Providing a concise answer is challenging with so much to address, so I’ll begin with a brief introduction that serves as a TL;DR. I hope this helps readers understand and engage with the longer discussion to follow.
This post should be a 10 - 15 minute read (depending on the reader’s fluency).
General Thoughts
Despite the challenges and reservations, I ultimately support Michael’s proposal. Given the limited options available, this course of action appears to be the best choice we have.
Since I started to participate in the POKT community, I have met two different kinds of people: the builders and the crypto venturers (who come in very different colors).
Builders (among whom I like to include myself) do not really care about price. Well, we care, but it is not our main focus. We build solid stuff and think about details and edge cases. We prepare the rocket to get to the moon and make sure that if you put fuel in it, we will get there. But we leave the fuel to be provided by others (or hope that it spontaneously appears in the tanks).
Our builders have designed a SOLID protocol. Shannon code is top quality, based on formal theory, and designed to be easy to build upon. The tokenomics in the work for Shannon will encode the golden promises of crypto: permissionless participation, self-sustainability, and supply stability (or even attrition, wrongly called “deflation”). Sadly, the price does not care.
Something I learned from getting deep into economic theory (deep for a non-economist at least) is that POKT price cannot (currently) be logically pressured to increase its relative price against a foreign currency (a.k.a. “numba go up”). We need more paid relays, and we don’t have them; that’s it. Stop asking for tokenomics miracles.
The second group of people in the community, the crypto venturers, mostly care little about tech and only see the token price, the total supply, and the APY. These are the guys providing fuel to our rocket (because someone has to pay the bills of devs and node runners). Among them, there are some knowledgeable people who seem to understand the price whimsical actions better than what economic theory can explain. However, in the POKT Network, we decided not to listen (me included above all probably) and head on the builders’ path. This seems to be a bad decision, given that fuel is not getting into the rocket…
This brings us to a crossroads. We could stay stoic on the builders’ path, retain our DAO, and slow but highly consensual movement or jump into the uncertain and highly dynamic world of crypto venturers, adapting to their liking in hopes of bringing more of them on board. It goes without saying that taking the latter road is incompatible with keeping a fully operational DAO and PNF, as it requires many fast decisions and mostly a responsible one whom we can blame if we lose the bet.
For me, the builders’ path has been walked for about a year and a half. We improved our metrics and laid the ground tokenomics values for a healthy ecosystem. The result was price volatility and complaints every time the price was not going up. The promised land of mint=burn is still far on the horizon (~25B relays per day), and the community starts to wonder how much runway we have left. And me too. Staying on this path is the less stressful but might lead us to a heat death scenario.
The other path is starting to play the game of the community that is most likely to give us fuel for our rocket, the crypto venturers. It means that we will let go of some economic variables (mainly token emission control) in favor of creating appealing numbers of APY, which could in turn create an upward trend in the token price and keep feeding this with new capital inflow (new chains/servicers, new holders) hoping for a FOMO effect of high APYs and upward token prices. All this while keeping the supply growth restrained (as much as possible). In a few words, try to go back to the game that took us to ATH, but this time without a DAO to let us hit the brakes discretionary and fast. All that we need to do is to give up our vote power and have a victim to sacrifice if this goes the wrong way (in the end, no one wants to be responsible for killing the protocol).
This leads me to a difficult choice, which is to take the second path and support Michael.
I cannot ensure that the builders’ path that I firmly defended all this time can lead us to the promised land. I still think that what we are building can slingshot us to Mars, but we need to get to the moon first. Being that the only way to play the crypto game is to be fast, I don’t find Michael’s demand of pausing the DAO irrational. Moreover, I would oppose passing any of these proposals if we don’t have a fast structure and a head to cut. Nobody is responsible for failed proposals passed with N votes, but we will have a sole responsibility in this case. That is the price Michael will be paying, being the sole responsible for losing this game and wrecking the ship.
Regarding how we got to this point, the resignation of the board and their performance, which I addressed in this other post, I will not comment any further here.
Also, the known and real threat of forking cannot be denied; it is not nice, but those are the rules of the game, as violent as they sound.
On the DAO and Reflexivity
The proposed economic path of following Soros’ reflexivity goes against everything I have learned about equilibrium, and I do not agree with it, so I won’t go deep into why this is good or bad or how economically sound it is. Let’s say it is a way of explaining some economic processes that are highly related to social science and that, sadly, seem to prime in the crypto world.
What I will argue here is that we cannot effectively implement the Reflexivity feedback loops if we keep a DAO voting over every decision.
I began to work in the POKT ecosystem when PNI (now Grove) and PNF were a single thing but were already starting to be formally separated. That year, 2022, was not a good one, with POKT price falling and supply growth running wild. The problem of the supply growth (“inflation”) was first addressed in the forum in 12/2021, the WAGMI proposal proposal, and it took 4 months for the DAO to deploy an answer to an evident supply growth problem, and its form was the PUP-13, a washed-out version of the original proposal. The DAO was late and wrong, passing a patch instead of a solution (what WAGMI proposed). This delay cost us a 60% increase in the monetary base. It didn’t take long to realize that we needed a solution, not a patch, leading to proposals that never came to be, like PUP-15 and PUP-15+ (naming conventions were not a thing yet, I think). Six months later, we ended up with a patch bundle called FREN (PUP-22). By that date, June-August 2022, the panic was on us, resulting in many more patchy things being pushed into the network, namely PIP-22 (this triggered my rage and initial involvement in the community), PUP-29, SER (PUP-30) and ARR (PUP-32), all in a single year (without counting unsuccessful ones). What I’m trying to highlight here is that despite the existence of a clear problem (supply growth, or wrongly called inflation), the DAO took a lot of time to engage and never produced a solution. It was only able to agree on patches that came in late.
It’s interesting also to note how the very inefficiency of the DAO to handle hype/FOMO cycles fueled by high APY/emissions led to the creation of ARR and posterior stability, which basically killed the feedback loop that Michael is now trying to revive. So, if you agree with Reflexivity or Michael’s plan, the DAO as it is now controlling every aspect of the network cannot function.
However, let’s be clear that the ATH that was probably achieved by a FOMO that is explainable using Reflexivity is not guaranteed to occur again. In my opinion, it is more speculation than economic theory behind it…
Reflexivity and the Long Term
The proposed path is not sustainable in the long term; no hype cycle lasts forever.
I think that, if deployed correctly, this path can lead to new buy-ins lured by higher APY (fed with higher supply growth) and kept in the ecosystem farming yield and airdrops. Higher buy-ins will help with liquidity, liquidity with exchanges, and exchanges with Moon. But it won’t last.
We are buying time here, and we will be buying it with dilution. There is an unavoidable end to the hype cycle that leads to the negative cycle. We don’t know when we will reach that point, but before that happens, we need to have grown our traffic. For you, Michael, the goal might be the token price; for me, it is the paid volume. Because I know that with enough paid volume, we will thrive regardless of the next shiny thing in the crypto venturers’ minds.
So, whatever you do, the building and growth should not cease (nor change direction, in my opinion). I can accept giving you control over economic variables of the network, but I will keep being noisy on technical stuff because I think that we are going in the right direction there.
Narrative and Community Growth
This is not my strongest suit; in fact, I probably go by wearing a swim brief here (really? “Sunga” is “swim brief” in English? I was hoping for “men’s beach thong” or something… you English people lack style…).
The problem of narrative has been a constant topic in the community. My understanding is that any decent narrative is regarded as fantastic if the price is up, but the same one is the root of all evil if the price is down. I think that there is only so much that a narrative can do to help a protocol, but if the narrative does not have the correct tools to operate in the target audience, we will always fail. I cannot say if the current narrative is good or bad; I personally think it is better than what we had before and much more concise and focused on our technical strengths.
Some of our previous public-facing numbers, which attracted the initial community growth, were based on things related to APY, relay volumes (which were not completely organic), and price trends. I don’t think that previous narratives were better, and they even cost us credibility (i.e., Tornado Cash, revenue calculation based on minting).
So, I think that the narrative will fix itself if the price goes up. The only thing we need to do is to avoid technical screw-ups. With this last thing, I want to bring up the role of AI that Michael is proposing to put at the forefront of the network. We worked a lot to keep the hype shit out of POKT Network’s approach to AI, and I hope that this is kept like this.
We do not have room for technical nonsense in our narrative after we have worked so much to keep it serious. You want to highlight APYs and other make-up numbers that crypto loves? Go ahead.
On the Role of Grove
I would like to express my opinions on some of the topics you touch upon regarding Grove:
The AI litepaper was not produced by Grove; it was an initiative of the PNF. It might show the values that Grove has for LLM inference, but it is only through the input of Olshansky. It is not as much from Grove as it is from the rest of the POKT Network.
It is undeniable that Grove (formerly known as PNI) has improved since it was separated from PNF. However, this development cannot be regarded as open. Grove’s portal remains closed source, and there is no open information on how it works. This is OK; you are a private company. But I have many questions:
- Why have you closed the open data streams that fed POKTscan and allowed the public to see the stats of the network?
- Why refuse to provide very basic QoS data in the format provided by Nodie’s Gateway server?
- Why don’t you provide data on incidents? I can recall two of them that made us work like hell and never got an answer. Never, radio silence from Grove.
This makes me wonder how open your decision-making process will be if we have you as sole director. Grove is not an example of transparency; “default to open” is not one of their values. This is especially important when you will be managing the whole DAO treasury, which will get bigger and bigger due to higher DAO allocation and supply growth rates.
How big will be the influence from Grove (employees or interests) in your decisions?
Proposed Actionable Changes
I will go one by one here:
Services per Node to 1
Thanks. I have advocated for this since 02/2023. It was not until Shane revamped the concept in GANDALF (a nice name goes a long way) that the DAO started to listen.
Sliding Supply Growth 5%->20%->30%->20%->30% …
So, you propose to fix RTTM, wait until we go from the current 5% to 20%, and keep it there, readjusting to 20% every 6 months or when it goes above 30%.
The first thing that I see here is that you expect to see the relays go from 500M/day to 2B a day in the near future. If we fix the RTTM that produces 5% supply growth today, with 500M relays/day, we need 4x relays to get 4x supply growth. Or are you planning to hard reset it to 20% supply growth with 500M relays?
Keep in mind that if the DAO allocation goes to 75% but the supply growth is not at 20%, the node runners will bleed.
10x on New Chains/Services
I believe that you will keep an eye on them and do some due diligence before whitelisting new chains. It is not a bad idea, but everyone will want to be creating new chains to farm yield.
Gateway Fee = 0
LOL, what? I know that you were advocating for a reduction, but zero is just too much. We need minimal friction for fake relays. I really see no upside here. If you have to buy at least 5K POKT to stake a node, why not have to pay a little for the traffic you send?
This opens up the door to spurious traffic. Strongly against. It is a step backward.
DAO Allocation to 75%
Well, not a problem if we are at 25% supply growth. The node runners will earn approximately the same:
Today we earn 0.75*220K = 165K
POKT per day, the same as 0.15*220K *5 = 165K
(given that 5x220 is 25% supply growth). If we stay at 20%, node runners will earn less than today (unless POKT price goes up).
Also, regarding:
Adaptation: We will adapt this parameter to maintain Node/Validator inflation aligned with the current schedule as annual inflation is adjusted.
and connected to:
Keep in mind that if the DAO allocation goes to 75% but the supply growth is not at 20%, the node runners will bleed.
You plan to increase the DAO take as the relays increase to keep node runners’ income constant?
Reduce Stake to 5K POKT
I agree on this. The number of nodes makes no difference today; the staking amount should be smaller. Also, it does not affect block size too much, as far as I know.
Marketing Around APY and New Services
No comments, seems OK.
Reposition Brand AI-forward, Support Beyond RPC
I like this. I will be watching closely to see what you actually intend to do. There is not much information on what this means to you.
Compensation Package
Let’s make a table…
# |
Milestone |
Reward POKT |
Reward USD |
POKT Market Cap Top # |
Years to get there (pure speculation from me) |
1 |
Shipping Shannon |
48 M |
?? |
?? |
0 |
2 |
Price: USD 0.5 |
48 M |
24 M |
~65 |
1 |
3 |
Price: USD 1 |
48 M |
48 M |
~30 |
2 |
4 |
Price: USD 3 |
98 M |
294 M |
~15 |
2 |
5 |
Price: USD 5 |
98 M |
490 M |
~10 |
3 |
The first milestone is not a valid one, in my opinion. The DAO already paid for that, and I don’t see how you being in charge should affect its development. Maybe something above the mere shipping, like an increase in relays (new ATH), could be rewarded.
Milestones 4 and 5 seem too much, in my opinion. Maybe I’m too poor… Why is the reward in POKT doubled when the POKT price is multiplied by 3 between milestone 3 and 4? Is that a typo? Are there examples of such high rewards in the industry?
NOTE: After I wrote this Michael clarified that the tokens are to be shared among many participants involved in the fulfillment of such milestones. In that case the new question would be, what’s the maximum Michael’s take on these tokens? because they are pretty high nonetheless…
Closing Remarks
Wow, you read the whole thing? You have my respect. Wait, you skipped to the end to see some elevated conclusion? Shame on you!
Well, there is not much else to say. It took me ~5 hours to write this. In the meantime, the Poktopus Den produced ~900 messages that I won’t read…
I don’t know how much time we have to keep discussing this, but there will not be much time given the current market volatility. We better make up our minds and try to bring calm to… us? as soon as possible…