Importance of burning mechanisms not associated with using relays

Ecosystem Economics
1

In a mature economy for the Pocket protocol we want the total supply to stay roughly even or decrease.

We have three main mechanisms for burning POKT as of right now:

  • Transaction fees
  • DAO proposals
  • Bad actors

It is important to note that these burning mechanisms are separate from any relays happening in the network. At scale and maturity, the profit of all validator nodes and PoS nodes will equal the total amount of burned POKT.

There is also staked POKT that can affect the amount of POKT in circulation. Though we want to strive for POKT versus total supply staying roughly equal at maturity, staked POKT acts as an extra buffer that can assist in this goal.

We can calculate the following ideal scenario for validators in a mature market:

Circulating supply = POKT minted - POKT burned - POKT staked

1 Like
2

At scale and maturity, the profit of all validator nodes and PoS nodes will equal the total amount of burned POKT.

Can you roughly explain how this conclusion was drawn?

Circulating supply = POKT minted - POKT burned - POKT staked

Reminds me of the golden ratio. However, from a macroeconomic perspective, does POKT staked really affect the economy in the ‘long-term’. I understand that the slow release mechanism allows us to slow down the process, but we cannot stop people from unstaking. I think you said it best:

Staked POKT acts as an extra buffer

I agree. However, a buffer is not permanent. In a bear market, we cannot stop the inevitable.

1 Like