Vote for this proposal 
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Here is my humble thoughts.
I think we let the market balance itself. We have a huge TAM that is also growing exponentially. We will continue to have innovation when it comes to fractional participation. It’s a 2 sided marketplace with trillions in TAM. I’m not concerned with inflation. Especially at prices under $100. My suggestion is to punt this until Q4 2022
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Hi all,
I would like to add in a few considerations. This post assumes two things: 1. The project/community/DAO is not agnostic towards $POKT token price (i.e. our goal isn’t for $POKT to increase to $20, but is also isn’t to keep it stable at $1) and 2. The project wants to achieve growth in a fast but sustainable fashion. If you agree with these two premises then feel free to read on.
Below I argue why, in agreement with Adam, that the RelaysToTokensMultiplier (the “Multiplier”) should be adjusted to manage inflation.
It appears that the principle reason to maintain the Multiplier and thus high inflation is to incentivize current and future noderunners. This is inadequate for the following reasons (i) the initial Multiplier had a much lower APR (prior to the current relay growth starting in November) yet node growth rapidly occurred, (ii) established businesses like $POKT do not require exorbitant inflation/APR to incentivize nodes and (iii) speculative node-runners acquiring $POKT nodes to receive 200% APR are not desired participants in the network.
I will take each prong in sequence.
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Multiplier APR Prior to Relay Growth. Noderunners did not start receiving ~200% APR and greater until early November. Prior to then, the APR they were receiving started at around 15% in July and increased to 100% in September and then to greater than 130% in October prior to the initial November jump. That initial stage of growth accounts for roughly 44% (~8,000 of the current ~18,000 nodes). This means that almost half of the nodes in the network were created prior to the exponential growth of relays and $POKT establishing itself as a dominant force in web3 infrastructure. That makes sense! Early noderunners and risk-takers should be rewarded for creating nodes and taking a risk on $POKT. This also tells us with respect to $POKT specifically that noderunners do not need exceptionally high APR (like the greater than 200% currently) to be incentivized to create nodes.
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$POKT is an Established Web3 Infrastructure Project. It follows from my first point that once a project such as $POKT establishes itself as a significant player in web3 infrastructure that the noderunners do not get even more rewards for running/creating nodes as the network and project have been established and they the noderunners have taken on less risk. We know and see that crypto and web 3 participants would want to participate in a project like $POKT at a significantly lower APR than 200%. I support proper incentives to further decentralize and bootstrap the network but excessive incentives for the sake of keeping the status quo should be met with scrutiny. Now that $POKT has established its place and reputation, the APR nugget is simply not required. The only negative press or publicity surrounding $POKT is excessive inflation because $POKT’s infrastructure product is in such demand that high inflation is unnecessary.
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Speculative Noderunners. $POKT team and community should want noderunners who are happy to run a $POKT node at 40-50% APR instead of speculative noderunners looking to capitalize on excessive APR greater than 3 digits. Per the money phases in $POKT’s documents, the project is not price agnostic and an appreciating price is fundamental to the eventual Maturity Phase. When this happens and the $POKT burning kicks in, the speculative noderunners leave along with their nodes, thus making the network less decentralized and secure. Sustainable APR until the Maturity Phase prevents this situation (particularly as noderunners are rewarded with APR and an appreciating token price) and incentivizes the right participants in the network. We want participants who want to run nodes in the $POKT network because it’s a dominant force in web3 infrastructure, not because its nodes shockingly offer 200% APR.
The preceding arguments lead to the same conclusion: $POKT has achieved and is achieving extraordinary product market fit and no longer requires excessive APR to incentivize participant noderunners. There is a reason publishers like The Block dedicated several pages in their year-end review to $POKT. It is a true Web3 project that is actually serving a true need in crypto.
Finally, and separate from my reasons above, an externality of the current dynamic is that inflation excessively rewards early participants (who have already been rewarded for their commitment). One of the most attractive aspects of $POKT is that it is a true web3 company. High inflation rewarding early participants for much longer is inconsistent with the principles of decentralization. Rewarding early participants with enormous APR looks uncomfortably similar to early crypto companies. Unlike other crypto projects where early investor/participant rewards were deliberate, this has only happened to $POKT because $POKT has grown exponentially in an incredible short time. The WAGMI proposal is a remarkable opportunity to course correct back to the path of web3/decentralization.
Apologies if any of this came off as aggressive. All the love to people on this thread.
Rodeo
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I respect your opinion and I am willing to admit I could be wrong. But almost everyone is talking about optics when it comes to the numbers. My argument is the numbers say we can support hyper inflation for a long time. And the market can correct itself when necessary. Can someone tell me mathematically why we would curb inflation.
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I agree. Which is why would should vote no
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I don’t see a mathematical reason to vote yes. I think we should vote no
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Healthy debate is good!
$POKT isn’t beloved because of its node APR, it’s because of its actual product, usage and decentralization. APR is not a feature of the $POKT network. $POKT optics are its TAM (like you noted) and its product. It’s APR is secondary to that. If users are seeking high APR, they could go to one of the many other crypto projects to fill that void.
How $POKT accounts for revenue is difficult for new members to understand . Its relays, chains and decentralization driving the $POKT narrative. Further, node revenue is appealing but its in the $POKT documents that revenue accounting will change (as will this inflation).
Mathematically, the supply of $POKT is set to double (from 770 million to 1.5 billion) over the next 12 months (assuming the current ATH relay rate does not grow, which is a conservative estimate). If we factor in growth, the supply probably increases to closer to 2 billion. If we care about $POKT price (which we do not have to by the way) and non node-runners (specifically participants in wPOKT), we would want to curb inflation to stabilize $POKT price. Further, having a highly publicized launch on ethereum to open up $POKT to other chains while diluting those very same new community members by 2 or 3x in the first year holding (even taking into account regenerative farming) is not a good thing.
In addition, much of the current buy pressure is a product of the highly anticipated $wPOKT. This is based on how the $POKT chart moved with respect to $wPOKT announcements and delays and with conversations with market participants.
My main question is why have such high inflation now that is has achieved its initial purpose (nodes grew so fast that blockspace became an issue!)? Relays aren’t directly related to high inflation. How does it further the business other than excessively reward stakers?
I also want to be clear that I am one of those stakers and stand to profit from continued high inflation.
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I was concerned about price at first. But we could plausibly double the nodes in the next month and have only a 10% gain in relays. Node runners live with that risk. The market is a live and liquid market. There is no way to predict a new commodity because they do have 2 sides. Gas prices go up in the summer when people travel. That’s years of data. We are in month 12. I think we pump the brakes on monetary policy.
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We also don’t have a clear cost model for service providers. I think we should let that mature
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How does the POKT$ token price figure in this debate? If the price drops due to high inflation, won’t that make use of the network more attractive to developers, enlarge the network’s market share, increase demand and drive the price back up?
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To this point. Some simple-man thoughts
Unknowns
EV of speculative traders
Relay growth
Price per POKT
Acceptable profitability of “sufficiently decentralized” node runner population
“sufficiently decentralized” node runner population
Acceptable entry point for “sufficiently decentralized” new node runners
What we can get an idea of is
Relative cost increase to maintain current profitability of node runners to match volume
Worst-ish case scenerio
Cascading effect of liquidity channels opening up, new node runners entering, relays drop.
Position
In general I am for the spirit of WAGMI because it aligns the correct behavior, grow the relay count with a sufficiently decentralized armada of node runners.
But I do not know what a “sufficiently decentralized” node runner population deems as “acceptable profitability”.
Other things like the risks associated with settling new chains may factor in here.
If we can not model that in advance, then we should air on the side of caution, monitor and change it where necessary.
Degen traders are f’in nuts so best to be clear up front by making inflation more predictable.
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yeah, seems like a worthwhile investment to make - a crypto econ guy. this proposal could be in 2 steps: set up WAGMI so it can be deployed when ready, then workshop the numbers until it’s ready. and i’m sure it’ll be a constant tweaking kind of thing even after we’ve put it in place…
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yeah, i mean. i don’t see the downside to having a mechanism in place just in case things start to happen.
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so. i think we should:
- get the WAGMI mechanism set up to be used if we need it
- hire a crypto econ guy to help with the #'s of how and when to use it
- increase DAO allocation
- throw a poktopus party
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I am not appose to the idea of carving inflation, but I have a few questions/thoughts:
- Is WAGMI considered a temporary solution, or a long-term solution?
In our model, the mint rate decreases by 10x from .01 to .001 and .0001 when total supply reaches 1B POKT and 2B POKT respectively.
- This quote above is from Pocket’s Economic Brief which brings 2 questions:
A. Wasn’t there a natural curve in rewards with Pocket original economic model?
B. Is this model currently in place?
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My hangup is having an economic model that is controlled by a few (the Foundation Directors). I do not feel this is a common mechanic for decentralized projects, and I would be concerned about the optics if this is our long-term solution.
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I do think Pocket’s economic model should be dependable and changes should be gradual and predictable. Carving inflation does sound like a good idea, but I would want the change to be eased in with a plan. WAGMI goals (or whatever other inflation curve we have) should be eased in-- but this proposal seems to lean toward abrupt changes, depending on the Foundation Directors goals. Is there a way to keep changes gradual with WAGMI?
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I feel it would be best to have a timelock on this delegation to the Directors. Basically this proposal would need to be renewed every X amount of months.
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Should the DAO take lead on finding a long-term economic plan or is there another inititve in process?
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What are @JackALaing’s thoughts?
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Just a reflection:
Current model from the perspective of a dApp: say the dollar cost of starting has moved from $5’000 to $15’000 (to keep it simplistic)
So, we would already need an adjustment of the base to keep it competitive vs. centralized solutions.
→ That will free up POKT staked by dApps (= sell pressure)
→ the price will fluctuate up and down, but not trend, and we could even expect a falling price from validator inflation
Proposal:
Make the cost to dApps in a stable currency (USD) - use the proceeds to buy and burn POKT
As the price of POKT increases, you will burn less POKT per user joining, but bigger adoption will burn more POKT.
Validator side: reduce rewards as planned after 1BN, 2BN, etc…
Reward nodes based on the time the POKT has been staked (or time locks, for up to 5 years); the longer the higher the rewards. If this is not technically possible; then create a mechanism to burn some of the rewards for new nodes, descending with time, until you reach full rewards.
Further offsetting deflationary mechanism: take and burn a transaction tax of 1%; same for a bridge tax of 1%.
LP fees: once and if the DAO owns its liquidity, use fees to buy and burn POKT
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I agree that an economic model controlled by a few appears off but I support delegating that authority to trusted members of the community and project. There is a difference between the community delegating authority to those members and those members simply giving themselves such authority.
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Adam’s proposal is dependable as is by the community determining a target inflation.
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The economic model you describe is not in place. It was a theoretical model that $POKT could adopt. However, it’s important to note that the POKT documents do consider that inflation would need be tamed over time. Adam’s proposal is consistent with that premise. The protocol is issuing 2 million tokens per day as a result of exponential growth. Adam’s proposal is not a radical deviation from POKT’s initial plan, rather it is exactly what was in mind.
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Further, the POKT documents define the Maturity Phase of its Monetary Phases as “the point in which Pocket Network has crossed equilibrium and the growth in inflation begins outpacing growth in the total staked supply of POKT.” The Maturity Phase is when the economic model shifts to a burn phase. I think we can all agree that we are far from that phase but high inflation as a result of exponential growth may artificially bring this Maturity Phase closer than it needs to be. Limiting inflation now balances out this formula to permit an elongated growth phase with persistent incentives via inflation. In other words, pushing the Maturity Phase out allows node incentives to continue and for new participants to participate in the upside of $POKT.
Again, the ask here is to limit APR per node from well over 200% per node to under 100% and change nothing else. Given (i) my prior posts re $POKTs product market fit, (ii) POKT’s publicity, (iii) POKT’s node growth during stages when APR was closer to my proposal instead of 200% and (iv) our aligned belief that the Maturity phase should not be close, this seems like something the community can get behind.
- Rodeo
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Thank-you for the detailed response!
Pocket’s original plan was to have inflation connected to network metrics. WAGMI connects inflation to a value metric determined by the Foundation Directors. That isn’t necessarily a bad thing, since it can help move things in a healthy direction, but it is a deviation from original plan. That is why I’m wondering if this is considered a short-term plan, or a long-term plan.
I would probably prefer that a long-term plan have inflation based on self-contained network metrics and not be reliant on human decision makers, hence my questions 
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If Pocket tokenomics ends up being controlled by the Foundation Directors we will drown in “FD is a new FED” memes.
Not the best optics, to be honest 
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Good angle @simsst . @zaatar also seemed to be hinting at this.
From the Demand side (dApps) perspective, any volatility in price doesn’t impact their cost to use the service. This is already dynamically adjusted by the previous and successful PUP 7 proposal. As a result, making the cost to dApps in a stable currency is not necessary.
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