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Cardano Considers Treasury Tax Cut: What Could It Mean for ADA Prices?

If the Protocol Change Proposal from earncoinpool goes through, more ADA coins will be available for market circulation, thus improving the overall liquidity as a finite digital asset in a thriving blockchain ecosystem.

Cardano Considers Treasury Tax Cut: What Could It Mean for ADA Prices?

  • With the Cardano treasury having reached over 1 billion in ADA using the 20 percent tax rate, a protocol change proposal (PCP) by earcoinpool has suggested now is the best time to reevaluate the rate to the original 5 percent. 
  • The Cardano treasury was set during the early days to enable network developments that improve the ADA mainstream adoption and overall trading volume.

The Cardano (ADA) network has undergone five crucial stages including upgrades to enable smart contracts, scaling, decentralization, and governance. With the Cardano network having grown to a mature web3 ecosystem handling huge transfers of money across the world at scale, the staking community has been introducing frequent change proposals to ensure a sustainable future.

In the latest Protocol Change Proposal (PCP) from a leading Cardano stake pool operator, earncoinpool based in the United States, the treasury tax rate should be reduced from the current 20 percent to the original 5 percent. The Cardano SPO argued that approximately 30 million ADA coins are added to the treasury each month, and the load needs to be eased on the holders.

The Cardano treasury tax is 20% instead of 5% planned initially.

In practice the effective treasury tax rate is currently closer to 33%. So approximately 30 million $ADA is added to the Treasury each month.

Should we reset it to 5%?

This is what this PCP (Protocol Change… pic.twitter.com/NJ6oMdS84F

— 竜 SM₳UG (@SmaugPool) November 7, 2023

Closer Look at Cardano Treasury Tax Rate

The current 20 percent Cardano treasury tax rate was set before the Shelly mainnet launch in a bid to accelerate the web3 development on the smart contract-based ecosystem.

Moreover, the more DeFi applications that are relatable to mainstream users a blockchain deploys has been found to have a bullish impact on the underlying digital asset. In this case, the Cardano treasury funds have funded notable DeFi and network developments that have helped the overall total value locked (TVL) scale to over $240 million and its stablecoin market cap to around $17 million.

As of reporting time, the Cardano network has seen its staking up to about 63 percent, which represents around 23 billion ADA, and facilitated by 3,127 delegating pools.

The next step in lowering the Cardano treasury tax rate, according to the PCP process, is to engage with the community and hope the discussion gains momentum for support. Once the Cardano community has had enough time to analyze the proposal change and a consensus is reached, a formal request to the developers will be made to initiate the necessary parameter changes. Worth noting the current balance of the Cardano treasury vas of Epoch 444 was about 1.38 billion ADA.

“Once the community has had time to discuss and provide analysis over the next several weeks or months if a consensus seems to have been made, we will formally request a technical review and recommendation from the Parameter Committee at that time,” the PCP noted.

ADA Price Action

Amid the slow altcoins’ breakout from the 2022 crypto bear market, ADA price has added about 30 percent in the DEFIpast two weeks to trade around $0.354 on Wednesday during the mid-London trading session. Notably, Cardano (ADA) had a total valuation of about $16 billion and a 24-hour trading volume of approximately $393 million.

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