I’m loving the debate and interest from so many parties. Everyone is right. And nobody is wrong. This is all our community, so that’s what makes it unique. We just need to reach a consensus on the highest priorities for the protocol as a whole, including all stakeholders - from the supply side to the demand side, capital providers, and community members just here for the culture and the values. Apologises for the diatribe in advance.
Getting down to brass tax, although the timing of this proposal was unfortunate, its importance should not be understated.
Pocket is massively overpaying the supply side. And while the tokenomics are a feature, not a bug; we’ve bootstrapped a global distributed community of nodes into existence. And even if you only joined in the last few months or weeks, you’ve benefited economically, aka the "perpetual fair launch.
WAGMI, truly. Pocket was on its knees for the first few years of existence, and it’s now a global juggernaut about to reach escape velocity.
Consequently, it’s an excellent time to start thinking longer-term about what we’re optimising for.
Is it node growth? If so, what kind of node growth? And where? Or is it something else?
Until v1 comes around, there is no QoS available to reward nodes for the quality of their work, as opposed to the quantity of it.
I think we’re playing a dangerous game if we use Pocket’s economics to reward a neverending arms race amongst node runners. Partly because I actually believe that it will flush out most of the smaller node runners as the technical requirements will just become too high. And it also seems to be a waste of effort and focus. Pocket is more than a protocol with a high APY for participants.
Picking up on a few data points shared by @iaa12 and others:
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as per PUP-7 - PUP-7: Whole Lotta Requests - Pocket’s centralised competitors get paid - very roughly speaking - $0.00048 to $0.00076 per relay
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The DAO’s current target cost for the demand side (the “USDRelayTargetRange”) is $0.00036 to $0.00059
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Currently, the demand side is paying $0. The foundation is paying for all of the relays - via dilution - on all apps’ behalf.
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Even at the highest end of the USDRelayTargetRange, 10B daily relays would result in around $2.15B in “cost” to the demand side of the protocol.
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Using the numbers from Token terminal - https://www.tokenterminal.com/terminal/projects/pocket-network- supply side revenue was $3.9m yesterday (Sunday 30 Jan 2022).
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That’s $1.4B in node revenue annualised per year, without relays or the price of POKT increasing. Of course, this isn’t investment advice, but neither of those things is true when you look further ahead than the next week or two, never mind the next couple of months and longer.
Taking all this together, the recommendations from me(apologies in advance as they respond to numerous concerns / points made in this thread, and aren’t limited to just the protocol’s reward per relay parameter) are:
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Start charging larger applications, ie those not on the “free tier” - this will increase the number of staked POKT, and should also create more skin in the game for the protocol’s demand-side as they will now experience greater upside (and downside) from the success of the protocol as a whole, using the price of POKT as a proxy for this
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I largely agree with @JackALaing on everything he said regarding the economics: reduce inflation over the next 4 months, but link it to node profitability in USD terms (ie acknowledging how the price of POKT has an impact on profitability). I think that inflation can come down by 50-60% (targeting a rough effective yield of 60-100%). I’m also wary of the circular impact of high incentives arbitrarily increasing node costs due to the need to upgrade infra to keep pace with the rest of the pack, with such costs then used to justify higher inflation rewards. And so on.
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we need to ensure that amendments to network-level economic parameters don’t detrimentally impact incentives for longer-tail chains. This means we probably need to review the settlers of new chains economics in tandem with any network-wide changes to the economics. See PIP6.2 for reference - PIP-6.2: Settlers of New Chains
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Establish a grants committee and accelerate the rollout of PEP-16 - PEP-16: Universal Contributor Income - we have a fantastic hive mind here. And just like how overpaying for the supply side worked, let’s start overpaying for community contributions. Drive more relays. Increase integrations. Improve documentation. Build more tooling. Create more dank memes. etc etc