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Cardano Treasury Rate

Proposal To Reduce Cardano Treasury Tax Floated, How Will ADA Prices React?

Dalmas Ngetich
by Dalmas Ngetich
1 year ago
·
Posted in Cardano
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

There is a proposal to reduce the Cardano treasury tax from the current 20% to the initial 5%. Taking to X, a user @SmaugPool, who claims to be a builder and developer on Cardano, said. However, the proposal must first be passed through the community for voting, the effective treasury tax currently stands at nearly 33%.

Accordingly, based on the developer’s estimation, every month, approximately 30 million ADA is added to the treasury, pushing the total to around 1.39 billion as of November 7. 

ADA in Cardano Treasury | Source: Smaug Pool on X
ADA in Cardano Treasury | Source: Smaug Pool on X

Proposal To Reduce The Cardano Treasury Rate Floated

The Cardano treasury is a source of funding for the development and maintenance of the broader ecosystem. Additionally, funds accrued can support community-led projects via initiatives like Project Catalyst. The Cardano Foundation, a non-profit organization, manages the treasury.

Related Reading: Unstoppable Bitcoin Hashrate: Miners Preparing For Next Bull Run?

The Protocol Change Proposal (PCP) to drop the treasury rate by 25% to 5% was laid out by Earn Coin Pool, a stake pool operator (SPO) on Cardano, in late October. Usually, the PCP can be floated to change one of the many parameters underpinning the Cardano network, including the treasury rate. Even so, since the blockchain is public, the PCP must be approved before implementation.

The PCP aims to change the treasury tax rate to 5% or lower the rate. At the same time, the proposal seeks to understand factors used to determine the “tau” parameter and the frequency at which it can be changed. 

This proposal might encourage more SPOs to deploy. Cardano is a proof-of-stake blockchain that depends on SPOs to verify and secure the network. 

More SPOs Expected, But Will ADA Prices Rally?

These entities run specialized software that verifies transactions and adds them to the longest blockchain. They are rewarded for their work with ADA either through the fixed fee set by the pool at 340 ADA or an additional variable fee, which is a percentage of the block rewards that the pool earns. 

There are over 3,100 SPOs who can be randomly assigned to validate a block of transactions and receive block rewards. Notably, in Cardano, anyone can become an SPO since there is no minimum stake requirement.

Related Reading: Expert Shatters Hope Of A Ripple IPO Using CEO’s Own Words

Presently, the Cardano treasury tax is at 20%, meaning that 20% of all transaction fees are deposited into the treasury. The remainder, 80%, is distributed to SPOs who validated transactions in a given epoch. 

So far, in Epoch 446, there are over 1.39 billion ADA in the Cardano treasury, which continues to rise as the network processes more transactions. From Epoch 443 to 431, the treasury added 5 million ADA every epoch.

Cardano price trending upwards on the daily chart | Source: ADAUSDT on Binance, TradingView
Cardano price trending upwards on the daily chart | Source: ADAUSDT on Binance, TradingView

ADA is firm when writing, trading around July 2023 highs but below $0.40. Even though the uptrend remains, only time will tell if ADA’s demand will increase if the community votes to reduce the treasury rate, encouraging more users to transact on-chain.

Feature image from Canva, chart from TradingView
Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Dalmas Ngetich

Dalmas Ngetich

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Dalmas is an experienced journalist with over a decade in Forex, general finance, technology, and blockchain developments. He is currently a crypto reporter for Bitcoinist, where he covers DeFi, blockchain, DeFi, and latest industry news. His work and that of his partners have been featured in top news outlets, including Forbes, investing.com, CoinTelegraph, and Entrepreneur, among others. He is passionate about technology and politics and is always on the lookout for the latest trends in these fields. He also loves spending time with his family and friends, exploring nature, and traveling to new places. Connect on X: @Dalmas_Ngetich, or message him directly on Telegram here: @Dalmas_Ngetich.

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