Vote on reducing the treasury cut to 10%

I am voting NO on the ongoing governance action to lower the treasury cut to 10%.

Governance Action Hash: 941502b0aa104c850d197923259444d2b57cab7af18b63143775465aaacc84f5

The metadata for my vote is located here, and this blog serves as a more human-readable form of that justification.

Justification

After careful consideration of a diverse set of opinions, I have decided to vote NO on this proposal, with reservations.

Ultimately I feel that the proported boost to staking rewards would be minimal, would disproportionately benefit larger stake pool operators, and diminish our ability to rebuild our treasury in the face of an aggressive spending agenda.

I am not convinced by the logic that some have put forth that “decreased income will encourage decreased spending”, and do not believe that indirect “pressure” as such represents responsible financial planning.

Additionally, I believe that any reduction in the treasury cut will be very difficult to reverse, as there is a natural inclination for such discussions to become charged, accusatory, and weaponized.

That being said, I do believe we, as an ecosystem, should consider more gradual changes in this regard, such as:

• More gradual and scheduled decreases in the treasury cut, spread over multiple years
• More focus on sustainable revenue sources for the protocol
• A new governance action that would allow funds to be moved from the treasury to the reserves

The last bullet point, in my opinion, would enable more targeted, effective, and sustainable replenishment of the network staking incentives.

Below, as in all of my votes, you can find an analysis of how I evaluated this proposal against my values.

As a reminder, you can find my values here.

Here is how I evaluate the proposal against each of my values:

1. Integrity - The proposal is a good faith attempt to engage with governance by Andrew Westberg. It does fail to mention that EarnCoinPool had previously attempted to make progress on this change through the parameter change committee, and the proposal would be strengthened by reference to this previous discussion, but I do not believe this was an intentionally malicious omission on Andrews part.

2. Freedom - The proposal has no negative impact on anyones freedoms.

3. Social Good - I believe that this proposal limits Cardano’s long term ability to effect social good, as it limits the inflows to the treasury without a concrete plan to replace that revenue.

4. Technical Soundness - I have no reason to believe that this proposal would be technically unsound.

5. Economic Soundness - The primary argument for this is that the original 20% was chosen “arbitrarily” and has never been re-evaluated. I find this argument unconvincing, because it points to a lack of financial modelling in choosing a 20% rate, and then does not offer it’s own in return. Other members in the community did do this modelling, but on balance, it overall remained unconvincing to me. I am not convinced that such a sharp change would be healthy, as it would leave us culturally hamstrung: it will likely be much harder to raise this value in the future than it will be to lower it. I also saw discussion in the community that this proposal would force frugal spending with the budget. I am also unconvinced by this argument. Instead, I believe it is likely to deplete the treasury faster, by limiting revenue and doing nothing to actually curtail spending. I do believe we should be diligent in our spending, and ensure that overall we are getting good return for our spending, but we should do that during the budgetary process, not by relying on secondary effects.

6. Effective Discourse - I believe that the justification attached to this proposal is sparse. There is extensive pre-existing discussion on this topic, and vigorous discussion in the time since, but none of this was attached to or referenced by this proposal. In theory, CIP-100 provides an excellent avenue for the community to publish their own responses in a way that can be indexed and discovered by governance tooling, but our ecosystem has not yet had time to see those kinds of initiatives mature.

7. Transparency - Barring the issues mentioned in the previous point, I have no reason to believe this proposal lacks transparency in any way.

8. Flexibility - While the parameter can “easily” be adjusted in the future, I believe the social dynamics of it will make it much harder to raise this parameter than lower it. Therefore, I believe this parameter should undergo gradual decrease, if neccesary, as opposed to sharply dropping it to it’s minimum allowed value by the constitution.