PUP-11: WAGMI Inflation

We have to think first about what we want to achieve at this stage of the network. If we want the price to increase, then inflation rate of new POKT minted has to be lower than the node growth rate. This way, the demand for POKT will outgrow the inflation so price can increase.

On the other hand, if the price increases too much, then we discourage NEW sovereign node runners to come in, since this will be very expensive for them.

As Orourke has said several times, the KPI is always “number of sovereign node runners” (we can add other parameters, like sufficiently decentralized number of node runners, but this will complicate things at this point). So, a price increase achieved by reducing inflation, will be negative for the KPI and decentralization of the network.

Another suggestion would be to set an algorithmically-defined inflation rate that takes into account the decentralization of the network, number of new sovereign node runners coming in and the number of relays in the network.
For example, if we have a surge in number of relays on xdai, we would need to have more nodes coming in to support the growth. How do we achieve this? By increasing inflation and keeping the price of POKT from exploding higher, in order for new node runners to come in. Once we reach a point that we have enough number of nodes in the network to support the relays, we can decrease the inflation in order to increase POKT price without reducing the number of nodes.

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I think though we have to also consider staking pools. While it’s true that it will be harder for any single person to be a node runner, if there’s millions of POKT holders that will create a flourishing ecosystem of fractional staking pools. Which will ultimately affect decentralization positively, as well as raising the network’s reliability and quality of service overall.

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Hype is more powerful than any economic model.
We’re gonna go up, and we’re gonna go down.
And…
If we’re lucky…
We’ll do the over and over.
Eventually, the fundamentals of supply will start to exert themselves, but not anytime soon.

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First thank you!
After going on your proposal and the comments i find me self bombarded with a lot of aspects to the issue of crazy high inflation, which is seen with very young projects. Pocket network have passed this stage in my eyes and should “behave” accordingly.

In order to simplify and being able to witness and measure each step we are taking towards reducing inflation, i think we should start with the WAGMI proposal and observe the results.

Than we will be able to see if and what steps are needed to further improve the tokenomics. this will also increase the amount of members who vote with a greater understanding and clarity. This simplifying will also increase the speed in which proposal can be improved.

Glad to be a apart of this community♥️

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hi all,

Re-iterating previous “warnings”:
I’m no financial wizard whatsoever + recently introduced into the project.

For transparency: I’m a node operator.

  1. Seems like the primary component of $POKT is the user (dApp). Its the user’s demand which sets the wheels of this protocol in motion. Without it - no POKT.
  • Does the above determine that the users are the ones who need to be highest in POKT’s chain of beneficiaries? (Benefitted in the form of low usage costs etc.) and only then come the rest?

  • With that in mind - it is obvious that the need for periodic control over the POKT’s faucet is mandatory. As mentioned above, it doesn’t have to be used, in case the “natural” flows of the market forces (more manipulated than “natural” in my view) take POKT to the anticipated “maturity stage” without too many growing pains and risks. But having the ability to regulate inflation is a must-have option that may prevent damage to the POKT project. (And lets be honest here, were humans, there’s a good chance (~99%) it will get irrational, biased and dominated by interests of the larger entities - so at least have some way to restrain human nature)

  1. What is the profile of a service node operator at the “maturity stage”? How many nodes will be staked by small retail investors (pools, individuals) and how many by Whale node operators?
  • The prices are expected to stabilize when equilibrium of dApps/service nodes reaches a steady state - pricing down POKT to the level expected from a project that is to be the dominant RPC distributor in Web3 (like LINK is aiming for oracles I guess?!). POKT should strive to incentivize both retail investors who stake and the large “whale” node operators. APR should be set accordingly throughout the project’s timeline - another reason for having the option to control APR.
  1. Getting this filtered through a professional seems like a must. I would get a few pairs of eyes looking at this. You may get different views and different weighing of the factors that come in play here. As mentioned above - there are hypothetical predictions that have to be taken into account - if we cannot model those accurately, we can at least frame the entropy using worst-case/best-case scenarios and predictions on usage volume/network size and their fluctuations etc.

This project’s fundamentals are very strong. The fact it is relatively easy to elevator-pitch POKT to anyone, is a great indication of a fantastic & well focused project.
Kudos to all involved!!!

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First of all thanks for allowing me to write down my views on it…!!!

I like this proposal, but it’s complex.

Instead of this WAGMI. I believe current inflation is sustainable. Current in the growing phase of the network, the emission is 0.01Pokt per relay. I read somewhere in past, once it achieves a growing phase (1B token total supply), then rewards per relay will go down from 0.1 to 0.001 means 10x lower than current.

So emissionbase on total supply is like :

upto 1B → 0.01Pokt/Relay
1Billion - 2Billion → 0.001Pokt/Relay
2B - 3B → 0.0001Pokt/Realy

The benefit of this is, that it decreases emission and keeps inflation in check. It may be argued that, it’s not sustainable for node runner but on the contrary token price rises based on supply-demand and low emission. This again keeps balance in the network.

I believe the proposed inflation emission is sustainable both in terms of adoption and in terms of price appreciation.

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We are already at 840 MLN tokens at the moment and growing with around 5 MLN tokens per day. So it will not be long before we hit the 1 BLN tokens. From that moment, the emission base will decrease from 0.01 - 0.001 POKT per token/relay.

So I do not see the benefit of the WAGMI proposal as the above will already take care of the inflation issue or what I am missing here?

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exactly my point…!! The current inflation control method of reducing rewards from 0.01 to 0.001 works best like Halving of Bitcoin…!! Some may claim that Node runner won’t be able to coup up their cost but By reducing the reward means the Price can go up…!! It’s a win-win for both “node runner” and “token price appreciation” as at a certain point token price will find its equilibrium.

With WAGMI controlling dynamic inflation but flatting out fixed daily rewards is not actually controlling inflation…!! it always stays for a lifetime…!!

There is no pre-programmed method of change in the mint rate at certain milestones of supply.

This isn’t accurate. The mint rate doesn’t automatically change at 1B tokens (or any other amount). While this was originally thought about, nothing was predetermined or hard coded upon launch of the protocol.

If you are referring to the model that I made, that was purely theoretical. The reality is that the DAO is in charge of the parameter and only it can choose to make the change.

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yes, I got it…!! Compared to WAGMI that solution seems more feasible and sustainable…!! or after certain blocks, do halving…!! This kind of model is sustainable compared to daily fixed amount of inflation for a lifetime…!!

Thanks for the info. I thought it was hardcoded.

So I guess once the 1 BLN hits, the DAO goes through a vote?

hi everyone

im revisiting my concerns about inflation from the perspective of a node runner who is very interested in price.

There are more pokt tokens printed than total volume traded in a day. This is during peak twitter “education” and retail interest, the difference was much larger before pokt burst onto the scene.

This means that node runners that want to sell build up vast amounts of pokt in times of no liquidity and rush to sell when there is liquidity available. It becomes a game of chicken where the big players know that everyone else is sitting on lots of pokt they want to unload. Instead of a healthy grind up for the token, it becomes feast and famine in which there are bursts of interest which are smothered.

This has the effect of trapping a lot of new buyers into high cost basis nodes. Yes, the same happens with all tokens, but the effect is far more pronounced in high inflationary environments where not all participants are aware of the amount of pokt build up that needs to be sold, and short term sellers are more likely to sell out “no matter what” when much of the pokt they got was free.

IMO, the costs of this setup do not outway the benefits. we want to foster an environment where there is sustainable access to exit liquidity for all node runners that need to take profit, not a great rush for the exit which inevitabely happens when more supply is minted than demand.

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I think this is an important consideration which hasn’t been well addressed.

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Overall, I support the WAGMI proposal and the idea of increasing the DAO’s allocation that has been brought up in a few of the earlier comments.

There are two related topics I wanted to raise:

  1. Reward distribution : A small number of chains reaping most of the rewards.
  2. Implementation : Feasibility of a variable reward multiplier.

Reward distribution

Problem : The strength and utility of the Pocket Network comes from having as many nodes as possible servicing as many different chains as possible. With Harmony being a significant source of relays today, WAGMI might create a disincentive for node runners to support new chains with a very small volume of relays due to the low return at the tail end.

Potential Solution : Implement WAGMI on a per-chain basis. This will create an incentive to add support for newly added or low volume chains, yielding higher rewards, until the network finds an equilibrium for supply & demand of service nodes. Note that this will likely increase Pocket nodes’ storage and compute requirements.

Implementation

Problem : Implementing a continuous function to compute variable rewards may be difficult given the current block-by-block nature of claims and proofs that are independent of each other. Additional state will need to be maintained to compute relay rewards on a rolling basis of some number of blocks.

Potential Solution : There is no way to avoid additional state storage (or compute) to implement this consensus-breaking change, but I believe a piecewise step function approximates the WAGMI plot with a parameterized terminal value would work as well.

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I will add that high inflation may deter some investors but not the the ones that benefit to the system, or not as much as investors that see high APR and want to stake.

One of the first question people ask in grouo after the bought the token is, can i stake? So yes you can, it is a litt different here so some education is needed, but like it drew a lot of attention and growth so far it will continue to do so.

Just want to show another side of high APR, and people understand high APR means high inflation, if they don’t? Practice brings perfection… Lol… Peace✌️

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i finally processed everything you spoke off :wink:

first i see it as a perfect solution that can be perfected further with time. the high APR is neither good or bad as long as it serves a purpose, in our case it fulfill only part of the purpose, that part is allowing the network to grow in term of node count. the second purpose of this high inflation is that we are providing the service for free in order to acquire clients and build reputation, the payment comes from the minting process of pokt. this marketing is amazing and it is similar in the defi space for LP and staking, the problem for projects is that most work with capped supply so the APY ends sooner than later, people leave and the project is suffocating. here on pokt there is not limit but we are burning our free subscriptions for one game, defi kingdom .

if we want to maximize our marketing strategy we want to offer this package of free use to more Dapps:

  1. we need to start lowering the APR each month gradually, to protect node operators who bought the top lately and new ones who are just joining from getting caught in a sharp change, we will do so till we reach our desired APR value, this will slow down the minting and prolong our free USE for new clients created by this inflation.

  2. if it’s possible to adjust the WAGMI APR for a specific project , this will be the holy grail with a project like defi kingdom who is responsible for a lot of the inflation.

do we have a number in mind how many tokens we wish to have at the end of this growth phase?

how much the network is being utilized today in % in term of relays and dapps?
do we have a number of nodes we expect to have in 6 and 12 months time?

what is the USD value ± we wish for each node to lock? this is directly correlated to supply, price and this is a thing i am unsure how easy it is t change? it can 2x or 3x or reverse and cut the amount of nodes.

got carried so i will stop here :grinning_face_with_smiling_eyes:.
i am for the WAGMI, it will simply give us control, regarding the numbers? we will discuss and vote on it ::slight_smile:

another thought that came to mind is to start “charging” defi kingdom to burn some of their staked pokt, it can even be a time frame based that after 6 months or X amount of relays of free use, a project begins to burn a certain amount of pokt. now i am way off topic…lol

thx for bringing such an elegant and flexible solution!

2 Likes

This proposal is now up for voting: Snapshot

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Sorry for the noob question, but Why not give POKT other use case utility value as well? Begin implementing POKT to have currency value, to draw in investors, and create scarcity? Is this not possible?

Really like the proposal and strongly we should move toward that long term.

Poket not being ERC20, not being on major exchange, having strong inflation etc … has allowed our grassroot community to stay free from moonboys.

With wrap $pokt on the horizon, having strong inflation as it comes lives would help mitigate inflow of speculators (disincentive join or punish free riding), and we could change the inflation params couple months after the initial wpokt hype?

Idk just random thoughts

PUP-11 passed with 67% quorum and 100% support. Snapshot

This proposal doesn’t specify WAGMI targets, see PUP-13 (which also passed) for details.