Cardano's Treasury Crunch: Is ADA on the Brink of a Funding Crisis?

Cardano (ADA) has long been heralded as a blockchain with a focus on academic rigor and institutional-grade infrastructure. Yet, as 2025 draws to a close, the project faces a dual challenge: a growing treasury imbalance and governance structures that risk entrenching wealth concentration. These issues threaten to undermine the very sustainability and decentralization Cardano claims to prioritize.

The Treasury Crunch: A Looming Depletion?

Cardano's treasury, which holds approximately 1.7 billion ADA ($1.3 billion as of Q3 2025), has become a focal point of concern. The 2025 annual budget allocated 290 million ADA (~$145 million at current prices) for expenditures, while treasury income from transaction fees remains a mere 2 million ADA annually. This creates a net outflow that, under current growth assumptions, could deplete the treasury within 5–6 years.

To address this, the community has proposed Treasury Bonds-a mechanism to issue stablecoin or fiat-backed debt without increasing ADA inflation. Additionally, a Net Change Limit (NCL) has been introduced to cap annual ADA supply increases from treasury withdrawals, aligning with sovereign wealth fund principles to ensure fiscal prudence. For 2025, the NCL proposed a 350 million ADA withdrawal cap, decreasing to 250 million ADA in 2026. While these measures aim to stabilize the treasury, critics argue they merely delay the inevitable without addressing the root imbalance between income and spending.

Governance Misalignment: Plutocracy Over Decentralization?

Cardano's governance model, while technically decentralized, has exposed structural flaws. The top 1.5% of ADA holders control 56% of voting power, while the bottom 50% hold just 1%. This concentration has led to accusations of plutocracy, where wealth directly translates to governance influence. Institutional actors, including decentralized exchanges (DEXs) and the Cardano Foundation, have further exacerbated this imbalance. For instance, DEXs have used liquidity pool ADA for proxy voting, prioritizing their own proposals and marginalizing independent innovators.

The Cardano Foundation's controversial deployment of 180 million ADA in Fund 13 drew sharp criticism for undermining democratic processes. By allocating funds to favored partners, the Foundation effectively ensured the passage of its preferred proposals. In response, the community has pushed for greater decentralization, including the DRep Delegation Program, which delegated 140 million ADA to seven Developer and Builder DReps to distribute voting power more equitably.

A Path Forward? Rebalancing Budgets and Governance

Efforts to recalibrate Cardano's governance and treasury systems are underway. The 2026 budgeting framework aims to introduce a more outcome-driven approach, empowering DReps to vote on budget types (Balanced, Surplus, or Deficit) and codifying the CAPEX/OPEX split. This shift reflects a recognition that past budgets-85% allocated to protocol R&D-lacked measurable impact on real-world adoption.

On the governance front, the Constitutional Convention, which ratified a draft constitution in December 2025, represents a step toward inclusivity. Meanwhile, initiatives like the Proposal Examiner and open-source voting tools aim to improve transparency and accessibility according to community reports. However, these measures must contend with entrenched power dynamics. For example, the Critical Integrations Budget Info Action, which received 85% DRep support, highlights the community's capacity for consensus but also underscores the influence of well-funded stakeholders.

Conclusion: A Test of Resilience

Cardano's treasury crunch and governance misalignment present a critical juncture. The proposed Treasury Bonds and NCL offer short-term stability but lack the transformative vision needed to align ADA's supply dynamics with market realities. Similarly, while decentralization initiatives like the DRep Delegation Program are promising, they must overcome systemic plutocracy to ensure equitable participation.

For investors, the key question is whether Cardano can balance its ambitious technical roadmap with sustainable financial and governance practices. The project's ability to adapt-without compromising its core principles-will determine whether it remains a viable long-term investment or succumbs to the very risks it seeks to mitigate.