Burn And 🥩 Harnessing (BASH) Deflation Economic Model

[msa6867]

Thank you @shane for all the time and effort that went into making this proposal. I know I’m late to the discussion… this is the first I’ve had opportunity to give the proposal a good look.

Following is some feedback to take into consideration :

1. It is hard to evaluate your idea of requiring/incentivizing Gateway staking without more information on what that staking entails. You raise certain questions for discussion such as leaving the stake unproductive vs using the amount staked to stake nodes etc, but there are much more fundamental questions that need to be addressed, such as
   –What is the purpose of the stake (staking for no other reason than to “create buy pressure” is a recipe for failure best left for the realm of meme coins)
   – What are the terms and conditions for the return of the stake to the owner for unrestricted use (this is important becase whatever “buy pressure” is created by requiring/incentivizing the stake always comes with an equal-and-opposite sell pressure when the unstake happens
   –What concept of slash is being defined for this stake. Is the stake being tied to “good behavior” by the Gateway in any way?

2. It is very questionable whether this staking feature will create any buy pressure until post 10B relay as current gateway operators likely have sufficient pocket in treasury to cover that stake (as long as their ownership in the stake is secure - see first question - , they can simply tx custody of their treasure from self-custody to DAO-custody to fulfill the staking component

3. It is rather unprecedented in the crypto space, as far as I know, to require an ever-increasing stake to operate as an ecosystem actor. If you have examples from other projects that do something similar to what you are proposing, it would help to have your staking idea taken seriously.

4. While v1 design decisions have been made to allow for the defining of “Gateway” as a unique protocol actor in v1 separate from “App” I think some very top-level discussions are needed in the community on whether we really want to go down that road and what should it look like if we do… prior to embedding presumptions of Gateways as unique actors into a v0 proposal . I.e., all the questions being asked above about purpose of stake, events that could cause slashing of stake, etc. As far as I can tell, if the T&C of being a POKT Gateway is too onerous in comparison to v1 self-staking, business entities can simply operate unregistered Gateways via self-stake mechanisms. All that to say, we really need to give this area careful thought. Note that this is very different than PIP-29 and GatewayFeePerRelay. That fee and burn mechanism is explicitly a precursor to app burn, not the precursor of a v1 Gateway-unique mechanism.

5. I simply am not understanding how Burn Supplement is anything beyond “smoke and mirrors”. Why would we go down the more complex path of minting more tokens only to send a portion to the DAO to be burned rather than the simpler and more straightforward path of just minting the desired amount of tokens?

6. Everything I said in the MINT proposal regarding USD-denominated supply applies here. I copy relevant portions of that discussion here. I think @RawthiL is starting to understand my concern and has expressed willingness to define an upper-bound on RTTM. I would challenge you to consider this issue as well and do likewise.

@RawthiL

@msa6867

Post maturity (eg >10B relays per day), a proper choice of parameters will guarantee the net mint is deflationary, but the problem remains that the feedback mechanism that can help token price rebound from ATL is removed and the system is stuck with high values for both RTTM and GFPR which will keep price depressed.

This is an interesting take, if I understand correctly you are saying that our economy might be stable in maturity but the nominality is too high. In simple words, the exchange rate would be stable low in 0.001 USD/POKT. We don’t want this.
While I believe that this is a very unlikely outcome I agree that we need safeguards.

@RawthiL

@msa6867

Since we are at RTTM ~= 500 right now (and dropping), and we are not in an environment where anyone is seeking to raise RTTM, I think it to be a reasonable expectation for proposed changes to the mechanism for setting RTTM to show how their methodology is at least bounded to RTTM <=500. This can be as simple as adding an explicit bound of MIN (500, x). That would satisfy the concerns raised above about removal of price feedback mechanism, etc.

I like this idea, let me explore it. I will test the cases of extreme POKT depreciation:

7. Unique to your proposal, the equation in cell B23 does not work. You have both a USD-denominated term and a POKT-denominated term. It is permissible to add unlike terms but not to subtract unlike terms in the manner that you current define. This is because when subtracting, there will always be some POKT-USD conversion rate at which the equation becomes negative and RTTM becomes undefined. See, for example, 20B relays and price $1. This is why, in the MINT comments, I suggested using a percentage less than 1 (rather than a subtractive element) to get mint to be less than burn once the subsidy portion goes away:

@msa6867

RTTM = RTTM_0 + PercentBurntoMInt * GatewayFeePerRelay * epsilon,

where the first term is a subsidy/bootstrap component and the second term is a percentage of the burn,