- A 50% reduction in Cardano’s treasury tax could boost staking rewards, attracting more validators and strengthening network security.
- Cardano’s flexible staking model already holds advantages over Ethereum’s locked staking, and a tax reduction could further enhance ADA’s appeal.
A heated debate is unfolding within the Cardano community as a proposal gains traction to reduce the treasury tax from 20% to just 5%. The idea behind this move is to boost staking rewards, which could attract more Stake Pool Operators (SPOs) and, in turn, strengthen the network’s security.
A CNF report from 2023 revealed that Cardano had considered a treasury tax cut, raising concerns about its potential impact on ADA prices. According to the report, approximately 30 million ADA is currently funneled into the treasury each month, adding up to a substantial 1.39 billion ADA in total.
The next step in reducing the Cardano treasury tax rate, according to the PCP process, is to engage with the community and build momentum for support. Once the Cardano community has had sufficient time to analyze the proposed change and reach a consensus, a formal request will be made to developers to initiate the necessary parameter changes.
While supporters argue that a lower tax rate would incentivize participation and boost ADA’s price, critics worry that cutting the treasury allocation too aggressively could threaten the long-term sustainability of the Cardano ecosystem.
Cardano vs. Ethereum: How Their Staking Models Compare
Both Cardano and Ethereum are built on a Proof-of-Stake (PoS) consensus model, but their staking mechanisms set them apart.
One major advantage of Cardano’s system is its flexibility—users can stake ADA without any lock-up periods, meaning funds remain fully liquid.
Ethereum, however, requires a minimum of 32 ETH to participate in staking, and those funds are locked for a set period. Additionally, Ethereum imposes slashing penalties for validator misbehavior, whereas Cardano’s staking model operates without such penalties, making it a more user-friendly option for many investors.
Could ADA’s Market Position Strengthen?
If the tax reduction proposal is approved, it could make ADA staking more lucrative, potentially driving up demandand positively impacting ADA’s price. However, much depends on how the community votes and broader market trends. Investors should closely monitor this development, as governance decisions like these can often lead to sharp price movements.
At the moment, Cardano (ADA) is trading at $0.7579, reflecting a 1.71% decline in the past day and a 1.65% decrease over the past week. See ADA price chart below.
