Cardano's Leios upgrade has achieved a sixfold increase in throughput capacity during testing, but the protocol's success depends on a harder economic challenge: attracting enough paying users to replace declining reserve funding that currently supports staking rewards.
During a 41-day public testnet phase, Leios reached peak performance of 26.8 transaction kilobytes per second, compared with the 4.51 TxkB/s ceiling of Cardano's existing Ouroboros Praos system, according to Input Output, the network's developer. The testnet generated more than 127,000 blocks and approximately 30,000 Endorser Blocks, with 63 stake pools registered during testing.
The protocol processed 18 times the transaction count seen on Cardano mainnet over a comparable period. However, this traffic was artificially generated for stress testing rather than produced by actual users paying transaction fees.
The Economic Model
Cardano's staking rewards currently come from two sources: transaction fees and releases from the network's remaining ADA reserve. As the reserve contribution declines over time, the network must increasingly rely on transaction fee revenue to reward stake pool operators and delegators.
A cost analysis accompanying the Leios specification models a 43% decline in monthly rewards by 2029, from a baseline of 48 million ADA to approximately 20.64 million ADA. Using assumptions of 1,500-byte average transactions and 0.221 ADA fees, the model indicates that roughly 36 transactions per second sustained continuously would be needed to generate the required revenue.
The relationship between network activity and revenue can vary significantly. At 50 transactions per second, the model generates approximately 28.7 million ADA in gross monthly fees. At 20 TPS, it produces roughly 11.5 million ADA, leaving a 9.16 million ADA shortfall against the modeled target. At 10 TPS, monthly fees would total approximately 5.7 million ADA.
When accounting for Cardano's 20% treasury allocation, replacing 20.64 million ADA in rewards would require closer to 45 sustained transactions per second under the same fee assumptions.
Capacity Versus Demand
Input Output designed Leios to remove throughput constraints that could otherwise prevent Cardano from generating sufficient transaction fees as reserve contributions decline. The protocol adds parallel capacity through larger Endorser Blocks that carry additional transactions while the existing Praos chain continues operating, without replacing the underlying security model.
However, increased blockspace creates no staking revenue until users actually pay to occupy it. Cardano faces the same economic tension confronting many scaling networks: abundant and cheaper blockspace can support adoption, but the network ultimately needs enough paid usage to finance infrastructure security.
Input Output has set a long-term goal of increasing Cardano from approximately 800,000 transactions per month to more than 27 million while achieving economic self-sufficiency as reserve funding declines.
Looking Ahead
The project is moving into the Water phase of public testing, where developers will test different configurations, a redesigned mempool, and production cryptographic keys. Input Output aims to make Leios mainnet-ready by the end of 2026, acknowledging that delivering a consensus upgrade on that timeline would be unusually fast.
The protocol includes a protection against bearing full infrastructure costs before demand arrives: ordinary Praos blocks can continue handling low traffic without activating additional Endorser Block work, limiting costs of unused capacity.
For stake pool operators and ADA delegators, the critical evidence will come after capacity testing concludes: sustained network transaction volumes, actual fees generated, and how much of the declining reserve contribution they can replace.
