be responsible for preparing, proposing and implementing a budget. This entity is appointed by a vote for a fixed term.
[i] An expert commission has to be responsible for the evaluation and selection of projects that best meet the budgetary requirements. The commission is appointed by a vote for a fixed term.
Treasury Governance Process
According to the ideas presented here, the treasury governance process is prepared and supported by the strategic entity [h] and the expert commission [i] described above.The logical sequence of the treasury governance process is then proposed as follows:
Treasury Governance Voting begins with a vote on the NCL.
Treasury Governance Voting continues with a vote on the budget. This includes the overall budget amount, the budget structure and the allocation percentages for the individual domains. Up to this point, no individual projects or initiatives are considered. Upon completion of this phase, projects can submit targeted applications.
Treasury Governance Voting is concluded with a vote on the overall treasury withdrawal. The corresponding treasury withdrawal action sets out the individual projects and their respective funding amounts under the budget structure.
Budget Structure
With respect to a budget structure, the following breakdown is proposed:
1. Core Protocol and Infrastructure
Funding for node implementations, consensus improvements, networking, scalability, interoperability, and maintenance of core Cardano infrastructure.
2. Developer Tooling and Technical Resources
Support for SDKs, APIs, indexing services, TypeScript/Rust libraries, smart-contract tooling, and developer experience improvements.
3. Research and Innovation
Academic research, formal methods, cryptography, scalability research, post-quantum security, and experimental technologies.
4. Commercial Ecosystem Growth
Treasury funding for DeFi, liquidity programs, wallets, dApps, enterprise integrations, and ecosystem adoption initiatives.
5. Administration and Operational Support
Funding for governance processes, treasury administration, audit systems, reporting, constitutional compliance, and budget coordination.
6. Community, Education and Marketing
Events, conferences, outreach, education, ecosystem awareness, and community engagement.
7. Other Strategic or Public-Good Initiatives
Broader ecosystem-impact projects aligned with Cardano’s long-term vision, sustainability, or societal adoption goals.
8. Functional Reserve
Reserve budget for emergencies or urgent motions. Directly accessible under predefined conditions.
About the Author
AtlasHub, a small DRep, committed to Cardano since 2019. No drama, no FUD, no "social" media.Rationale highlights
Why some of the largest DReps voted for and against, in their own words.
As a DRep, I have decided to vote NO on the proposal: Reforming Treasury Governance My rationale: I support the discussion opened by this proposal. Cardano needs a more coherent treasury process, and I agree that the current model of isolated treasury...
As a DRep, I have decided to vote NO on the proposal: Reforming Treasury Governance
My rationale:
I support the discussion opened by this proposal. Cardano needs a more coherent treasury process, and I agree that the current model of isolated treasury withdrawals is not sufficient for long-term strategic governance.
However, I cannot support the proposal in its current form because I have concerns about shifting decision-making power away from DReps and the community towards a strategic entity or expert commission.
Expert review can be useful. It can help with due diligence, technical evaluation, milestone assessment, and contract review. However, final accountability for Treasury decisions must remain with DReps and the community.
Any future model involving expert commissions or execution bodies must include strong transparency requirements, conflict-of-interest rules, clear appointment and removal mechanisms, public reporting, and meaningful oversight by DReps.
Changes to the Cardano Constitution should also accompany changes to the budget process and governance model.
The Constitution should more clearly separate the roles of voters (DReps) and executors. A party that can directly benefit from the approval of a proposal should not also act as a voter on that proposal.
Today, the rules are not applied evenly in practice. Some DReps abstain from voting on their own proposals, which can negatively affect approval, while Pentad members may support each other's proposals or their own proposal.
The Constitution should establish clear and consistent rules for all actors.
It may also be necessary to define additional governance roles and their competencies.
If an expert commission or execution body is established, elected DRep representatives should be part of it with one vote. They should have the right to review contracts under NDA where necessary.
DReps should retain the final authority to approve or reject recommendations made by such bodies.
Another important issue is cost. Establishing expert commissions or execution bodies can become expensive. Therefore, maximum compensation levels, budget limits, and accountability rules must be defined in advance.
Any future compensation model should avoid creating new imbalances. It would not be healthy for the governance system if execution bodies were generously compensated while DReps and CC members remained largely uncompensated.
Compensation should be transparent, proportionate, and aligned with responsibility.
The current Constitution addresses compensation primarily for Constitutional Committee members.
However, Treasury governance involves more actors and different kinds of responsibilities. DReps decide who receives funding, face significant public pressure, are asked for consultations, and are expected to provide rationales and oversight. The Constitution should address compensation more comprehensively for all governance actors.
The greater the DRep's voting power, the greater the responsibility and social pressure. The biggest ones are even forced to change their vote. Some DReps have already retired and left Cardano forever. This is an unacceptable situation.
One possible option is to allocate a small percentage of the NCL or approved budget, for example, 1–5%, to compensate for governance-related work. Another possibility is to link staking with governance in a way that better aligns incentives.
The NCL concept also needs reform. It should either be removed or turned into a proper protocol parameter. The protocol, or temporarily DReps, should ensure gradual allocation across the full NCL period. Allocating the entire budget at the beginning of a cycle is not a sustainable model.
The budget process should ensure that resources are distributed fairly across the ecosystem. Categories such as infrastructure, research, integrations, operations, ecosystem growth, tooling, education, and community support should be clearly defined.
Proposals should then request funding within specific categories, rather than forcing DReps to compare unrelated proposals against each other. We need a synchronization mechanism and to select the best proposals from many in a given category.
I would also support a multi-year planning model. DReps should approve a three-year strategic budget plan so that the ecosystem can see in advance which budget categories are expected to receive less funding over time, which categories are expected to receive more funding, and where future funding needs are likely to emerge. This would improve predictability, planning, and strategic alignment.
It is also essential that proposals follow a uniform format. If smaller submitters are expected to provide FTE estimates, cost breakdowns, and detailed milestones, the same requirements must apply to all proposals, including those submitted by founding entities.
Governance deserves deeper reform. These are only some of my thoughts, but they explain why I cannot support the proposed direction in its current form.
At the same time, I see this governance action as a useful starting point for debate. Every DRep may have a different view of what Cardano governance should look like, and this discussion is necessary.
However, any reform must preserve DRep accountability, prevent conflicts of interest, and ensure that Treasury governance remains transparent, fair, and community-controlled.
If you'd like to support my work, consider delegating to the MANDA pool and backing me as a DRep. Your support is the only way I can get time for governance.
MANDA Pool ID:
pool1c3fjkls7d2aujud8y5xy5e0azu0ueatwn34u7jy3ql85ze3xya8My DRep ID:
drep1y2m0g4r66pyaw3p7u454wc0p4f0ygm8ueaev0mgd3tvwm7sskqwqpI do not favor removing the ability of individual proposals to reach the DReps without going through a centralized budget. I am unpersuaded that would be an improvement. Sounds like more centralization and more bureaucracy. Some on the inside would surely...
I do not favor removing the ability of individual proposals to reach the DReps without going through a centralized budget. I am unpersuaded that would be an improvement. Sounds like more centralization and more bureaucracy. Some on the inside would surely prefer that. But, I am unconvinced it would be a net benefit for our decentralized ecosystem or that it is even philosophically consistent with decentralization.
I am voting "Yes" on this proposal. Although the details are needed to be discussed further, I welcome the awareness of current governance problems. As I expect this for a kick start, I support this proposal.
IO: Hydra