On June 3, Input Output Global (IOG) unveiled significant results regarding two pivotal governance proposals currently in the hands of Cardano’s electorate during its Voltaire era. The company announced via a late-night post that it had completed its evaluation of the Amaru and DeFi Liquidity budget Info Actions. IOG determined that while the Amaru initiative was constitutionally valid, the DeFi Liquidity proposal failed to meet the constitutional standards set forth by Cardano. This revelation sparked fresh discussions about the robustness of the Cardano Constitution, a legal framework adopted earlier this year to enhance on-chain voting processes.

Examining Cardano’s Governance Proposals

IOG’s decision to reject the liquidity proposal stems from a critical requirement outlined in Article III, Section 5 of the Cardano Constitution. This article mandates that all governance proposals must include a URL for their off-chain documentation, alongside the cryptographic hash of that documentation recorded on-chain. The intention behind this rule is to ensure that the documents cannot be tampered with once voting commences.

In the specific case of the liquidity proposal, discrepancies emerged between the calculated hash and the one embedded within the transaction. IOG’s engineers, upon downloading and analyzing the file, found a variation that “renders the proposal unconstitutional,” as it casts doubt on what voters are truly endorsing.

As a result, unless the proposal authors rectify the metadata inconsistencies, the ambitious ₳50 million Stablecoin Liquidity initiative aimed at enhancing liquidity in Cardano’s decentralized exchanges (DEXs) will be halted. While Delegated Representatives (DReps) can still cast their votes, the Constitutional Committee will be unable to recognize the outcome.

In contrast, the Amaru 2025 proposal concerning the “Cardano Blockchain Ecosystem Budget” successfully passed IOG’s scrutiny. This project, seeking ₳1.5 million to create an alternative Cardano node implementation utilizing Rust, boasts an impressive approval rate exceeding 90%, comfortably surpassing the necessary support threshold.

IOG’s endorsement of the Amaru proposal underlines its compliance with several pivotal points of the Constitution: the project’s objectives align with the decentralization spirit articulated in the Preamble and Article I; it adheres to the mandated metadata format in Article III, Section 5; its fund-management plan aligns with Article IV, Section 2; and it reassures stakeholders that it won’t infringe upon the Net-Change Limit specified in Article IV, Section 3.

However, IOG flagged a potential concern regarding the term “Ad-hoc mercenaries” used for audit coverage, suggesting that clarification is required before any funds can be distributed.

Upcoming Developments

According to Cardano’s CIP-1694 governance process, DReps are given until epoch 563 (June 8) to finalize their votes. The DeFi Liquidity initiative, plagued by its erroneous metadata, is likely to be dismissed, irrespective of the vote count. Conversely, the Amaru budget proposal is on track for approval; once sanctioned, its administrators will have the ability to disburse funds in phases, contingent on adherence to on-chain spending protocols and oversight provided via PRAGMA’s legal framework.

This situation emphasizes the importance of maintaining rigorous procedural standards within the Constitution. A breach of the “single source of truth” principle could lead to vulnerabilities, allowing unauthorized modifications that could evade detection during audits. As IOG succinctly stated, the hash inconsistency “undermines the constitutional requirement for a clear and verifiable connection between on-chain governance actions and their off-chain documents.”

As of the latest market update, ADA was trading at $0.69.