TLDR:

Treasury reserves & responsible spending – Cardano’s treasury holds approximately 1.7 billion ADA, and ensuring its long-term sustainability is critical. Applying principles from sovereign wealth funds (SWFs) can help balance growth with fiscal responsibility.

Net-Change-Limit (NCL) proposals – There are several NCL proposals that are looking for DRep feedback. These cap annual withdrawals at 350M or 300M ADA in 2025, followed by 250M ADA in 2026, or a proposal that considers using a percentage approach to understanding the NCL. Such limits ensure spending does not exceed projected income, promoting financial stability.

Prudence and investing for growth - Deciding on the net change limit is a critical decision for DReps and how we best balance the need for fiscal responsibility while ensuring we can maximize the opportunity for Cardano.

Introduction

Cardano's treasury currently stands at approximately 1.7 billion ada, representing a significant reserve to propel and sustain ecosystem growth. As Cardano matures and its ecosystem expands, safeguarding this treasury through thoughtful governance practices and sustainable management becomes increasingly essential.

Intersect, as a young member-based organization, recognizes the value of collaborative learning and emphasizes humility in our approach to the Net-Change-Limit and the broader budget process. Through the contributions and cooperation of our diverse membership, we continuously explore best practices from other successful institutions. For example, throughout 2024 and 2025, we've actively engaged with organizations joining the Linux Foundation and Hyperledger, among others, to learn and integrate valuable insights into our practices.

Carrying this forward, the Budget Committee has explored approaches similar to those employed by sovereign wealth funds (SWFs). These funds provide valuable insights into prudent wealth management, strategic investment, and disciplined stewardship - lessons that can positively inform how the Cardano community manages its treasury responsibly.

Why sovereign wealth funds matter to Cardano

Sovereign wealth funds, such as Norway’s Government Pension Fund Global (GPFG), Abu Dhabi Investment Authority (ADIA), and Singapore’s GIC, are state-managed entities entrusted with investing national wealth to benefit both current and future generations. These funds employ structured governance frameworks, rigorous investment strategies, and disciplined spending policies, ensuring long-term sustainability and prosperity.

Norway’s GPFG, in particular, is known for transparency, governance, and disciplined spending. It adheres to a fiscal rule limiting annual withdrawals to approximately 3% of the fund's total value, matching the expected sustainable returns. This practice preserves the principal indefinitely, ensuring ongoing prosperity for future generations. 

Applying sovereign wealth fund principles to Cardano

The Cardano Treasury is both a store of value and an engine for growth. Inevitably, community opinion on how to utilise it will cover a broad spectrum of mindsets from the fiscally conservative to the boldly entrepreneurial. Cardano can adopt core principles from successful SWFs to enhance treasury governance and sustainability. By developing structured guidelines, transparent decision-making processes, and sustainable spending frameworks, Cardano’s treasury can effectively support ecosystem growth while preserving resources for the future.

Introducing a Net-Change-Limit (NCL)

Reflecting fiscal discipline exemplified by Norway’s GPFG, at least two Net-Change-Limits (NCL) have been proposed or submitted on-chain for Cardano’s treasury ceiling in a given period. The Budget Committees’ proposed annual withdrawal cap of approximately 350 million ada aligns broadly with the treasury’s projected 2025 income of circa 300 million ada, ensuring responsible financial management. Importantly, the NCL is intended as a ceiling - a maximum allowable withdrawal - not a target. By setting clear limits, the Cardano community can prioritize spending decisions strategically and sustainably, maintaining long-term financial stability.

Additionally, there is an alternative NCL at 300 million ada for 2025, followed by 250 million ada for 2026 now on-chain for DRep and ICC consideration. This community-driven proposal also represents a responsible and conservative approach to treasury management. While both proposals aim for sustainability, they differ in specifics, governance action structure, and timelines. The community proposal highlights the importance of immediately establishing spending guidelines to avoid opportunity costs and provides flexibility for future adjustments. These parallel proposals reflect healthy community engagement and shared commitment to fiscal prudence.

Vote or provide feedback!

You can view and vote on both proposals on Cardano GovTool today via here. 

Governance improvements inspired by SWFs

Drawing on the Santiago Principles, effective governance is central to the success of sovereign wealth funds. Throughout our budget process, the Cardano community has been considering various ways to strengthen oversight and fiscal responsibility, such as:

• Clear mandates and roles: Establishing clearly defined governance roles, including treasury oversight committees, to clarify responsibilities and enhance accountability.
• Transparency and reporting: Providing regular and transparent reporting on treasury activities to build trust and ensure clarity around funding decisions.
• Leveraging Cardano’s technology: Deploying smart contracts to manage fund disbursements, including mulit-sig checks and balances.
• Accountability mechanisms: Implementing rigorous audits and ethical standards to prevent misuse and foster responsible stewardship.

You can read more about the changes to the budget process here.

On-chain economic considerations unique to blockchain

Unlike traditional financial institutions, Cardano's treasury disburses funds exclusively in ada. Recipients then utilize these funds across various assets - both digital and fiat - introducing unique economic considerations. Market volatility, liquidity constraints, and exchange rate fluctuations between ada and other currencies necessitate additional layers of prudence and flexibility in financial management. Recognizing these novel dynamics and proactively managing their impacts is crucial for sustainable ecosystem funding.

While SWFs strategically diversify investments to ensure sustainability, Cardano's treasury currently faces limitations regarding diversification. As of now, the treasury primarily holds ada, with limited mechanisms for diversifying into other assets. Expanding treasury capabilities to hold Cardano native tokens, stablecoins, and other stable assets is a potential area for the community to consider with future upgrades. Diversifying the treasury could stabilize purchasing power and ensure consistent funding availability during market volatility. There are also constitutional considerations to take into account.

Long-term sustainability and community alignment

Sustainable spending guidelines like the NCL, combined with dynamic budgeting and revenue-generating mechanisms, can enhance treasury longevity. Regular reviews and adaptive strategies would enable the treasury to remain resilient amid market changes. Equally important, the Cardano community is coming together for the first time to propose and approve budgets, ensuring the blockchain ecosystem's ongoing maintenance, development, and effective governance - all vital components aligned with the vision laid out in Cardano's constitution.

The enactment of Cardano’s constitution in February 2025 marked an important step toward decentralized, transparent governance. The constitution explicitly supports disciplined spending measures such as the NCL, aligning treasury management with broader community principles.

Building a sustainable future together

Intersect, guided by humility and committed to collaboration, aims to facilitate dialogue and foster sustainable ecosystem governance for Cardano. Learning from established institutions like SWFs can help inform our community’s decisions, enabling us to steward Cardano’s treasury responsibly. 

Together, we can lay the groundwork for an ecosystem that sustainably supports innovation and growth for future generations.