Gov Action Deposit

In September 2024 Cardano bootstrapped its efforts to transition to on-chain governance with the Chang hardfork major software update. Since September there’s been a number of additional big milestones including:

• 50 global workshops to co-create a constitution
• A constitution convention in Argentina and Kenya
• A second hardfork to enable Cardano holders to propose 7 different types of governance changes, including proposing withdrawals from the treasury.
• Intersect and Pragma, which are two Cardano Members-Based Organizations, create two budgets to be voted on for the 2025/2026 fiscal year.

What all these efforts have in common is launching and enabling on-chain governance for Cardano. Cardano’s move to on-chain governance means that decisions about protocol changes, treasury allocations, and network rules are recorded on the blockchain and executed automatically. It also means that the decisions about how it works have to be ultimately written not just on paper, but in the code that runs the chain. Those coded settings are what we call “Governance Parameters.”

One such parameter has been coming up in a lot of conversations lately: the governance action deposit. gov_action_deposit is the amount of ada that must be deposited when submitting a governance action transaction on the Cardano network. As of this article the gov_action_deposit is currently set to 100,000 ada

Think of it like a refundable security deposit at a hotel. You hand over some money upfront; if everything goes smoothly and you haven’t trashed the room by the end of your stay, you get your deposit back. The point is to ensure everyone behaves responsibly. In Cardano’s case, the goal is to limit spam and frivolous proposals since the lifetime of every governance action can span up to 30 days and may involve participation from hundreds of community members.

Why Does It Matter?

Cardano wants more and more governance decisions to happen on-chain. That means anyone could bring forward an idea—like changing a protocol parameter, allocating treasury funds, or adding new features via a hardfork. But if there’s no cost at all, bad actors could flood the system with junk proposals, or folks might propose things just for fun, never intending to follow through. By setting a gov_action_deposit, Cardano introduces a bit of friction to ensure that when you propose something, you’re serious. After all, you’re locking up some of your ada until the process is ratified or expired! It’s a gentle gatekeeping mechanism that strikes a balance between keeping governance purposeful and decentralization.

How It Works

When you submit a governance action, you must include a deposit of ada—this is the gov_action_deposit. Here’s the general flow: 1. Proposal Submission: You decide on an idea or change you want to propose, and you post it on the blockchain with the required deposit. 2. Community Review & Voting: People read your proposal, debate its merits, and eventually cast votes for up to 6 epochs (30 days). 3. Outcome: • Success: If your proposal passes, your deposit is returned (you get it back!). • Failure or Expiry: If the no votes are overwhelming, or if it just expires, your deposit is also returned.

This structure nudges proposers to make sure their ideas are well thought out before asking 100s of community members to spend time thinking, discussing and ultimately voting on it. It’s worth noting that, while your 100,000 ada is being held by the system, it does not earn any staking rewards. So ultimately, it can cost 200 to 300 ada on missed staking rewards.

Looking Ahead

Just like other Cardano parameters, the specific number for gov_action_deposit can be adjusted over time. If the deposit is too high, it might discourage perfectly good ideas from smaller community members. If it’s too low, the system could be flooded with half-baked proposals. Striking the right balance is key—and that’s exactly what on-chain governance is all about.

Interestingly, there are many in the community that already find 100,000 to be too high, and not just in parts of the world where Cardano community members live with lower earning potential. This is interesting because the solution being pursued is not to lower gov_action_deposit. Instead, via Project Catalyst, the team from Sundae Labs has been funded to build CoSponsor, “a platform where users can browse proposals and collectively fund them until they reach 100k ADA, ensuring community-driven projects meet the submission threshold.”

Final Thoughts

By asking proposers to put a bit of skin in the game via the gov_action_deposit parameter, Cardano ensures that governance decisions are handled seriously—and with the best interests of the network at heart. It’s one more way Cardano moves toward a truly decentralized, democratic future—where real people with real ideas can guide the platform, as long as they’re willing to back those ideas up with action (and a little bit of ada, 😉).