PUP-30: Sustainable Emission Reduction (SER)

[msa6867]

@TheDoc

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.

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?

@RawthiL

Regarding the node-runner operational costs, this reduction will be aggressive in the node runners finances that are at their limits in most cases.

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

@RawthiL

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…

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:

@crabman

I disagree with this statement. Many investors just like to hold their tokens and/or happy with a low APR delegating their tokens to someone else. What really drives investors away is a constant dilution of the market share of their tokens and uncertainty of max supply. Ideally, we want investors to do NOTHING with their tokens but just buy and hold. Pocket is very expensive to run and we want to stop encouraging people to run their own 3-4 nodes because that makes the network over provisioned and expensive. In my eyes, two things are very important in this regard, one we need to create easy ways of staking (TPOKT for example) but something decentralized, and second this proposal which encourages people to just buy and hold.