Treasury Withdrawal Strategy
I’ve made a mathematical model of the Treasury income for the next 10 years.
Current Treasury yearly income is about 300 million ADA. In 5 years it drops down to 125 million ADA per year. And in 10 years it’s about 40 million ADA.
My thoughts on the Treasury withdrawals as a DRep and Cardano developer:
- I don't mind once a year withdrawals. I think @radioastro made good arguments why this is OK during Cardano Summit presentation on Governance. It's easier to plan, to vote, to hedge against the price volatility, etc.
- I'm against the idea of random withdrawals from the current Treasury. Treasury withdrawals should be sustainable. Thus we need a strategy.
- The Treasury withdrawals should not be staked.
- No voting with Treasury withdrawals
Treasury Withdrawal Boundaries
I propose defining Treasury Withdrawal Boundaries for Cardano's spending model. The budget would be constrained by:
$$Budget \in [50%⋅TreasuryIncome, TreasuryIncome + 20% \cdot Treasury]$$
This approach ensures:
- A flexible budget that adapts to Cardano's evolving needs and market conditions
- Opportunity for Treasury growth during favorable periods
- Sustainable long-term Treasury management with built-in safeguards
Based on current projections, this would make 150M–600M ADA available for the 2025 budget.
The parameters (50% and 20%) are adjustable based on community consensus – for example, a 70%/10% ratio could also be viable.
Cardano Treasury Model
import numpy as np
import matplotlib.pyplot as plt
def calculate_treasury_for_epoch(
fees: float,
current_reserve: float,
tau: float = 0.20,
rho: float = 0.003
) -> dict:
"""Calculate treasury for a single epoch"""
monetary_expansion = current_reserve * rho
rewards_pot = fees + monetary_expansion
treasury_portion = rewards_pot * tau
next_reserve = current_reserve - monetary_expansion
return {
"monetary_expansion": monetary_expansion,
"rewards_pot": rewards_pot,
"treasury_portion": treasury_portion,
"next_reserve": next_reserve
}
# Parameters
INITIAL_RESERVE = 7_660_000_000
CURRENT_TREASURY = 1_600_000_000
WITHDRAWAL_RATE = 0.10 # 10% of remaining treasury each year
EPOCHS_PER_YEAR = 73
YEARS = 10
EPOCHS = EPOCHS_PER_YEAR * YEARS
FEES_PER_EPOCH = 100000 # 100k ADA
# Calculate yearly treasury income
yearly_treasury = []
current_reserve = INITIAL_RESERVE
treasury_this_year = 0
for epoch in range(EPOCHS):
result = calculate_treasury_for_epoch(
fees=FEES_PER_EPOCH,
current_reserve=current_reserve
)
treasury_this_year += result["treasury_portion"]
if (epoch + 1) % EPOCHS_PER_YEAR == 0:
yearly_treasury.append(treasury_this_year)
treasury_this_year = 0
current_reserve = result["next_reserve"]
# Calculate withdrawal amounts and correct treasury balance
treasury_balances = [CURRENT_TREASURY] # Start with current treasury
withdrawal_from_treasury = []
total_withdrawals = []
for i in range(YEARS):
starting_balance = treasury_balances[-1] # Get the last balance
new_income = yearly_treasury[i]
# Calculate withdrawal from treasury (10% of current balance)
withdrawal = starting_balance * WITHDRAWAL_RATE
withdrawal_from_treasury.append(withdrawal)
# Total withdrawal is treasury withdrawal plus all new income
total_withdrawal = withdrawal + new_income
total_withdrawals.append(total_withdrawal)
# Calculate ending balance (only reduced by the 10% withdrawal)
ending_balance = starting_balance - withdrawal # New income is withdrawn, not added
treasury_balances.append(ending_balance)
# Create figure
plt.figure(figsize=(15, 8))
# Create stacked bar chart
years = np.arange(1, YEARS + 1)
plt.bar(years, yearly_treasury, label='New Treasury Income', color='lightblue')
plt.bar(years, withdrawal_from_treasury, bottom=yearly_treasury,
label='Withdrawal from Treasury (10%)', color='coral')
# Add total values on top of bars
for i in range(len(years)):
plt.text(years[i], total_withdrawals[i], f'{total_withdrawals[i]/1e6:.1f}M',
ha='center', va='bottom')
plt.xlabel('Year', fontsize=12)
plt.ylabel('ADA', fontsize=12)
plt.title('Available Treasury Withdrawals per Year (10% of Remaining Treasury)', fontsize=14)
plt.grid(True, linestyle='--', alpha=0.7)
plt.legend()
# Format y-axis labels to millions
plt.gca().yaxis.set_major_formatter(plt.FuncFormatter(lambda x, p: f'{x/1e6:.1f}M'))
# Add text box with parameters
param_text = f'Initial Reserve: {INITIAL_RESERVE/1e9:.1f}B ADA\n' \
f'Initial Treasury: {CURRENT_TREASURY/1e9:.1f}B ADA\n' \
f'Withdrawal Rate: {WITHDRAWAL_RATE*100}% of remaining\n' \
f'Fees per Epoch: {FEES_PER_EPOCH:,} ADA\n' \
f'Treasury Rate (τ): 20%\n' \
f'Expansion Rate (ρ): 0.3%'
plt.text(0.02, 0.98, param_text,
transform=plt.gca().transAxes,
verticalalignment='top',
bbox=dict(boxstyle='round', facecolor='white', alpha=0.8))
plt.tight_layout()
plt.show()
# Print detailed statistics
print("\nDetailed Withdrawal Breakdown:")
print("-" * 50)
for year in range(YEARS):
print(f"\nYear {year + 1}:")
print(f"Treasury Balance at Start: {treasury_balances[year]:,.0f} ADA")
print(f"New Treasury Income: {yearly_treasury[year]:,.0f} ADA")
print(f"Withdrawal from Treasury (10%): {withdrawal_from_treasury[year]:,.0f} ADA")
print(f"Total Available for Withdrawal: {total_withdrawals[year]:,.0f} ADA")
print(f"Treasury Balance at End: {treasury_balances[year+1]:,.0f} ADA")
print("\nSummary:")
print("-" * 50)
print(f"Initial Treasury Balance: {treasury_balances[0]:,.0f} ADA")
print(f"Total New Treasury Income Over {YEARS} Years: {sum(yearly_treasury):,.0f} ADA")
print(f"Total Withdrawals from Treasury: {sum(withdrawal_from_treasury):,.0f} ADA")
print(f"Total Available for Withdrawal Over {YEARS} Years: {sum(total_withdrawals):,.0f} ADA")
print(f"Final Treasury Balance: {treasury_balances[-1]:,.0f} ADA")
Detailed Withdrawal Breakdown:
--------------------------------------------------
Year 1:
Treasury Balance at Start: 1,600,000,000 ADA
New Treasury Income: 303,176,153 ADA
Withdrawal from Treasury (10%): 160,000,000 ADA
Total Available for Withdrawal: 463,176,153 ADA
Treasury Balance at End: 1,440,000,000 ADA
Year 2:
Treasury Balance at Start: 1,440,000,000 ADA
New Treasury Income: 243,755,372 ADA
Withdrawal from Treasury (10%): 144,000,000 ADA
Total Available for Withdrawal: 387,755,372 ADA
Treasury Balance at End: 1,296,000,000 ADA
Year 3:
Treasury Balance at Start: 1,296,000,000 ADA
New Treasury Income: 196,037,077 ADA
Withdrawal from Treasury (10%): 129,600,000 ADA
Total Available for Withdrawal: 325,637,077 ADA
Treasury Balance at End: 1,166,400,000 ADA
Year 4:
Treasury Balance at Start: 1,166,400,000 ADA
New Treasury Income: 157,716,550 ADA
Withdrawal from Treasury (10%): 116,640,000 ADA
Total Available for Withdrawal: 274,356,550 ADA
Treasury Balance at End: 1,049,760,000 ADA
Year 5:
Treasury Balance at Start: 1,049,760,000 ADA
New Treasury Income: 126,942,970 ADA
Withdrawal from Treasury (10%): 104,976,000 ADA
Total Available for Withdrawal: 231,918,970 ADA
Treasury Balance at End: 944,784,000 ADA
Year 6:
Treasury Balance at Start: 944,784,000 ADA
New Treasury Income: 102,230,020 ADA
Withdrawal from Treasury (10%): 94,478,400 ADA
Total Available for Withdrawal: 196,708,420 ADA
Treasury Balance at End: 850,305,600 ADA
Year 7:
Treasury Balance at Start: 850,305,600 ADA
New Treasury Income: 82,384,104 ADA
Withdrawal from Treasury (10%): 85,030,560 ADA
Total Available for Withdrawal: 167,414,664 ADA
Treasury Balance at End: 765,275,040 ADA
Year 8:
Treasury Balance at Start: 765,275,040 ADA
New Treasury Income: 66,446,696 ADA
Withdrawal from Treasury (10%): 76,527,504 ADA
Total Available for Withdrawal: 142,974,200 ADA
Treasury Balance at End: 688,747,536 ADA
Year 9:
Treasury Balance at Start: 688,747,536 ADA
New Treasury Income: 53,648,043 ADA
Withdrawal from Treasury (10%): 68,874,754 ADA
Total Available for Withdrawal: 122,522,797 ADA
Treasury Balance at End: 619,872,782 ADA
Year 10:
Treasury Balance at Start: 619,872,782 ADA
New Treasury Income: 43,369,991 ADA
Withdrawal from Treasury (10%): 61,987,278 ADA
Total Available for Withdrawal: 105,357,270 ADA
Treasury Balance at End: 557,885,504 ADA
Summary:
--------------------------------------------------
Initial Treasury Balance: 1,600,000,000 ADA
Total New Treasury Income Over 10 Years: 1,375,706,977 ADA
Total Withdrawals from Treasury: 1,042,114,496 ADA
Total Available for Withdrawal Over 10 Years: 2,417,821,473 ADA
Final Treasury Balance: 557,885,504 ADA
Why No Staking For Treasury Withdrawals
The Treasury withdrawals should not be staked.
According to Cardano Shelly specification, staking rewards are taken from the Reward pot, which is filled by the Reserves and Fees pots.
When Treasury withdrawals are staked, the rewards are taken from the Rewards pot to Reward accounts. Thus less money goes to Treasury.
This means that by staking the Treasury withdrawals we are decreasing Treasury income, essentially taking money from Treasury twice.
No Voting With Treasury Withdrawals
Well, I think that's obvious. Intersect should not vote with Treasury withdrawals.
Delegate
If you like what I'm doing, please, consider delegating your voting power to me:
CIP-105: drep1k4h4cd5jknvcfeq5uuzqthpl7sdjxrwf9gn25tdk49qxyfhusgm
CIP-129: drep1y26k7hpkj26dnp8yznnsgpwu8l6pkgcdey4zd23dk655qcse26y3g
And vote for our Catalyst proposals! Search LANTR.