Since Pocket Network’s mainnet, our economic system has been largely static outside of the WAGMI system. It’s time to start a discussion around what can be implemented to better serve our holders, node runners, and applications. The changes proposed below are designed to alleviate many of the pain points experienced by the Pocket community in these market conditions, while balancing the need for sustainability.
For nodes, POKT is staked by node runners on as many nodes as possible which would net them the maximum token incentives possible. This design was created to maximize node count and token distribution until the time at which we could compete with centralized RPC providers. Mission accomplished: over the last few months we’ve become just as fast, if not faster than centralized alternatives, we are orders of magnitude more redundant, and way more cost-effective. There are no longer trade-offs when selecting Pocket Network as your web3 provider.
Given this milestone, it makes sense to turn the page and begin to think about how we evolve the tokenomics to better suit the needs of the network and its participants. At the present, we have too many “sources” and not enough “sinks”, one of the major critiques we’ve heard in the past. Sources are where POKT is minted or otherwise becomes liquid and sinks being systems that take POKT out of circulation.
WAGMI is designed to curb the main source, but it only addresses part of the problem and, in my opinion, doesn’t go far enough. It was the first step in the process to create sustainable economics, but WAGMI is not the end all be all. I view it as the first in a series of proposals needed to bring Pocket Network out of its bootstrapping phase.
We are working internally and enabling externally to author concrete proposals. To give you a sense of a recommended order of operations I would suggest a timeline that looks like this:
- Development of self-staking tooling on the Pocket Portal (already started)
- An increase of minimum stake and the associated coordination effort potentially combined by an increase in validator count (if technically viable)
- Decrease of rewards in proportion to the decrease in network cost
- Development begins of the stake-weighted session selection mechanism (not started)
- Stop-gap parameter changes are made to encourage consolidation of POKT stakes
- Release of self-staking in Pocket Portal
- Release of stake-weighted session selection mechanism and unrolling of the stop-gap parameter system (6-12 months)
I’ll begin by addressing sources and then I’ll speak to sinks that I think are worth focusing on, not necessarily going in the proposed chronological order. As a note, proposals could/should rolled back as long-term fixes are introduced by better proposals or by code-based fixes.
To maximize utility and value-driven to the token, we need to reduce the cost of the overall network which in turn can be used to dramatically reduce sources of POKT. Our tests indicate that nodes can handle far more than what they’ve been given credit for. At present, our engineers are estimating the ideal node count considering distribution and capacity to be about 15,000 nodes distributed across the globe near traffic sources. To be clear: this means we’re highly over-provisioned and can cut network costs without damaging the quality of service. During times of discovery, testing, and growth, this sort of over-provisioning can be useful, but we view it as unnecessary going forward.
To reduce the node count while maintaining effective sinks, we must move to a new model. There are a few options presented to us in this case. The first is increasing the minimum stake. This would be a large coordination effort to implement, but the juice is worth the squeeze for economic security alone, not to mention the effective sink that this would create. The exact numbers will require some debating to not hurt small node runners, but our initial thoughts are 2-3 times the current minimum stake of 15,000 POKT. Further, the count of validators could be increased to bolster the security of the network and encourage more diverse validation.
Secondly, we can design and implement a system that encourages the consolidation of large amounts of POKT on a certain number of nodes. In this framework, node runners would be required to concentrate POKT on fewer nodes. Without getting into implementation, this can be accomplished by code or parameters. The code implementation would increase the likelihood of being chosen in a session in proportion to the number of POKT staked. A parameter stop-gap implementation could encourage validating over servicing. There are pros and cons to both approaches and those should be discussed at length.
After you reduce the cost of the network, it’s simple to continue decreasing the mint rate of POKT in proportion to the reduction in cost (using WAGMI). This will impact many of the businesses built on Pocket Network, but those businesses have been surveyed and they are bought in on reducing the costs of the network and inflation in a way that creates long-term sustainability.
By implementing all of these changes, we can better balance our sources and sinks in the lead-up to Pocket Core v1.0. If we are successful, we can work toward becoming a minimally extractive network - a core guiding principle of the founders.
Further, it’s time to start encouraging applications to stake. Staking would produce three flavors of apps on Pocket Network:
- apps under the free tier
- apps that buy POKT on the open market and stake on Pocket Network
- apps that pay but don’t own POKT directly
Regarding the first, Gigastakes was effective at getting us to a billion relays/day, but is not designed to be a sink. This is a freemium model to get users hooked on Pocket and then convert them to “paying” users. Users can be converted in one of two ways as described above. Apps that bring their POKT are a simple matter of having them stake in one of the pre-staked slots on Pocket Network. This is the cleanest and simplest way to interact with Pocket Network. If apps want to pay with credit cards or stables, as proposed by Florida, a community member, a buyback program should be considered. Runners of Portals (you can too - it’s open-source) can charge apps a one-time or recurring fee and buy the POKT off the open market. Charging for app stakes is a simple cycle that gets POKT in the hands of developers and also makes the UX simple for anyone to use.
We understand that any of the ideas proposed above would lead to dramatic changes to the stakers of POKT network. This fact is not lost on me. I expect there to be many detractors of any change. Now more than ever, our ecosystem must take a long-term view on Pocket Network and do what’s best for the protocol over the interests of anyone individual or group.
For those that have weathered the storm with us for years, we you. For those that are newer and nervous, we understand. We’re doing everything to keep earning everyone’s trust on a day-to-day basis, and we’re going to keep building no matter what happens in the market.
As a reminder: the core team doesn’t control any of these changes - the voters of the Pocket Network DAO do. If you’d like a voice, we have a one-person, one-vote system. Have your say.