Further to the recent announcement (https://x.com/easterncardano/status/2032283002055901696) regarding our determination that Cardano governance does not currently have an active Net Change Limit (NCL), we wanted to provide additional information following questions from our community about why we believe the 350 Million ADA NCL is not active.
The following provides our reasoning for why the governance action with ID “gov_action1m3xx08yv788vfxqh6nfvrjtvmqpwezsy0ggaczctkyjmttc2wmxsq4jsr7q” and titled “Net Change Limit (Epoch 613 to Epoch 713)” needs to be assessed against the constitution and therefore because it did not reach the constitutionality threshold it cannot be considered an active NCL.
Rationale
We have determined that the Constitutional Committee (CC) must assess the constitutionality of Info governance actions (the above NCL was submitted via an Info action). This is based on Article III Section 1.4, which states “The CC shall be limited to voting on the constitutionality of governance actions, including any proposed or contemplated actions contained within “Info” actions.”
This interpretation is reinforced by the deliberate departure from the previous constitution, which explicitly stated: “Because ‘Info’ actions have no on-chain effect and, accordingly, are neither constitutional nor unconstitutional, Constitutional Committee members may not prevent ‘Info’ actions from being recorded on-chain.”
The removal of that exemption in the current constitution, combined with the affirmative language of Section 1.4, reflects a clear authorial intent to bring Info actions within the CC’s review remit. If the author did not intend for the CC to assess the constitutionality of Info actions, there would have been no reason to include Section 1.4, and no reason to remove the previous constitution’s explicit exemption.
As the above NCL Info action only received 4 Yes votes from the CC, it fell below the 67% threshold required to be considered constitutional.
Counterarguments
While we have not seen any official counterarguments from other CC members, we have observed social media posts that may relate to the opinion of some CC members. The following are some of the sections that have been referred to about whether an NCL Info action needs to be assessed as constitutional to be considered active.
Article III Section 1.1 states “A CC shall be established as the branch of Cardano’s on-chain governance process that ensures governance actions to be enacted on-chain are consistent with this Constitution.”
It has been suggested that this paragraph implies that the CC’s responsibility is to ONLY assess governance actions that are “enacted” on-chain, which Info actions are not. This would be a reasonable interpretation of this paragraph if it was the only entry, but it is not stated in isolation. As stated above, if the intention of the author was to exclude Info actions from requiring constitutional assessment, there would be no reason to include Section 1.4. The two provisions are best read together: the CC ensures governance actions enacted on-chain are constitutional (Section 1.1), and separately assesses the constitutionality of Info actions (Section 1.4).
Guardrail TREASURY-01a states “A Net Change Limit for the Cardano Treasury’s balance per period of time must be agreed by the DReps via an on-chain governance action with a threshold of greater than 50% of the active voting stake”
This guardrail is being used to argue that only DReps need to approve an NCL, as it doesn’t reference the CC. This argument however implies that the guardrail should be considered in isolation from the rest of the constitution. The purpose of the guardrail is to define the DRep threshold for it being considered passed (i.e. >50%). The guardrail still requires agreement “via an on-chain governance action,” which means the other constitutional provisions governing governance action approval (including CC review) as required by the current constitution continue to apply.
Timing
The ECC’s decision to pause voting during the constitutional transition period was explained publicly in advance. That decision was unrelated to the outcome of either NCL action, and any suggestion that the ECC deliberately withheld votes to prevent treasury withdrawals from passing is without foundation.
The ECC was not aware that other CC members did not intend to vote on the 350 Million ADA NCL, and could not predict the outcome of either that action or the 300 Million ADA NCL that followed. We note that had the ECC intended to block the NCL, the appropriate mechanism would have been to vote No, not to abstain or to pause voting on procedural grounds.
Coordination
This situation highlights the issue of the lack of professional coordination in Cardano governance, where DReps, CC members and the broader community can discuss constitutional issues that may present themselves.
While we have observed some discussion on social media platforms (such as X), this does not provide effective coordination. Algorithmically mediated social platforms favour whoever speaks loudest, and whoever has the most followers. That’s not deliberation. There is no way to ensure that anyone sees posts from anyone. This doesn’t create the conditions to conduct an appropriate constitutional debate.
Independently of the constitutional questions addressed above, we encourage the Cardano community to explore more explicit and robust means for setting Net Change Limits, mechanisms that remove ambiguity about the threshold, process, and constitutional review requirements that apply. The current situation demonstrates that the existing framework lacks the procedural clarity needed to ensure those requirements are consistently understood and met by all governance participants.
