Net Change Limit explained

In discussions about the Cardano budgeting process and withdrawals from the Cardano Treasury, you will often see references to the Net Change Limit (NCL). This page explains what it is and why it is central to Cardano's financial management.

What is the Net Change Limit?

The NCL is a governance safeguard that caps the amount of ada that can be withdrawn from the Cardano treasury over a defined period. In effect, it’s an agreed withdrawal limit on a community-owned account. It doesn't dictate how funds are spent, it caps the total amount that can leave the treasury during that time.

The Cardano Constitution requires the establishment of a Net Change Limit, which defines the maximum amount of lovelace that can be withdrawn from the treasury over a specified period of time.

Why does it exist?

The NCL exists to protect the long-term sustainability of the Cardano treasury. It safeguards against excessive dilution of token value by setting an upper limit on the amount of ada that can enter circulation through treasury withdrawals. It is a fiscal guardrail, not a spending target, meaning DReps and the community should approve budgets based on merit, not simply because the limit allows it.

How does it work?

The NCL applies to all treasury withdrawals within a given period. When the total amount of ada withdrawn reaches the defined NCL, any further withdrawals exceeding the limit become unconstitutional.

How is the NCL set?

The NCL is established through an Info Action — a type of on-chain governance action used to gauge community sentiment and formally record a decision. Approval of a Net Change Limit requires support from more than 50% of active DRep voting power. A DRep’s voting power equals the amount of ada they have been delegated.

The NCL can be expressed in different ways:

It can be defined as a specific amount of ada for a given period, for example, 350M ada for 2025. Alternatively, it can be expressed as a percentage of treasury revenue from a past period, such as 80% of treasury income over the previous 72 epochs. The community decides which approach they prefer.

Intersect's role

Intersect's Budget Committee has played a central role in modeling, proposing, and communicating the NCL to the community. The NCL underpins the annual Cardano budget process; treasury withdrawal actions cannot proceed constitutionally without one in place.