Governance, Oversight & Legal Fragility
“Funding the cargo before the ship is built.” — DucTiger
“Promises of governance after approval violate fiduciary duty.” — Khale
Core Issue:
The proposal entrusts ₳50M of public treasury funds to an under-defined governance structure.
Accountability, legal clarity, and oversight mechanisms are all missing or deferred.
Key Points:
- The tDAO (oversight DAO) is not yet formed and has no legal entity or operational model.
- 9-person multisig committee concentrates control; unelected, partly conflicted, and opaque.
- No formal reporting, audit, or fiduciary framework.
- No Conflict-of-Interest (COI) rules or mandatory recusal policy.
- “Legal structure to follow” is backward sequencing — legality must precede funding.
- Jurisdictional and regulatory exposure unaddressed (risk of asset freezes, liability).
- Constitutional fairness risk: treasury governance must remain neutral and transparent.
Merged from old Category 2 (“Governance & Execution Failures”) + DRep legal/oversight concerns.
→ Defines governance, legal, and compliance risks as one integrated foundation issue.
Scale, Risk Management & Treasury Stewardship
“Right idea, wrong scale.” — Maureen
“No professional investment policy or drawdown rules.” — Khale
Core Issue:
The requested ₳50M is disproportionately large and lacks safeguards or structured deployment.
Risk and return are misaligned with responsible treasury management.
Key Points:
- ₳50M (~3–14% of treasury) is too large for a first-cycle initiative.
- No staged deployment or milestone-based tranches.
- Consumes Net Change Limit (NCL) early, reducing treasury flexibility.
- 4% yield target too low for the risk assumed.
- No investment or risk policy (caps, diversification, counterparty limits, drawdowns).
- No KPIs, clawbacks, or sunset clause for fund reevaluation.
- Premature for Year 1 of Minimum Viable Governance (MVG).
Expanded from the financial aspects of Category 2, plus brock, MREDGARCROSS, and InputEndorsers’ critiques.
→ Focused purely on financial prudence and treasury risk policy.
Market Structure, Fairness & Competitive Distortion
“Liquidity alone doesn’t create utility.” — Khale
“Entrenches incumbents, blocks smaller DEXes.” — multiple DReps
Core Issue:
The proposal risks entrenching incumbents (Minswap, Snek) and undermining open competition,
contradicting treasury neutrality and ecosystem fairness.
Key Points:
- Concentrates liquidity in 1–2 DEXes → de facto oligopoly.
- Favors incumbents and excludes smaller/newer players (VyFi, CSWAP, etc.).
- Fee competition disappears under 1-year lock → monopoly risk.
- High trading fees (Splash 1%, Minswap 0.75%, Sundae 0.6%) remain unaddressed.
- DEX-only TVL ≠ usable liquidity without CEX/MM depth.
- Protocol selection criteria opaque and subject to discretion.
- Perceived favoritism erodes trust in treasury impartiality.
Based on original Category 1 (“Market Structure & Distortion”) plus fairness concerns raised by Victor, brock, and Maureen.
Market Impact, Optics & Ecosystem Trust
“Looks like an insider subsidy.” — InputEndorsers
“External optics could damage Cardano’s credibility.” — brock
Core Issue:
The proposal carries negative optics — internally as favoritism and externally as reckless subsidy —
potentially harming community morale and Cardano’s public credibility.
Key Points:
- Sell pressure and front-running risk when converting large ADA to stablecoins.
- Appears as insider favoritism or subsidy to select projects.
- Excluded protocols may lose token value and motivation.
- Public perception of bias damages Cardano’s neutral image.
- Path dependency: once entrenched, allocations are hard to reverse.
- No ecosystem-wide impact analysis provided.
Refines Category 3 (“Market Impact & Trust Erosion”) with DRep emphasis on perception, fairness, and community trust.
Staking Rewards & Hidden Subsidy Dynamics
“Staking rewards become a permanent hidden subsidy to incumbents.” — multiple DReps
Core Issue:
Liquidity funds delegated to DEX pools would generate staking rewards for those operators,
creating an unintended, permanent subsidy loop favoring incumbents.
Key Points:
- ₳25–40M delegation yields ~40k–50k ADA per month in staking rewards.
- Rewards flow to DEX operators, not back to the treasury.
- Funds could be used to hire devs, incentivize LPs, or reward insiders.
- Perpetuates unfair advantage and reduces competition.
- Treasury capital becomes a self-reinforcing subsidy mechanism.
Preserved from original Category 4 (“Staking Rewards Distortion”) as a unique structural concern.
Summary Table
| # | Category | Focus | Representative DReps | Type |
|---|---|---|---|---|
| 1 | Governance, Oversight & Legal Fragility | Institutional readiness, COI, legal setup | Khale, TriangleForces, DucTiger, InputEndorsers | Governance/Legal |
| 2 | Scale, Risk Management & Treasury Stewardship | Size, risk control, ROI alignment | Maureen, brock, MREDGARCROSS | Financial/Policy |
| 3 | Market Structure, Fairness & Competitive Distortion | Oligopoly risk, fairness, selection bias | Victor.Villagomez, brock | Economic/Structural |
| 4 | Market Impact, Optics & Ecosystem Trust | Reputation, community morale, optics | InputEndorsers, Maureen, brock | Social/Perception |
| 5 | Staking Rewards & Hidden Subsidy Dynamics | Delegation rewards creating long-term bias | Multiple DReps | Structural/Operational |
Final Synthesis
This 5-category framework captures the two major axes of DRep criticism:
- Institutional/Structural Risks → (#1 & #2): weak governance and financial overreach.
- Market/Systemic Risks → (#3, #4, #5): distortion of fairness, trust, and long-term neutrality.
Consensus Summary:
“The direction is right — Cardano needs liquidity — but the structure, legality, and timing are wrong.”
In short, the DReps’ collective NO vote was not against the goal,
but a call for redesigning the governance, legal, and competitive foundations
before deploying large-scale treasury funds.