PUP-30: Sustainable Emission Reduction (SER)

msa6867 · February 7, 2023, 11:58pm

Attributes:

Author(s): @msa6867 , @cryptocorn, @caesar
Parameter: RelaysToTokensMultiplier

Current Value: variable so as to maintain Target Daily Emission = 690k $POKT/day starting Jan 1, 2023 and beyond. (At projected Jan 1 supply of ~1.50B $POKT, this corresponding to an effective inflation rate of 16.8% for 2023, 14.4% for 2024, 12.6% in 2025, etc.)

New Value: variable so as to maintain Target Daily Emission = 690k $POKT/day during January and February 2023 and decreasing by 4.05% monthly thereafter for 12 months starting March 1, 2023 terminating at 420k $POKT per day starting February 1, 2024 and thereafter. (At projected Jan 1 supply of ~1.501B $POKT, this corresponding to an effective inflation rate of 14.0% for 2023, 9.0% for 2024, 8.2% in 2025, etc.)

Summary:

Since the start of WAGMI in February of last year, RTTM has been aggressively reduced from 10000 in February 2022 to 574 on January 1, 2023. Corresponding, average servicer rewards per 15k staked have reduced from the hundreds of POKT per day to high single digits today. The reductions have been effective in reducing the rate of growth of POKT supply as shown in Figure 1, but have come at a cost to node runners in terms of being able to innovate fast enough to remain profitable.

Figure 1 – Historical record of POKT Supply (Million), Genesis through Present

There have been several sentiments expressed on how to proceed once PUP-22 reaches the end of its reduction cycle on Jan 1, 2023. The main sentiments expressed are as follows:

Node runners need a break from further emission following 10 months of aggressive reduction
Less aggressive emission reduction measures are needed going forward: the rate of recent reward reductions is outstripping the rate at which node runners can innovate to reduce costs, threatening the ability of node runners (especially small node runners) to continue their nodes
Node runners need predictability of rewards: monthly reductions over the last 10 months have varied between 0 and 24% and the WAGMI and FREN proposals only cover about 5 months at a time, making it hard to know what rewards to expect in the future
Inflation/daily emissions is still too high and needs to be reduced further
Having a tokenomics with infinite max supply hurts Pocket Network in terms of appealing to a larger investor base; defining POKT tokenomics to have a finite max supply is beneficial in terms of market appeal and attracting investors.

Continuing with further aggressive reductions in the vain of WAGMI and FREN is incompatible with the first two sentiments expressed above, while doing nothing is incompatible with the last two. Both these courses of action are incompatible with the middle sentiment above of wanting predictability of what the near-to-medium-term future holds.

On the other hand, bringing the era of aggressive emission reduction to a close while continuing for 12 months with a moderate, predictable monthly reduction going forward provides a good balance to all of the above-expressed sentiments. This proposal puts in place a monthly reduction in target daily emission of 4.05%, reducing target daily emission from 690k today to 420k by February 1, 2024, as shown in Table 1. This will allow us to immediately change the narrative of inflation to 12.6% as of March 1, dropping to single-digit inflation by September of this year.
Pausing any further reductions after the 12 months of reduction is meant to motivate the DAO to take follow-on action that incorporates per-region, per-chain RTTM control that is expected to be available in V1 as well as to develop a comprehensive strategy related to the relationship between emission and app burn. If V1, app burn, or other factors leading to a better more comprehensive emission plan are available prior to the 18 months, the DAO may supersede this emission schedule by voting in a replacement emission scheme.

Table 1: Target Daily Emission Schedule

month of SER	month	target daily	projected end	Inflation forecast
reduction		emission (K)	supply (M)	(= Mi+12/Mi - 1)
	Dec-22		1,501
	Jan-23	690	1,522	14.0%
	Feb-23	690	1,543	13.3%
1	Mar-23	662	1,563	12.6%
2	Apr-23	635	1,582	12.0%
3	May-23	610	1,601	11.4%
4	Jun-23	585	1,619	10.9%
5	Jul-23	561	1,636	10.5%
6	Aug-23	538	1,652	10.1%
7	Sep-23	517	1,668	9.8%
8	Oct-23	496	1,683	9.5%
9	Nov-23	476	1,697	9.3%
10	Dec-23	456	1,711	9.1%
11	Jan-24	438	1,725	9.0%
12	Feb-24	420	1,737	8.9%

Abstract:

This proposal provides for a moderate ~4% per month step down of target average daily emission that PNF uses to set RelaysToTokensMultiplier (RTTM). The exact schedule to be used by PNF is shown in Table 1.

The Pocket Network Foundation (PNF) will continue to calculate the RelayToTokenMultiplier (RTTM) by dividing the target daily emission rate (denominated in uPOKT) by the Trailing 7 Day Average Relays. Poktscan shall be used as the source of truth for relay counts for the measured periods. As per PUP-29, RTTM updates take place once per week; updates to target daily emission rate will reflect starting with the first regular weekly update following the first of each month.

This proposal is a middle ground between taking no further action after the last January 1 (keeping target daily emission at 690k) and continued aggressive reduction in emissions as seen in Figures 2 and 3.

Figure 2 - Average Daily Emissions (Million) Genesis-Present plus projection into the future under various pot-FREN conditions (blue = no action. grey = this proposal, orange = continued aggressive reductions)

Figure 3 - Total POKT Supply (Million) Genesis-Present plus projection into the future under various post-FREN conditions (blue = no action. grey = this proposal, orange = continued aggressive reductions)

Under the terms of this proposal approximately 168M $POKT would be added to the supply during the last 10 months of 2023 (in addition to the 42M added during January and February) and approximately 154M $POKT would be added to the supply in 2024, resulting in single-digit inflation by September of this year.

Motivation:

The Bootstrapping phase, from approximately June 2020 through February 2022, was designed to encourage user adoption of the Pocket Network. Following this, aggressive emission reduction measures were taken from February through January 2023, to reduce annual inflation from triple digits to mid-teen levels. Going forward, it is desirable neither to maintain high inflation nor to continue highly aggressive inflation reduction measures; a middle ground is needed. This proposal seeks to provide that middle ground.

Continued moderate, predictable reduction to emission averages results in stabilizing the POKT supply and combatting the false narrative that Pocket has uncontrolled inflation and indefinite supply. Under the terms of this proposal, Pocket Network will be able to claim single digit inflation within six months of the effective start date. This is desirable in terms of public relations and attracting new investors to POKT who, whether right or wrong, have bought into a narrative concerning Pocket Network inflation that is stuck in the past.

Rationale:

In pre-proposal discussions and debates, alternate methodologies to implement moderate continued reductions were explored. The record of those discussions and methodology can be found at this link:

It was determined to continue with defined monthly reductions rather than defined Maximum Supply in order to avoid prematurely creating a narrative centered around Pocket having a “Maximum Supply” since there are too many unknowns regarding the best emission practices under V1 and the turn on of app burn. For similar reason it was determined to limit the number of monthly reductions to twelve months in order to force the DAO to revisit emission strategies – and especially demand-centric strategies, once V1 mainnet turns on and once app burn is immanent. In addition to the above link, discussion regarding the desirability in the future of a demand-centric approach to emission can be found at this research thread:

Monthly reductions of ~4% was chose over the original 1.4% suggested in the pre-proposal in order to drive the narrative of single-digit inflation by the end of the year and strike a better balance between continuing to put pressure on node runners to continue innovating and not being so aggressive as to loose key talent from the ecosystem by driving out node runners.

Dissenting Opinions:

“This approach is not aggressive enough. What is needed is an immediate cut in emissions by half or two-thirds in order to cause node runners to capitulate resulting in reducing node count to only that needed to service current and near-term forecasted relays.”

As noted above, this proposal if implemented, does not preclude a more aggressive approach to be proposed to supersede this one, if such an approach can be justified and accepted by the community. That being said, the drawback to a more aggressive approach is that in the process of driving out current node runners via capitulation, the ecosystem will loose more in lost talent and lost innovation than it will gain by reducing the node count.

“This approach is too aggressive. Node runners are already stretched to the break-even point; Emission targets should not be changed during this season. “

The reductions are modest enough that those node runners who are willing to continue to innovate should stay profitable. Driving the narrative of single-digit inflation is important for the program and may reflect in POKT/USD price as investors gain confidence that Pocket Network has its inflation issue under control. While such reflection cannot be guaranteed, any price stabilization that does materialize would more than offset any negative effect rom reductions.

“A methodology should be defined that guarantees a Max Supply. This is needed to help drive the Pocket Network inflation narrative.”

This was considered and heavily debated during the pre-proposal phase. Ultimately it was decided that it is premature to claim or advertise a max supply, as there are too many unknowns regarding what the best emission practices will be post-V1. That being said, the approach taken herein is consistent with asymptoting to a maximum supply. Were 4% monthly reductions to be renewed indefinitely at the end of twelve months, Pocket supply would asymptote to approximately 2.0B.

Copyright

Copyright and related rights waived via CC0.

poktblade · February 8, 2023, 12:13am

Do y’all have any statistics on how this inflation rate compares to other chains? Most chains are generally more off hands and a passive generator, whereas, POKT is pretty unique. Curious about what that delta is

msa6867 · February 8, 2023, 12:20am

@caesar has committed to populating such a table. Looking forward to seeing it. He thinks it will show high-single digit cluster… I think it will show more of a low-to-mid-teens (based anecdotally on what I’ve seen them do with the various chains within the Cosmos ecosystem). Pancakeswap seems to be somewhat of an outlier at this point among legit projects, happily chugging along at some 40% inflation

RawthiL · February 8, 2023, 1:29pm

I think that this proposal is a good start.

In the pre-proposal thread my main concern was the inclusion of a MaxSupply, which seems innecesary for a token like $POKT (IMO). This new proposal creates an asymptotic behabior to low-slope which is enough to keep inflation low and avoids to set a MaxSupply.
I think that during the following months we can create a model that will enable the justification of a “floating” supply, avoiding the need of setting a MaxSupply and enabling a solid narrative around our tokenomics post Application Burning. The exact value of the target supply will be arbitrary, as any other inflation control that we might come up with, but I am more concerned in having a solid plan behind it. In this terms, this proposal can help us up reach that value without adding too much noise.

Regarding the node-runner operational costs, this reduction will be aggressive in the node runners finances that are at their limits in most cases. We are working on some ways to reduce the infra costs of the network but it will not be enough to whitstand a 40% reduction of incomes. I hope that the sales targets are met and some buy pressure could increase the $POKT price. If the price does not follow, the number of node-runners will take the hit and unstaking will follow. Nobody knows what will happen if 50% of the staked tokens (>25% of the current $POKT supply) becomes liquid…

TheDoc · February 8, 2023, 5:19pm

Just want to add that from a marketing and wider investor perspective, not having a MaxSupply is an immediate red flag to many and it will result that many people won’t dig deeper to understand the coin economics, even if POKT becomes deflationary at some point. People will just pass and decide not to touch it. It’s also looking bad at CoinMarketCap or CoinGecko. I’ve seen this issue in multiple projects and it’s much easier to put MaxSupply than educate the masses, which is kind of an impossible task. It’s always better if MaxSupply is set to some random amount that will never be achieved (or achieved in 20 years from now let’s say) than not having MaxSupply set at all.

Jinx · February 8, 2023, 6:59pm

I like the schedule here, and the fact that it gets to single digits this year.

poktblade · February 8, 2023, 7:19pm

Yes, I’m starting to have more concerns about this as well.

I generally agree with proposed solution for reduction, however it sorta makes me wonder if it’s actually needed. We still want it attractive for node runners to operate for POKT (our quality on certain chains still suck, too) instead of other chains

Curious if this sentiment is actually still prevalent or not given the current price action.

msa6867 · February 8, 2023, 8:39pm

This, in essence, is what we spent the last month debating. For now, the line in the sand we have come up with is to not push that narrative. If the community feedback favors such a narrative, it can still be considered - whether via modification of this proposal or via a new proposal.

Question for @TheDoc : would not the “single-digit inflation” narrative be sufficient to cause investors to not do a preemptory rejection of considering POKT as an investment?

Yes, 4% monthly reduction is on the aggressive end of what was considered during the pre-proposal phase, but it is much less aggressive by a factor of 3x compared to the average 12% monthly reduction over the course of WAGMI and FREN. If we navigated the waters of 12% monthly reduction that dropped rewards by a factor of almost 20x over the course of the last twelve months, I think the network can survive and innovate its way to handing a 40% reduction that is gradually put in place over the next twelve months. It will be good to hear from multiple node runners. Driving the single-digit inflation narrative, in our opinion, is worth the pain.

Throwing out some other number for consideration, if we were to abandon the “420” meme. The following are the minimum monthly reductions that are needed to be able to claim single-digit inflation by the end of the year:
3.2% reduction for 12 months
2.45% reduction for 18 months
2.35% for 24 months or more

Note that the latter, done indefinitely, gets you right back to defining a MaxSupply (of 2.40B) and puts us right back where the pre-proposal started

there is a natural feedback loop to stabilize node count in so much as rewards rise for remaining nodes as some nodes drop out due to attrition. I cannot see any scenario in which a 40% reduction that is implemented gradually over the course of a year leads to an unstaking of 50% of the node-staked tokens. Realistically, given the above feedback loop, given historical data in the face of WAGMI and FREN reductions (if I recall last June, node runners were already complaining of being at the break-even point and we have reduced rewards by a factor of 3 since then) and given the power of innovation if given enough time to innovate, I think a reduction-induced attrition of not more than 10% is more realistic.

I use to be in the camp of worrying about the effect of moving POKT from locked to circulating and thought it best to keep as much POKT locked as possible. Vitaly has been chipping away at that notion as being a false narrative and suggests the opposite. As investor confidence is restored that Pocket emissions is uner control and on sound footing, they dwill be glad to buy-and-hold unstaked tokens on the anticipation of capital gain without the worry of inflation devaluing their investment. I copy over also the comment posted by @crabman in the pre-proposal discussion:

msa6867 · February 8, 2023, 8:45pm

Based on discussion thread I have seen on CoinMarketCap re POKT, I think this sentiment is still prevalent outside the community. Given comments made by @o_rourke , @ArtSabintsev and @Jinx I think this is still a well-represented sentiment within the community, including at PNI.

Also, what do you mean when you say “given the current price action?”

RawthiL · February 8, 2023, 8:46pm

My numbers were pure speculation, nobody knows what will happen. My rationale was, if the node-runners are at break even, those who survive will need to claim 40% more network share (in terms of relays) and that share needs to come from unstaked node runners, so at least 40% of them need to go to keep status quo.
Anyways, it is impossible to know and I cannot propose anything better right now, so no need to dwell much more around this.

poktblade · February 8, 2023, 8:51pm

OK, just wanted to check in if this is still the sentiment. Some days, I hear inflation should be lowered. On other days, I hear it should be higher. I haven’t really given too much thought about which direction we should go now that the network has gotten much more efficient.

ArtSabintsev · February 9, 2023, 1:45am

Leaving my 2 cents in here based on some of the comments in here.

We at PNI believe the network is drastically over provisioned based on data we’ve received from multiple larger node providers and community members. We were planning on introducing an inflation reduction proposal that would take us into the single digits, and this was to be based on what we believe it would to operate the network. However, this morning we decided not to do so. There were a few reasons for this, however, in speaking with @o_rourke today, we don’t believe it is PNI’s role to drive these decisions, especially after formally having PNF split from us. We believe the community and PNF can handle it, as they have been doing, and moving forward we can add our thoughts just like other members of the community.

As it stands, we do support reducing emission. I cannot yet say if I personally support it through this proposal because I am still digesting the content, but I support the spirit of what this is trying to achieve.

The fact that it gets us to single digits this year is in the same spirit of what we were thinking of doing.

I’ll leave it at that for now.

Cryptocorn · February 9, 2023, 2:18am

On the narrative side:

I’ll let Caeser chime in as this is his specialty, but I think the ‘single digits by the end of the year’ will be enough for most of the ‘but won’t someone please think of the Inflation!?’ brigade.
I do agree with The Doc that having some very long way off way to get down to 2% to satisfy the ‘tick box’ crowd is useful. Maybe something we can look at as SER gets closer to wrapping up, we start the next bull and v1 ready to drop.
At that point it could be something super shallow- a reduction from 8% → 2% inflation over 10years etc, giving lots of time for ABR to kick in. But we shall be in a better place to discuss EoY, and hopefully have a better token price to ease concerns of node runners.

msa6867 · February 9, 2023, 2:53am

Even if you decide not to move forward with introducing that proposal, I would request that you synthesize the data obtained and release a white paper (doesn’t need to be long) outlining where you think we can land and why, emission wise, with an all-bare-metal network. Even if PNI does not wish to drive the emission control discussions, the role it currently plays in terms of having the node-runner community support and trust in even being able to pull together and synthesize such data is enviable and not easily reproduced by myself or @cryptocorn or anyone else. That form of co-laboring would be most welcome.

TheDoc · February 9, 2023, 10:04am

I wish that’s the case, but sadly “average Joe” ( == average crypto investor) won’t dig deep to understand coin economics for any coins, including POKT, but listen to what it’s being said on social media. Stories will be circulating (like it’s already happening) that POKT is a hyperinflationary coin. If the Max Supply field is empty on CoinMarketCap or CoinGecko, that is still a red flag even if inflation rate is single digit (even 2% only). I’ve seen such cases already and projects were trying to explain deeper their coin economics (a.k.a. educating masses), forwarding people to their whitepapers or coin economics website page, but it’s doesn’t really work. It’s a painful process that can be avoided easily just by putting arbitrarily some random number at MaxSupply to have that data available on CoinMarketCap and then on top of it we can explain how POKT can become deflationary with ABR etc.

ArtSabintsev · February 9, 2023, 1:32pm

The information we received came by asking some node runners in private conversations about their setups, and understanding their profitability standpoints, and operating margins. I don’t want to break their trust and share that information publicly. The initial rough draft that we had written only took some of that information into account, but the numbers we came to were rough. We had more conversations then we spent time writing/updating our proposal internally.

So let me flip that back at you - I think it would be good for the community, the DAO, and/or the Foundation to put together a truly anonymous survey to understand what it costs to be a node runner at this point. I believe questions a long the lines of:

How many nodes (and tokens) do you have under management?
How many regions do you operate in?
How many chains do you support?
How do you choose which chains you operate and do you dynamically update those?
Do you do a revshare? If so, how much?
What are your operating/labor margins?
What is your break-even point?

And so on.

There’s probably a few dozen questions in total that can b strung together, and if synthesized properly, could be used to build out a bunch of models and projections. Assuming everyone is trustworthy in their responses, then data can be used to help drive some of these decisions in emission.

Caesar · February 9, 2023, 5:21pm

@msa6867 I wanted to present this for benchmarking- compare POKT’s 16.8% & where SER will take POKT VS the space.

I believe the takeaway is self-explanatory and one of the reasons I lobbied hard to go higher than where SER pre-proposal initially was.

About the table:

Annual Inflation % for all tokens in one place is hard
https://coincodex.com/ attempts it but there are severe data integrity issues
Even Messari can do it for only a few selected tokens
Randomness, gamification, non-programmatic burns, other differences and complexities/combinations such as fixed cap, pre mine, lock, releases, make it almost impossible
There are niche paid providers who supply similar data to traders. I maintain some data for occasional trading, so got some help there
Net X 2, plz consider this a best attempt and I apologise for the lack of aesthetics, have a day job too
Top 50 tokens by MC
Removed stables, meme coins, metaverse, new ones such as Aptos, irrelevant ones such as lido, and others we probably don’t care about- xrp, ltc, etc
Tokens such as ATOM might undergo changes in tokenomics. Once that happens ATOM will become my other favourite in addition to ETH as far as tokenomics goes.
Solana follows a simple emission reduction plan as proposed in SER.

Thanks @Cryptocorn , will just copy/paste what I have already written about narratives-

Here &

"POKT is different"- I have come across this line in the past.

It’s analogous with parents/mothers saying “our baby is different”.

POKT “CAN” be different, sure!! There are numerous possibilities in the future.

But for now a prudent approach is to work around the similarities, do some benchmarking with other chains and protocols and remind ourselves that POKT trades in this small market competing for attention amongst hundreds and thousands of distractions, driven by common narratives that drive sentiments.

There are no certainties but given historical patterns, the probability of token value appreciation due to any type of supply cut is high .

Takes me to-

@Cryptocorn, let’s discuss marketing around SER if it gets approved. May be ask for some budget from the DAO. I love your CoinDesk idea. @msa6867 & @RawthiL can also get involved if interested.

Talking about marketing, I am warming up to Messari. Will reach out to you @Cryptocorn separately as you are one of the dissenters

My thoughts about fixed supply are here and we have spent weeks debating it specially with @RawthiL . I would encourage the community members to read through those exchanges in the pre-proposal.

The pre-proposal has been debated for 2 months. We and @RawthiL have all agreed to present this proposal in its current form. I personally would spend my energy in discussing this proposal on this thread instead of diverging into something totally different.

Having said that- open to succession planning- SER getting superseded by a sophisticated and dynamic model that incorporates burn, demand factors, etc but on a separate proposal. We have discussed openness to such evolutions several times in the pre-proposal.

Tokenomics should be a living and ongoing discussion as we learn more in this nascent space IMO.

I appeal to the community to support this simple reduction plan starting Mar, 23.

JackALaing · February 17, 2023, 10:12pm

This proposal is now up for voting Snapshot

poktblade · February 21, 2023, 1:55am

I realize I am not an amazing economist nor will I pretend to be one, but I would say I do have a good gut feeling when it comes to incentives. I’ve outlined my pros and cons:

Pros:

Decreases inflation slightly to attract more investors who believe we are hyperinflationary (speculative)

Cons:

Force small node providers slowly to look into chain sharing or quit node running (which is still not mature at the moment as CC is not available and we need more than 1 provider to offer this service imo).
Note: I have also received word from multiple small node runners that this is detrimental to them, and this also limits the potential and motivation of becoming a large node provider in the future. I would love to see more diversity in the node-staked set.
We reach inflation rates closer to other more “mature” tokens such as AVAX and ATOM.
There are fishermen and portal actors in V1 who should be incentivized from the get-go. We aren’t including them in the inflation measures, and we will need to pay them. THis becomes increasingly difficult if we are decreasing rates now.

I am concerned about the small to medium short impacts this proposal has, and I don’t believe we are being future forward enough to leave room for V1 incentives. In my anecdotal experience, small runners’ skills, input, and experience are extremely valuable to this ecosystem, and I don’t believe we are in a mature place enough to be forcing them to consolidate due to the lack of software available. While I realize that we can also revert course on these changes, it may come with certain pushbacks that will be hard to reverse. There are a lot of unknowns that we haven’t figured out yet, and sometimes the best thing to do during a time like this is nothing.

msa6867 · February 21, 2023, 5:12am

Thank you @poktblade for some very well thought out feedback. For context, I will paste below the discussion points I made in our dm outlining from my perspective, “why SER”.

I note that the cons you list are very node-runner centric. We have tried to do node runners justice in this proposal as a counter to the more drastic cuts Art and Michael were suggesting, and shifting to a reduction rate that is much slower than that of the last year (4% per month vs 12%). On the other hand, we must collectively remember that the project does not exist in order to prop up node runners. If that becomes the goal sans commensurate demand, it becomes a ponzi scheme, which eventually collapses with token price driving to zero. In which case node runners are in much worse shape than any hit resulting from this proposal.

I am mindful of upcoming v1 shakeup of the emissions pie. I do not know if portal actors need to get a piece of the emissions pie, as they should be capturing value by the differential between fees collected from their clients and the expenses incurred. They do not need pay from the protocol in order to capture that value . But fishermen… yes they will squeeze into the pie, and yes servicer rewards will likely have to be reduced to make a carve-out for fishermen.

The end goal is emissions produced in balance to app burn (“burn and mint”). As app burn increase, emissions for node runners will increase, not decrease, even as the inflationary boost-strap portion of emissions diminishes and eventually gets phased out altogether. If some node runners decide to call it quits in the current environment, I think that will be temporary only. Once demand is there to warrant growing the network, emission growth via burn-and-mint will naturally lure back those that were sidelined.

(1) The negative publicity in the marketplace from hyperinflation period before WAGMI, combined with the inability of the POKT DAO to take any more decisive action Q1 2022 than it took via WAGMI has really, really long legs and is a drag on both retail and more sophisticated investor interest in Pocket and therefore a drag on the price. The “single-digit” narrative can be very-very useful in putting the final nail in the coffin of the persisting misconception of Pocket being hyperinflationary. I had tried to do something similar with first draft of SER via the max supply = 3.0B narrative (with the gentler 1.4% monthly reduction) but lost that battle “in committee” so to speak. I think the positive price pressure of achieving this narrative will more than likely make up the difference in USD value of node runner rewards. There will never be a way to measure this, of course, so it is a bet. (Back to thinking in bets)

(2)Vitaly is right concerning investors becoming increasingly more sophisticated and recognizing that the higher the ratio of circulating to total tokens, the healthier the project. I used to think the opposite but have come around to his pov. Projects that rely on keeping tokens locked are seen as sh$t projects with no utility. Even at 16% inflation, that level still causes a reliance on keeping tokens locked in order to maintain POKT price, as investors are not willing to hold unstaked bags at that rate of getting devalued. Driving down inflation to single digits puts token investors in a place where they can start considering holding tokens simply for capital gain purposes without the bother or worry of staking to nodes. Such investors are the lifeblood of the project, and I do not think the project survives without this investor category.

(3)Vitaly/Art/Michael have fairly compelling case for drastic cut to emission and forcing out half to two thirds of the node providers. The economics imply to do so. While I choose not to go down that path for the reasons we’ve discussed (providing for IP generation), I think making a move in the right economic direction is sound. Think of it as negotiating a middle ground between “do-nothing” and the Art/Michael path

(4) While I agree that 16% inflation is not as harmful as previous time periods, it does not mean that it is a good stopping point. See eg #2 above. I believe that continuing pressure forces increased commitment to innovation. For example, if smallest node runners have found out how to eek by at current emissions level, Shane’s community-chain idea may never become a reality. Continued pressure could help them unify behind Shane’s idea and support it becoming a reality (just to give a hypothetical example).