A massive token reserve looks like the ultimate safety net for a proof-of-stake blockchain. New research from the Cardano ecosystem suggests that the net may have holes in it.
A paper presented at the 8th Conference on Advances in Financial Technologies (AFT 2026) argues that a large stockpile of native tokens is not enough, on its own, to guarantee a network’s long-term security.
What the paper actually found
The research is titled “Reserve Depletion and Security Runway in Proof-of-Stake Systems.” It was co-authored by Paolo Penna of Input Output Global (IOG) and Manvir Schneider of the Cardano Foundation.
The Cardano Foundation presented the work at AFT 2026, held in London from October 6-9, 2026. The paper appears in the LIPIcs proceedings, dated October 2, 2026.
The central contribution is something the authors describe as a state-dependent reserve threshold. Think of it as a dividing line whose position moves depending on the current conditions of the network.
Above or below that line, a proof-of-stake system lands in one of three distinct security conditions:
Complete failure: the network cannot sustain adequate security, regardless of how things play out.
Reserve-dependent security: the network is secure, but only because the reserve is propping it up.
Fee-only security: the network can stay secure on transaction fees alone, with no need to dip into the reserve.
The authors built their model using discrete-time stochastic methods, treating key variables as uncertain rather than fixed. According to the research, the findings point to vulnerabilities that may persist even when reserves are substantial, particularly in the face of market volatility.
Why Cardano’s reserve design is a useful test case
Under Cardano’s design, 0.3% of the remaining reserves is drawn each epoch to fund rewards. Taking a fixed percentage from a pot means the absolute size of each withdrawal gets smaller as the pot itself shrinks.
Because the threshold is state-dependent, a network does not get assigned one permanent category. Shifts in market conditions could move it from one region to another.
What this means for investors and protocols
For investors, the most direct takeaway is that reserve size alone may be a misleading comfort metric. The research suggests two factors stand out: whether a protocol’s reserves are adequate relative to its security needs, and how its reward disbursement mechanism actually works over time. A slow, percentage-based drawdown behaves very differently from a fixed payout schedule, and both behave differently when markets swing.
There are clear limits to keep in mind. This is a theoretical model, not a verdict on any specific network’s present condition, and the paper does not predict when or whether any chain will cross into the failure region. What it offers is a framework for asking better questions.
Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.