Cardano Future Sustainability May Depend on One Crucial Change, DRep Says

Cardano community figure and well-known DRep Jaromir Tesaf has raised concerns about the network’s long-term ability to fund itself and maintain security. 

In a recent publication, he discussed several issues that could affect Cardano’s future and shared what he believes needs to happen to keep the ecosystem sustainable.

Tesaf explained that Cardano’s security can remain sustainable over the long term only if transaction fees eventually take over the role currently played by reserve subsidies. 

He pointed out that the reserve continues to shrink over time, which means staking rewards are gradually declining.

Because of this, fee revenue will need to grow massively within the next five to ten years. If that does not happen, Cardano could face serious challenges, both in terms of network security and ecosystem funding.

Cardano Reserve Levels Continue to Fall

Speaking on these concerns, Tesaf noted that Cardano’s reserve has already been reduced by roughly half since the network’s early stages. At the beginning, during epoch 209, the reserve stood at ₳13.3 billion. Today, the figure has dropped to ₳6.3 billion.

He also mentioned changes in the Treasury. Specifically, the Treasury once reached an all-time high of ₳1.82 billion, but it currently holds ₳1.49 billion. Considering the present rate of spending, Tesaf estimated that the Treasury could run out in around five years.

He stressed that while the goal is to keep spending in line with Treasury income, the protocol does not guarantee such an outcome. According to Tesaf, DReps can approve very large Net Change Limits (NCL) and even modify those limits when necessary.

ADA Fee Revenue Remains Too Low

Tesaf mentioned fee income as a major factor in Cardano’s future sustainability. At the moment, the network generates an average of about ₳50,000 in fees per epoch. Over a year, that amounts to roughly ₳3.6 million, or around $600,000.

He pointed out that this fee income is approximately 100 times lower than the approved NCL. He also noted that Cardano currently earns about the same amount in yearly fees as some development teams request to build a real-world asset (RWA) platform.

At the same time, Cardano’s funding requirements are much larger. Tesaf stated that the network needs around ₳200 million to support infrastructure. Based on current prices, this equals roughly $60 million. As a result, current fee revenue does not even cover basic protocol maintenance costs.

He added that reserve funds remain the main source of Treasury income. Because of this, the Treasury continues to play an important role in securing Cardano’s future.

Treasury Must Fund Both Development and Expansion

Tesaf argued that the Treasury needs to support two major priorities. The first is completing the Cardano protocol and maintaining it over time. The second is growing the broader ecosystem.

He emphasized that Cardano will never truly be finished, as the network will always require research, improvements, and new features. For that reason, funding cannot focus only on maintenance, as ongoing development will remain necessary.

According to Tesaf, the price of ADA also has a major impact on funding. He noted that ₳350 million will be distributed during this year’s NCL period. At the current ADA price, that amount is worth only about $60 million. However, if ADA were trading at $1, the same allocation would be worth $350 million.

Tesaf warned that if ADA’s price continues to decline, Input Output (IO) and other teams may have to reduce their workforce. In that situation, some planned developments might not be delivered. On the other hand, a stronger ADA price could create opportunities for growth and expansion.

Strategic Decisions Will Be Critical

Tesaf said the Treasury must support ecosystem growth in addition to infrastructure and research. While stronger infrastructure can create long-term opportunities, it does not automatically bring users or adoption. He warned that without investment aimed directly at growth, Cardano may not fully benefit from the technology it builds.

The community figure pointed out that history has shown many examples where better technology failed to win because competing products attracted more users. To him, the current NCL period did not allocate enough funding toward ecosystem growth.

He also said ADA’s price played an important role in this outcome. Since IO will likely require the largest share of the budget, the company needs funding in specific dollar amounts. When ADA trades at lower prices, a larger portion of the NCL must be used to meet those needs. If ADA’s price rises, more funds become available for ecosystem growth.

Meanwhile, Tesaf said Cardano should focus on sustainable growth rather than waiting for future market cycles. While he understands that IO wants to complete the protocol, he questions whether that should be the main priority. 

He believes ADA’s price does not only depend on quality of the protocol but also on network effects such as user growth, partnerships, real-world use cases, liquidity, retaining existing builders, attracting new builders, and other initiatives that require investment.

For the next budget cycle, Tesaf called for a better approach to funding decisions. He suggested that key ecosystem participants provide estimates of their budget needs before the community approves the NCL. He also recommended that DReps agree on how much funding should go to major categories before approving Treasury withdrawals.

In addition, he proposed giving proposals more than six weeks for review and evaluating them alongside other proposals within the same category. According to Tesaf, Cardano’s current funding process reacts to immediate needs, and this leaves considerable room for improvement.