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July 11, 2020
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What makes the Cardano Blockchain Treasury System special?


In recent years, the entire cryptocurrency and blockchain ecosystem has blossomed and experienced a tremendous level of creativity never seen since the early days of dot-com. A steady stream of more than 12,000 cryptography-related articles has flowed from the academy since 1996, with many in recent years. Overall, interest in mainstream has steadily grown to reflect the growing interest in the blockchain and Cardano space – the first third generation blockchain to evolve from a scientific philosophy. One of the curiosities concerns the nature of Cardano’s native ADA digital currency or digital asset and how it compares to the traditional banking and monetary system. With the current Cardano Testnet Incentive 1 in progress, development is heading towards a mature Cardano blockchain ecosystem.

What kind of currency is Cardano ADA?

Cardano ADA is a deflationary digital currency as it has a fixed supply. Cardano ADA is proven to be safe and smart money, native to the Cardano blockchain protocol and plays an important role in protecting the overall blockchain network in a decentralized manner. The expert developers behind Cardano approach ADA in a scientific way, because the Cardano blockchain protocol itself evolved in the first place from a research approach.

Nowadays, some investors are looking for capital growth beyond traditional assets and Bitcoin. They are looking for benefits related to digital currency, such as betting income 1, the ability to create your own tokens (i.e., user-issued assets), and more. Cardano ADA is a digital currency that promises the ability to meet these demands as it will be able to scale worldwide and interoperate with other blockchains and systems connected via Ni-Po-Pow 1 . Part of the Cardano ecosystem will involve a Treasury to ensure the sustainability of the blockchain.

The Cardano Treasury differs from the traditional US Banking Treasury and this article will explore these differences, as well as explain the interesting benefits that the Treasury will provide to the Cardano ecosystem. To do this, however, let’s first examine the role and functions of the traditional US monetary system.

Traditional Monetary Bank

“The history of the Treasury Department [dos EUA] it started in the turmoil of the American Revolution, when the Continental Congress of Philadelphia deliberated on the crucial issue of financing a war of independence against Britain. ” Imagine, 244 years ago – not even a blink of an eye on the cosmic clock – ” the Congress [EUA] had no power to charge [ou] collect taxes , nor was there a tangible basis for obtaining funds from foreign investors or governments “.

Today, in addition to collecting taxes and managing federal finances, the role of the US Treasury is to enforce federal financial laws, manage currency and minting, supervise national banks and savings institutions, and advise on economic policy.

At the request of politicians and spending projects, the US Treasury issues bonds with fixed interest rates, that is, glorified IOUs, which are technically called “debt securities” for investors and banks, who are willing to lend money to the government for a period of time in exchange for the interest they will make. This interest is paid to investors through future taxation. In total, these bonds represent the national debt. Traditionally, bonds have relatively low returns, as they are safe and guaranteed investments.

In the Cardano ecosystem, none of the stakeholders will be able to issue a new Cardano ADA digital currency out of nowhere, unlike the current US monetary system. This means that spending will need to be limited significantly effectively and based on real data.

The US Treasury regularly conducts bond auctions, for which banks compete to buy those bonds. Through a process called “open market operations”, banks sell some of these securities to the Federal Reserve “The Fed”; of course, they also profit from these sales.

Federal Reserve pays these bonds into an account in which there is really no bank deposit. The Federal Reserve is a private bank; it is not a federal agency. The currency is created out of nothing. Banks use this currency to buy more securities at the next auction. The US Treasury deposits that currency in various branches of government.

Banks lend money under different rules, but generally, for every dollar they hold in reserve, they can lend nine; this essentially creates money out of thin air. This fractional practice of reserve lending and the central bank has been going on regularly for over a thousand years. They managed to ensure that only the incredibly wealthy and powerful are able to transfer their wealth across generations after the financial meltdown, while everyone else had to start over.

The interest rate decided by the Fed controls banks’ basic interest rate (the rate at which they charge their best customers), adjustable rate mortgages / loans, interest-only loans and credit card fees. An adjustable rate mortgage is a loan that bases its rate on an index. Interest-only loans are adjustable-rate mortgages in which the borrower only has to pay the interest rate, usually a low “initial fee”, in the early years.

There is a vast network of legislation, electronic systems, organizations, products and loopholes that support and enable the current financial system. This also includes 272 central banks, as well as major known investment firms and thousands of others. Obviously, there are many more laws, organizations and systems that can be listed here; the aim is to demonstrate the monolithic nature of the current system and give inquisitive researchers new avenues of revision.

On Chain Governance

The fundamental objective of the Cardano Treasury is “to resolve the issue of financing sustainability for the development and maintenance of cryptocurrencies in the long term”. At Cardano’s Treasury, “the voting power is proportional to the corresponding participation.” Voting does not require identity. The system collects funds through three sources: mining a new ADA, staking reward fees and donations. The Cardano Treasury system is defined as a 50-page Treasury System document, entitled A Treasury System for Cryptocurrencies: Enabling Better Collaborative Intelligence.

Cardano implements a system called Liquid Democracy. This is a hybrid between representative democracy and direct democracy. ADA stakeholders have the option of voting directly or delegating their votes to experts in the field. In the current US monetary system, from a pure voting perspective, there is essentially no incentive for anyone to become a domain expert other than lobbyists. In other words, someone with 50 years of experience in an incredible domain, whether in health, technology or any other field, has a vote that counts exactly the same as a teenager who has no knowledge in this field.

Zhang et al. stated in the document of the Treasury System what,

“The main component of a treasury system is a decision-making system that allows community members to collectively reach some conclusions / decisions. During each treasury period, anyone can submit a proposal for projects to be financed. Due to the scarcity of available funds, only a few of them can be supported. Therefore, a collaborative decision-making mechanism is needed “.

The prototype system uses a voting model that has three options: Yes, No and Abstention. A certain proportion (for example, 20%) of the treasury fund will be used to reward voting committee members, voters and experts.

So, how will the financing be disbursed? Zhang et al. explain that “the naive approach is to select projects for funding, ranking all proposals submitted according to the number of votes they get and receiving a number of projects whose total budget does not exceed the treasury budget. However, there is a risk of underfunding. vital areas due to numerous project submissions and inflated discussions in some other areas. We can categorize proposals and allocate a certain amount of treasury funding to each category to independently secure funds for all vital areas ”The categories are likely to include: marketing, technology adoption, development and security. organization and management and a comprehensive general category.

In the Treasury System document, two ways of measuring agreement in the Cardano protocol are described. “Usually, two related measures, measure of consensus (measure of agreement between all participants) and measure of proximity (measure of agreement between individual solutions and collective solution) [24,21] are used to assess consensus. ” As the Cardano Treasury system is still under development, at a specification level, it remains to be seen whether its functionality will be extended to the assets and side chains issued by the user.


One of the goals of collaborative decision-making (community participation) is to improve relationships with the community, and research evidence shows that an involved community is better than a passive one. As a result, ADA holders become evaluators willing to make decisions and policies through betting, which results in improved community support for the decisions reached.

The Cardano blockchain protocol and the native digital currency ADA represent the next step in terms of decentralization, functionality and usability. The Cardano network can be protected by verifiable functions / random numbers and stakeholders acting in balance with each other to ensure decentralization. It was specifically designed to be scalable, sustainable and interoperable, to be the blockchain platform for key stakeholders.

Source: emurgo

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