PUP-22: Further Reduction of Emission Numbers (FREN)

Updated Aug. 18, 2022 by @adam :

  • Added the PUP-22: FREN Calculator to avoid calculation ambiguity
  • Specified language that would cause a monthly update to the RTTM parameter regardless of whether or not there is a concurring specified change to the target daily emission rate to account for changes in Trailing 30 Day Average Relays.

Updated Aug 17, 2022 by @msa6867:

  • Incorporated @JackALaing August 15 feedback. Simplified and clarified that NPF is to set RelayToTokenMultiplier (RTTM) based on a specified target emission rate, rather than the more ambiguous term “target inflation”. The corresponding expected annual inflation is also shown, but the target emission rates will be what is normative for setting RTTM.

Updated Aug 12, 2022 by @msa6867:

  • Modified the first in the series of “WAGMI Target Inflation” reductions to jump immediately to 35%
  • Aligned all WAGMI Target Inflation adjustments to month boundaries starting September 1, 2022
  • Added clarity on what token supply baseline the Foundation is to use when calculating the RelayToTokenMultiplier from WAGMI Target Inflation

Attributes:

Author(s): @Cryptocorn @msa6867 @adam
Parameter: RelaysToTokensMultiplier

Current Value: variable so as to maintain WAGMI Target Inflation = 50% (corresponding, in implementation, to a WAGMI Target Daily Emission of 1.295M $POKT/day)

New Value: variable so as to maintain WAGMI Target Daily Emission = 1.000M $POKT/day decreasing to 690k $POKT/day. (At current supply of ~1.36B $POKT, this corresponding to an effective inflation rate of 26.8% decreasing to 18.5% over the next twelve months)

Summary:

While the WAGMI inflation reduction proposal (PUP-11) was contentious and heavily debated during the start of 2022 when there was a total of 10k – 15k nodes servicing the Pocket Network, subsequent over provision of nodes (to a maximum of just under 50k nodes) and the needs of node runners to sell POKT rewards to pay for infrastructure fees has led to a general consensus within the community that inflation must continue to be lowered as we leave the Bootstrapping phase and its associated goals of prioritizing network adoption and move towards the Growth phase and a focus on more balanced long term economics.

The last of the PUP-13 Initial WAGMI parameters was implemented on July 24th, giving a target inflation rate of 50% as measured from the ~945M $POKT supply at the time PUP-13 was passed. This corresponds to an average daily emission of 1.295M $POKT/day (472M $POKT/year). Since its passage, approximately 416M $POKT have been minted. The current supply stands at approximately 1.36B $POKT. If no follow-on action is taken, the target of 1.295M $POKT/day will remain in effect resulting in $POKT supply growing by 472M $POKT over the next 12 months. This corresponds to an inflation rate of 34.7% over the next twelve months based on current supply of $POKT.

This proposal extends the reduction of emission rate over an additional 5 months, starting with an immediate reduction of target emission to 1.000M $POKT/day with a goal of 690k $POKT/day by the end of 2022. This corresponds to an effective inflation rate of 26.8% decreasing to 18.5% over the next twelve months. The step down sequence will apply an approximate 12% reduction in RTTM value at each step (RTTM_new ~ 0.88 x RTTM_old) with the first value of 1.000M representing an immediate double-sized step-down from the last PUP-13 value.

Abstract:

This proposal provides for a gradual step down of RelaysToTokensMultiplier (RTTM) via specifying a target average daily emission in keeping with the spirit and intention of PUP-11 and PUP-13 though with an updated nomenclature to clarify that what is being specified is a target emission rate (that unless changed will remain constant from year to year) rather than a target inflation rate (which would cause emission rate to grow from year to year due to the effects of compounding).

  • September 1, 2022 (*): WAGMI Target emission rate = 1.000M $POKT/day (~26.8% effective inflation)
  • November 1, 2022: WAGMI Target emission rate = 880k $POKT/day (~23.6% effective inflation **)
  • December 1, 2022: WAGMI Target emission rate = 780k $POKT/day (~20.1% effective inflation **)
  • January 1, 2023: WAGMI Target emission rate = 690k $POKT/day (18.5% effective inflation **)

(*) Assumes that this proposal is passed by August 31, 2022. In the event that it is passed after this date, the first adjustment shall take place immediately with no change to the remainder of the schedule.

(**) As measured against the baseline supply at the time of the proposal passing. The forward-12-month effective inflation rate corresponding to each subsequent change to target daily emission rate beyond the first would be slightly lower, culminating in a 17.1% inflation rate for 2023.

Implementation of this proposal would be simple, as it is a continuation of the existing mechanism enacted by PUP-11 excepting that it simplifies the math for the PNF by eliminating an archaic reference to the exact supply of tokens at block height 51909 on Feb 24, 2022 at 6:37 GMT.

The Pocket Network Foundation (PNF) shall calculate the RelayToTokenMultiplier (RTTM) by dividing the target daily emission rate (denominated in uPOKT) by the Trailing 30 Day Average Relays. Poktscan shall be used as the source of truth for relay counts for the measured periods. This is unchanged from PUP-13, but is simplified in explanation and implementation.

For example, on July 24, PNF divided the final target daily emission rate of 1.295M $POKT (1.295T uPOKT) by the Trailing 30 Day Average Relays of 944.5M relays to obtain the current RTTM value of 1371.

PNF may also use the following calculator to calculate RTTM:
PUP-22: FREN Calculator - Google Sheets

By inputting the Trailing 30 Day Average Relays and the WAGMI Daily Target Emission rate, a new parameter value is outputted. As a part of this proposal, the parameter value will be adjusted monthly, on the first of every month to account for changes in Daily Average Relays, regardless if there is a change to the Target Daily Emissions Rate.

Note there is no adjustment to WAGMI target daily emission rate on October 1, 2022. This is because what would have been the October step-down was accelerated by a month and combined into the September 1 step down, so that the inaugural step down represents a double-sized reduction from the last PUP-13 value. (I.e., September 1 reduction of target daily emission to 1.000M is approximately 0.88^2 x 1.295M $POKT/day.

Under the terms of this proposal approximately 111M $POKT will be added to the supply from time of enactment of first reduction on September 1, 2022 until the end of the year, an increase of approximately 8% over current supply.

In the absence of follow-on proposals, the default target daily emission rate in 2023 and subsequent years will remain fixed at 690k $POKT/day (252M $POKT/year). Since this is a fixed rate rather than a compounding rate, the effective inflation rate will decrease each year. Namely :

  • 2023: 17.1% (252M/1.47B)
  • 2024: 14.7% (252M/1.72B)
  • 2025: 12.8% (252M/1.97B)
  • 2026: 11.3% (252M/2.23B)
  • Etc.

Motivation:

The Bootstrapping phase was designed to encourage user adoption of the Pocket Network. To this end, it exceeded its goal and the network has passed the milestone of processing 1 billion relays per day multiple times as of writing (early August 2022).

High inflation via a generous reward program was used to incentivize the creation of the node network to provision the infrastructure that could process client relays at scale. Coinciding with a steep rise in POKT’s price as more investors entered the POKT ecosystem, this led to ultimately an over provision of nodes. The associated need by node runners to sell rewards to pay for infrastructure costs coupled with a bearish Macro environment has led to POKT’s price dropping from a peak of $3.15 to a low in early August of $0.062, or over 98%.

While great effort has been made to optimize supply of nodes without harming product provision, detailed in PUP-19, PIP-22, and the work around LeanPOKT, this proposal argues that an inflation rate of 50% is still too high for the long term health of the Pocket Network.

As the cost of supplying a functioning node to the network reduces due to supply optimization outlined above, this gives the ecosystem opportunity to continue to reduce reward inflation in a way that balances the needs to continue to incentivize node runners to provide for the network while lowering the inflation rate in a sustained, controlled manner.

This proposal builds upon the previous PUP-11 and PUP-13 proposals, which have generally been accepted by the community to have been both necessary and helpful to the ecosystem at large.

We recognize that an end emission rate 690k $POKT/day (~17% annual inflation in 2023) may still be too high for the long-term needs of Pocket Network, and further proposals may be required to continue to manage inflation against reward over-provision.

However, this proposal seeks to balance a steady reduction of the inflation target, in a manner such that it does not bring overt shock to the ecosystem and any 2nd or 3rd order consequences this may entail.

Rationale:

Providing immediate reduction to 1.000M target daily emission (~27% inflation rate) slows growth in token supply and keeps pressure on node runners and service provider to continue to innovate on cost reduction and performance improvements, while not being so severe as to immediately cripple existing node runners assuming a return to recent lows in POKT price.

Pausing further reduction for the month of October allows time to absorb PIP-22, Lean Pocket and the start of portal monetization. For example, during the month of September, the DAO can begin to study system behavior in response to PIP-22-induced consolidation and the resulting QoS impact on smaller chains and the impact, if any, on smaller node runners. Pending review of these results, the DAO may determine that it is acceptable to raise PIP22-allowed consolidation from 60k, POKT to 90k POKT leading to further consolidation and cost savings during the month of October. That could help prepare the node-running community for further reductions in inflation target in the latter months.

During these two months the community is encouraged to continue to explore other methodologies for emission control that may form a more permanent roadmap for Pocket emission than the 5-month reduction plan put forward by this proposal. Any such proposal, if passed, would supersede the remainder of this proposal. Specifying a resumption of emission reductions post-October is necessary, however, to plan for the contingency that no superseding proposal is put forward or passed between now and November 1.

Resuming reduction of WAGMI Target Inflation starting November 1 will continue progressive reduction in the growth rate of token supply commensurate with node runners and service providers continuing cost-reduction and performance-improvement measures.

Stopping the reductions at 690k average $POKT/day allows for a reassessment of all factors, including price behavior of the POKT token, QoS, number of nodes, relay growth, demand-side monetization progress, etc. so that the DAO can take all this new information into account in deciding next steps.

Specifying reductions in terms of target daily emission rate rather than target inflation brings clarity to an ambiguity that existed in the original PUP-11 and PUP-13 proposals and ensures that even in the absence of follow-on action by the DAO, the actual inflation rate, on a percentage basis, will continue to decline in subsequent years.

Dissenting Opinions:

NB: in all following discussion, any and all references to “inflation” are, in context, references against the baseline number of tokens as of Feb 24, 2022 (approx. 944.5M $POKT) not to current supply (approx. 1.36 $POKT). It is left to the discretion of readers to convert into current inflation rates if they so choose. ]

While the majority of the POKT community now accepts the need for reward inflation reduction, some have argued for a more aggressive approach to lower inflation further, faster.

This proposal balances the perceived need for further inflation reduction with a timeline and model that allows both for medium-long term projection modeling by node operators and to keep incentives high enough that there is no sudden change in node provision and the economics behind such that may lead to unwanted consequences that are detrimental to the ecosystem.

Some have argued to continue the 10% monthly reduction utilized by PUP-13 to a goal of 20% or 10% annual inflation. The proposal above curves the reduction to a more gentle slope over time, as keeping with a 10% reduction would continue the increasing percentage change of total reward reduction. A drop from 30% to 20% target inflation is a steeper reduction of 33% compared to the reduction of 24% to 20%, a drop of 16.6%. The reward reduction of 20% to 10% target inflation would be steeper still at 50% percentage drop.

This proposal further recognizes that a 20% target inflation will likely not be the long term inflation rate needed for the Pocket Network. Informal conversations and Pocket Network social media debates have given a range of proposed targets, ranging from 12 - 8% to a negative deflationary environment post a burning mechanism being implemented.

This proposal further recognizes that multiple POKT influencing events will transpire over the timeline suggested above (PIP-22, PUP-21, PUP-19, the Portal for demand side POKT staking and others) and as such we believe it to be prudent to limit the scope of the next phase of the inflation reduction measures, such that a hard stop in 150 days will create a focal point to re-evaluate the inflation target after the implementation of current proposals and any outside influencing events. If any major event were to dramatically call for a more immediate change in POKT’s target inflation, a superseding proposal could be tabled to address a pressing concern. However, this proposal is designed to allow for a measured reduction in inflation that attempts to balance all stakeholders needs as viable at the present time.

Further dissenting opinions that were expressed during the PUP-22 debate:

“DAO should wait until PIP-22, Lean Pocket and Portal Monetization are assimilated into the system before deciding on next steps for emission reduction”

The authors have carefully considered this concern and conclude that at current POKT prices there is no breaking point that the vast majority of node runners would face by an immediate reduction to 35% even if this reduction occurs prior to their ability to incorporate these coming changes. A pause in further reduction is included to give node runners time to take full advantage of PIP-22 and Lean Pocket and renegotiate service-provider contracts as needed prior to further reductions.

“DAO should immediately reduce target inflation to 20%, not do so in progressive steps.”

The authors are sympathetic to this view point, but ultimately decided against this course of action in order to give node runners sufficient time to explore and implement a wide suite of cost-reduction and performance-improvement measures. We offer a concession to this viewpoint, however by reducing target inflation immediately to 35% (the half-way point between 50% and 20%) rather than the originally proposed 42%.

Review:

Proposal has been reviewed by Jinx, who advised to bring it to the wider community for comment and debate. Thanks also to Jinx for offering a better title name than the working name.

11 Likes

This proposal is designed as a starting point for the discussion around increased inflation reduction over the coming months.

I look to collaborate with the community and in particular invite @adam and @msa6867 to review the proposal and tokenomics effects the proposal will have.

3 Likes

I will be glad to collaborate and study the tokenomic effects. Without having a chance to do that yet, I can say that 20% final seems about right and gentler slope than 10% increments definitely seems right. Getting a good handle on the business plan is a first priority and any further changes to emission needs to fit hand-in-glove with that.

5 Likes

I love the strategy behind this, and pending @msa6867 's review, I strongly support it.

3 Likes

I will play a Devil’s Advocate here. I’m strongly against this proposal.

Contrary to logical and natural economic forces, reality shows that ever since POKT started fighting against “bad” inflation and introduced emission reduction proposals, POKT price started crashing badly, much faster than any other project out that that still has very high inflation rate.

So, straight to the point, we should rather face the facts and determine what really caused the price crash and also what caused the huge price growth back in January this year. POKT had high ROI and serious attractiveness/incentive to run the node(s) until early this year. That’s where the huge demand came from. People were buying POKT even above $2 because rewards were so good that demand was still coming no matter of high infation. Ever since rewards reductions were introduced, people started selling their rewards instead of staking them additionally for more nodes.

What I do suggest is that we keep the inflation high. In other words, keep the ROI high to retain the attractiveness of POKT from investor’s perspective. We shouldn’t deny the average crypto investor psychology which buys the high ROI. We should solve the issues the other way.
The issues are:

  1. too many nodes for current relay count
  2. overly expensive infrastructure which is pressuring the price down further and further longer we wait
  3. low attractiveness to run a POKT node (especially compared to January 2022)

As a solution, I’m heavily against cutting the ROI/attractiveness, but doing the following actions:
(1) further focus on node consolidation like with PUP-21. Starting from 60k immediately, and increase to 75k in 60 days, then to 90k in 120 days, and finally to 105k in 180 days. Then further analysis should take place to see where we are once v1 launches. Goal is to keep the node count low until there aren’t 10+ Billion relays daily. To sum up, further consolidation would ensure that newly created POKT doesn’t end up being sold on market, but being staked additionally on existing nodes. Needless to say that currently low node count helps reducing the sell pressure coming from infrastructure costs.

(2) increase the validator attractiveness by rewarding it even more. It will both secure the network additionally and also increase the required amount of POKT staked to be a validator, resulting with more POKT being staked and more POKT competing to be a validator.

(3) lastly, but maybe even most important, increase the ROI (inflation rate) of POKT. Instead of reducing it down to 20% over time, we should increase it gradually starting from 50% by 10% each month until we reach 100% ROI again. Importance of having high ROI between 80-100% even longer term is from multiple perspectives: if you ever had experience working with Binance ie., you know that their (accept it or not) brilliant marketing and biz dev team loves working with high ROI projects and are willing to promote such projects much more than any other projects. Promotions are by Tweeting about locked savings, fixed and flexible savings, and other promotions. Also, high ROI will again attract investors so, contrary to expectations, POKT’s price chart will either remain equal or even more likely increase.

That’s it for now. Happy to hear opinion about this as well.

NOTE: I have a degree in economics, I’m just emphasizing it here so that you know that I’m well aware of the inflation and its effects on economies, but I’ve been following crypto projects since 2015 and huge part of this opinion comes from experience, from which we all should learn from imho. Cheers!
@o_rourke @adam @msa6867 @nfahenry @addison @Andy-Liquify and others. Thanks.

Thanks @TheDoc. I agree with much of what you are saying. I was not around during the days of PUP11/13; had I been I would have raised objections much along the lines of what you are saying. As I have said elsewhere in various pokt forums, inflation is not an issue when it is known, predictable and serves a purposed growth. As an investor I simply discount by the known inflation when making my deployment decisions. WAGMI up-ended the prediction model used by early investors which (1) creates uncertainty about the future and (2) sows seeds of doubt re the integrity of the governance of the project. Both of these put downward pressure on price All-in-all, pivots tend to be bad news for start-ups. WAGMI was such a pivot. A start-up only gets a very few number of pivots before investors loose confidence completely.

That being said, the WAGMI ship has sailed. It is the path we are on. Both this proposal and an alternate approach of do-nothing further after last WAGMI adjustment can be seen as logical continuations of PUP-11/13 and thus would not be pivots On the other hand, to reverse the WAGMI process as you are suggesting (in your role as devil’s advocate) would be a second pivot in a three-strikes-and-your-out kind of world and would further erode investor confidence that the governing body knows what its doing. So that is simply not an option at this point.

Further, something had to be done back in the Jan/Feb time frame. Not because inflation itself was a problem, but because the too-rapid growth invited a lot of players into the space with loose wallets entering into grossly disadvantageous service-provider contracts that never would have arisen in tighter economic conditions. This has started to reverse and this reversal process needs to continue. Feel free to dm on discord or telegram; I’d love to discuss this more with you

2 Likes

I’m inclined to agree with TheDoc on this one (I’m no economist just a software engineer mind). I think best solution is to introduce app side burning and or lockin’s rather than reducing rewards/inflation from servicers/validation at this stage. This will help drive demand and reduce circulating supply

1 Like

Thanks @Andy-Liquify for the response. I wanted to start this topic because things are not straightforward with coin economics in crypto space as they are by economic theory in real economies. That’s why I have emphasized my background in economics.

I think we should zoom out and try to understand the bigger picture here. Focus should be on:

  1. increasing the attractiveness of running a POKT node, not decreasing it. We should drop the thought that increasing the inflation rate necessarily means that POKT price will go down. High inflation rate (ROI) might be driving the demand much more than there are sellers willing to sell coins that are paying out juicy rewards.
  2. actions that will ensure that newly created POKT is being locked up further instead of being sold on exchanges.
  3. reducing the infrastructure costs. It is much easier to say than make it happen (if we talk about LeanPokt for example), but what we can do in short term is to make sure all (majority) of the newly created POKT from nodes is being continuously added to existing node owners to increase their stake. For example, until we don’t have high relay count, we don’t need more nodes, so consolidation should be consistently increased (from 4x to 5x, 6x and more). Once more chains get added and relay count start going up massively, we will stop increasing the multiplier. For example it will stop at 6x (which is 90k POKT staked per node) and let newly created POKT to be used for creating new nodes instead of being added to existing nodes.

I agree with this proposal. One has to ask: what is the true purpose of inflation in the POKT ecosystem?

Is it to attract mercenary capital via high rewards? If so, mercenary capital does not offer stability to the Pocket Network.

Is it to encourage node growth? If so, it is not necessary at this point since the community has learned that the existing nodes are sufficient for our current and foreseeable relays. And not to mention we had to scramble to do damage control with PIP 22 and other measures to cut down the network costs…which were triggered by overprovisioning an inefficient network (which was made easier by high inflation).

So I fail to see the necessity in continuing to mint tokens at the current rate.

But inflation reduction by itself will not be supportive of the price of POKT long-term. An Application Burn Rate (ABR) must come sooner rather than later.

We continue to give relays away for “free” at the expense of the node runners. To be supportive of the price, POKT must be burned during relays and developers/apps must purchase more to “top off their tank” to run more relays. The upcoming Purchase Portal only requires an initial purchase of POKT once for staking. No burning…no topping off are required.

Until an ABR is implemented the price will be partially determined by the race between developers buying POKT once to stake to run relays versus the minting rate (inflation). The current demand for POKT (buying once) is not sufficient to equal the minting rate so the market will be continue to be flooded with tokens. Why do we need a constant flood of POKT tokens? We don’t.

Lowering the inflation rate until an ABR is proposed/debated, etc. will help be supportive of POKT’s price and the health of the ecosystem.

I would recommend that we also consider incorporating a one-time, introductory, fixed ABR with this proposal: for example, institute an ABR of 10% until a further proposal is proposed and refined.

A small 10% ABR coupled with further reductions in inflation would instill confidence in investors and Pocket Network participants.

1 Like

A few replies:

  • Correlation is not causation. I don’t think that one can definitively state that POKT price went down because of WAGMI.
    Most alt coins are down 90%+ based on the Macro environment. While inflation plays a part in pricing, and why I believe this proposal will help address that, price is due to multiple factors more than a lowering inflationary environment.

  • Number or rewards itself is only part of the equation, this must be added to price to give what POKT holders actually care about: Value of rewards. I’d rather get rewards of 1 POKT per day if POKT was priced at $10 per unit, than 1000 POKT per day if it was priced at $0.0000001. So correlating the utility of running a node based purely on reward output by itself is meaningless.

  • I certainly agree that we need other proposals and implementations within the network to optimize POKT and support price. Supply optimization via PIP-22 and PUP-19, LeanPOKT, a demand payment infrastructure (the portal) and longer term a burn mechanism and some of the other features that will appear in V1 and beyond. However, those points are not the focus of this proposal, this proposal is purely focused on what an optimal inflation rate should be.

  • High inflation was a very useful tool to solve the ‘chicken and egg’ problem of how to seed the network with nodes to process relays. It was laid out in the founding documentation as a key component of the ‘Bootstrapping Phase’. This worked very well, if anything too well and led to the over provision of nodes that caused the sell pressure problems we now face. As we move into the Growth Phase and away from Bootstrapping, those overly high rewards are no longer needed as we don’t need new node provision.

  • While jacking up inflation to very high levels is often a useful short-term marketing tactic, and I agree can make a BInance listing more likely (although in POKT’s case note that as it is not an erc-20 compatible token, considerable more engineering work is required to list on Binance compared to a typical BSC ‘shitcoin’,) this isn’t POKT’s goal. POKT is not a meme coin to pump and dump based on nothing more than market speculation and ‘something something Metaverse’. POKT is a multi-decade infrastructure play that is designed to have lasting utility, those focused on immediate ‘price go up’ mentality I strongly disagree with; the team are creating an ecosystem with real long term value that will far exceed any short term speculative pump from a Binance listing.

  • I’d be happy to be corrected, but I can’t think of any serious project that has succeeded with continued high inflation. Of the top 10, and maybe the top 100 projects, I can’t think of any that has been successful with a permanent high inflation. BTC is probably negative given the rate at which BTC is lost/unrecoverable. ETH is single digit, and even higher inflation SOL, MATIC, DOT etc are in the high teens. I associate continued high inflation with ponzinomics projects like Wonderland $Time, which followed a pretty standard set path for these types of tokens - an initial pump from retail attracted to high APRs, and then an eventual death spiral due to lack of continued demand for the ever increasing token supply.

1 Like

Other projects I follow that use high inflation as a marketing tool drop the inflation as well over time. Akash has recently gone through similar governance decisions to accelerate the lowering of inflation; pancake swap inflation for liquidity providers starts high to attract depositors and then ratchets down over time. In the case of akash I cannot see any correlation between price and their recent slashing of inflation. It would do well to understand some of the differences. First and foremost is the POKT concept of a servicer separate from a validator and (until recently) the 89 to 1 favoring of servicers over validators. This has led to deployment of tens of thousands of servers running at perhaps less than 1% utilization. Akash on the other hand has of order one hundred validators., so approximately 400 time more native token needs to be sold off daily to cover infra costs in the case of pocket as compared to akash (40k pokt servicers / 100 akt validators = 400)

1 Like

The community needs to remember that PIP-22 does not drive up server utilization as a function of POKT staked. POKT-23 needs to be put back on the table to achieve this. There is no reason to let PIP-23 languish just because PIP-22 passed. Think of PIP-22 as the short term play for the 6 months or so until PIP-23 can be implemented.

1 Like

For those who says that a 50% inflations is logic, tell me ONE serious project that have given that inflation on the first or second year… No one. Its simple, all the POKT are not applied to nodes. Those who are only investors will not buy a coin with that inflation and hold it, its stupid. Like no one in Venezuela wants to stay in Bolivars. Pokt on nodes are there, and pokt on holders push the price down because they see that its not convenient to hold it.

Inflation must be in a range of 20-25% maximum for this year and must be done drastically, like every big MC project. And descending 5% per year until 10%, and after that 1% until 6%.

For those who say that the price went up before, that was because of the listings. I saw it with my eyes… the flood of POKT that came from the shadows. It was like all the POKT were waiting the listing to be sold. And yes was a brillant desicion to make fortunes.

The nodes will have their income better than actually if the inflation is 20/25%. I prefer less coins of something that the value increase, than having 50% of something that is going to the floor.

The equation is easy. IF you have a reasonable inflatiom, holders investors will hold to trade. New investors and money will come and the price will go up. If the price goes up, the rewards will be hold or reinvested on new nodes. At these circunstances POKT burn on our hands and we must stop that.

Who with something of experience on real economy will say that inflation of 50% is good? For no one is good.

Thanks for the time to put this together @Cryptocorn. I am inclined to agree with this approach and would support this proposal.

Some good comments on the thread I’d like to address:

While I agree with your points here, you’re defining the reflexive nature of crypto systems. Reflexive up also results in reflexive down (we have experienced this first hand), particularly when talking about a supply side that depends on high rewards attracting new node runners. It’s impossible to define what the counterfactual might have been, though the nature of the debates around WAGMI was focused on having a more stable, long-term oriented supply side to mitigate reflexivity risks.

Last year it made sense to have high rewards to bootstrap the supply side of the network. By having such broad, global coverage, we improved our quality of service. After a certain point we began getting diminishing returns on this. As a result the demand and supply sides of the network were out of whack, leading to the reset we are in now.

Further, reflexivity still exists. POKT is still a nascent market, and will continue to be affected by self-reinforcing loops. The difference moving forward, is that with any self-reinforcing loop (positive or negative) the foundation will be sustainable given the improvements with PIP-22, PUP-19, leanPOKT, and real economic demand from applications.

Let’s activate the demand-side first and see what the impact of this is before contemplating burning. Numbers related to developers will be public and on-chain. I believe demand will outstrip the supply side creation and selling of POKT in the market moving into Q4/Q1 next year as we reduce rewards and find cost improvements across node running.

Agree here, though I believe a flat, protocol-wide inflation may not be the best long term solution. WAGMI does not take the price of POKT nor the cost of infrastructure into consideration. @kjenkins have been doing some research and thinking on what a cost + margin model might look like, where the price of POKT and the cost of infrastructure at a protocol-wide level are contemplated. A cost + margin model would continue to incentivize efficiencies within the network while keeping node runners profitable across the true cost of the network.

This isn’t easy as much of the node costs and human capital costs outside of Pocket nodes are opaque, though I think it’s possible to achieve.

5 Likes

I support this proposal. It seems like a sensible way to reduce inflation in an orderly way allowing node runners time to plan accordingly to needed changes.

I agree with 20%, but with the light client on the horizon, as well as other consolidation initiatives, I think we need to go to 20% directly, upon release of the light client. We take another 5 months to drop inflation we’ll be at 2-3 cents by the time it’s all said and done, if we’re lucky. Let’s target 200 million and call it a day. A reminder that with the current earning potential of the network of about 2 million dollars per year at 1 billion relays per day, 200 million tokens per year would put token price at about 1 cent if ABR were in place.

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Thanks for putting this together, @Cryptocorn.

@TheDoc, I think WAGMI was the right call at the time. Unfortunately, WAGMI did not address the underlying symptoms of the larger disease - the need to sell tokens to cover over-provisioned infrastructure. In its original form, I designed WAGMI to control over-provisioning through a decrease in rewards, but during the governance process was neutered to the point that it didn’t really solve the issue of inflation or overprovisioning. In that sense, WAGMI was the right thing to do, but it didn’t go far enough to accomplish the goal I designed it to solve.

The best counterargument to @TheDoc’s point is looking at C0D3R’s network chart on staking. You’ll see that staking increased at nearly the same pace as pre-WAGMI while price continued to decline. Additional staking during this period would have only led to more sell pressure to POKT, a net negative.

I’m happy to look into this further with @msa6867. My gut tells me that mixing the pot during a period with major network changes from PIP-22 and the light client will only add more uncertainty to POKT holders. This uncertainty will make it more difficult to justify holding on to POKT and will only add to the lack of confidence around the token. I’m open to changing my mind, but I would like to see the dust settle with these large items before adding more to the pile of economic changes.

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Pokt is a great project envisioned by great minds. However these genius level developers unfortunately lack proficiency on economic side of things.

Inflation around the world has risen, and what do we see now? Increase in interest rates.

If POKT price has touched the lows where even OG cypherpunks are talking about it because it might kill the project, then maybe it’s time to follow basic principles.

Instead of trying to assess what pokt tokenomics would be in a separate reality, the time has come to accept the reality that we live in AND adjust.

How? By introducing a dollar anchor. By allowing protocols to pay in US$ and have those dollars transferred to a tight squeeze AMM like UNIV3 with deep liquidity.

In a phase where people strive to find dollar to get interest on, where Euro Dollar parity reached 1:1, where all the dollar outside of US is trying to find it’s way back home, think…

In a world where the reserve currency interest rate is almost at 4% and increasing, why in hell would anyone invest in POKT with 20% returns?

The only way going forward with POKT is high inflation. The thing most people miss here is that running costs don’t increase with inflation but pokt price will increase up to a certain satiety.

What to do after that satiety is reached and the turning point is around? That should be planned on the way there.

I’m seeing a general consensus that this proposal is directionally correct (i.e. reduce inflation), with disagreement on whether it should be gradual or immediate.

One thing worth highlighting is that, even if this proposal outlines a 6 month schedule of stepwise reductions, we’re not locked into the schedule if another proposal should come along and override it.

Another thing to note is that, in the absence of this proposal, WAGMI is set to continue anchoring to 50%. 1 month from now, the parameter can either be held at 50% or reduced again according to this proposal’s extension of the WAGMI schedule.

I believe there is general consensus that inflation should be cut more aggressively if measures such as the light client decimate our operating costs. There’s nothing stopping us from passing a new proposal if that should come to pass.

With these points in mind, knowing the options that will continue to be available to us, we shouldn’t let a disagreement about the reduction timeline get in the way of incremental progress. Until we have proof that reduced infra costs justify a more aggressive reduction, this proposal seems a sensible continuation of the path that WAGMI started.

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You are 100% right, the gradual reduction schedule is a lot better than arguing about details and doing nothing. Let’s roll with it.