How does Cardano reach its supply cap via staking?

So, there’s about 31 Billion ADA in existence so far with a reported 45 Billion ADA maximum. Currently targets for average return via staking are a bit over 5%. This would translate to around 1.5 Billion ADA created in one year. Will this total amount of ADA created continue? If so, that would mean that in roughly 9 years, all of ADA would be created?

What’s the actual math that has Cardano reach its supply cap?

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Basically you’re right, though the staking rewards are intended to diminish each year being replaced by increasing transaction fee income. I don’t believe the rate of that downslope is pre-determined.

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The staking rewards are paid from transaction fees and the “reserve”. Each block a fixed percentage of the reserve will be used as rewards. As the reserve shrinks and the fixed percentage stays constant the total reward amount diminishes each epoch until approaching zero.

Thank you Rob. This is slightly concerning since if nothing were to change, ADA would be above the advertised 45 Billion ADA. Hopefully we get a definitive answer and plan soon.

@Klobbinger please tell me more about this reserve. What is it?

All 45 billion Ada already exists on the blockchain. 31 billion is in circulation. The difference is the reserve (and treasury if I’m not mistaken). The reserve is where the rewards are taken from. Once it’s empty all 45 billion Ada will be in circulation, with part of it sitting in the treasury to be spent on contractors to do protocol updates.

Edit: check 5.4.3 in the delegation design specs

It’s not a fixed percentage as I said earlier. There is an inflation parameter and the amount of blocks produced is also taken into account besides other things.

I really encourage anyone interested in details to read the shelley ledger and delegation specs. You don’t have to understand all the “math stuff” but a lot is written in plain English.

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From the ledger design specs:

Preservation of value Every coin in the system must be accounted for, and the total amount is
unchanged by every transaction and epoch change. In particular, every coin is accounted
for by exactly one of the following categories:
• Circulation (UTxO)
• Deposit pot
• Fee pot
• Reserves (monetary expansion)
• Rewards (account addresses)
• Treasury

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I didn’t mean to imply that. Regardless of the rate at which it goes, when it’s gone it’s gone, there can be no more ADA.

Good information here! Thanks for sharing

This might provide some visuals that capture the dynamics of emissions.

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That’s helpful. So at the moment, we’re at Epoch 214 and Epochs last 5 days. You picture goes up to Epoch 239 which is going to be in 25 * 5 days from now. Could you expand your chart out? When are ADA Rewards via Staking only ( not transactions ) supposed to disappear ?

The emissions are non-linear so you will have greater amounts of ADA released in the first few years but very little 10 -20 years from now. By the end of year 2031 we will have less than 1b in reserves… by year 2050 the total reserves will be 18M. This only takes into consideration the reserve emission schedule (i.e. no transaction fees which don’t really affect reserve emissions).

image

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Thank you Umed! This needs to be blasted out more as this is the proof that Cardano has a supply cap! Did you make the chart yourself?

What’s the relationship between the reserves and the treasury?

So ADA via staking will continue past 2050, can you extrapolate the year that Pools will make money via transaction fees only? Bitcoin mines the last BTC in 2143 I believe; we need to have a good estimate of when the last ADA will be released too!

As long as rho does not change we can predict with a precision to a Lovelace how much ADA will be in reserves.

Yes I made the chart myself. I track everything in a nice excel sheet so pulling this data isn’t that hard. The supply cap is there in the genesis and is equal to 45B.

Treasury is a separate “account” that collects 20% of emissions+transaction fees+unstaked rewards+return differences between pools introduced by a0. This account has no owner and its funds can be accessed through voting.

So rho reduces reserves at diminishing rate. This means they never get depleted actually unless there is one final payment at the end. Realistically you could hit a time period when the reserves are so small compared to tx. fees that they would make no difference and that could be when you would just stop their emission.

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The rewards per eopch also depend on the number of blocks produced. So technically if some pools miss producing their blocks the reserves will hold a little longer :wink:

That is true. the difference btw the expected performance and actual performance on aggregate will always be positive and that will go back to the reserves.

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Right, I forgot about that one. It used to go to the treasury iirc?

I think they changed it to reserves…

That’s what I meant to express :slight_smile:

Good luck in the slot lottery 3m to go!

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Something else to keep in mind, While the amount of ADSpaid out will diminish, the value of ADS will also increase. This will take place in the early volatile period we are in now. As the crypto space matures and a greater number of use cases are added to the Blockchain the price of each ADA will stabilize at higher value and theoretically become more like a fiat currency in their use and stability. (YET TO BE DEMONSTRATED IN REAL LIFE)

Excellent information. Charles did in one of his AMA s explain this. He didn’t have your graphs.

Thanks you for providing them to us.