PUP-31: Reduce UnstakingTime Due to Current Market Instability

Proposals Parameters
21

A few question I ask in these situations:

-What is good business long term?

-What is doing right by the customer (user)?

-How would our opinion change if we are on the other side of the transaction?

-What is the risk/reward in this trade (decision)?

-What are the 10x/100x UX improvements this space should offer for gaining critical mass?

-What principles do we want to live by and this space is built around?

-Is “incentives drive outcome” playing out in the reactions?

And considering the above, I really cannot find a sound argument against reducing un-bonding to 7 (or X) days.

The validator/security argument raised by @jdaugherty could be a valid one, so maybe there should be a distinction there. But then, other projects are approaching this in many different ways.

A measure by the naysayers here could be to put together the list of un-staking periods and conditions in all (not cherry picked but all) the web3 infra projects, and then forming an argument around it.

Even then the answers to my questions above may not change. But at least the line of argument becomes a bit more objective.

We will be walking on a dangerous path if we start following the ponzinomics of those projects that suppress sell pressure artificially. It’s a very common practice in this space and is coloured and camouflaged in several “seemingly justifiable” ways.

The resultant price becomes not a floating/free flowing supply/demand dynamic, causes all sorts of distortions in market economics but ultimately do suffer the “come to Jesus” moment.

Market should be able to buy, sell, stake, lock POKT by choice and freewill and without the frictions created to artificially favour the demand side. There can be legit frictions as well.

There are good examples in this space if we want to take inspiration.

To digress a bit- POKT is not as new as popularly thrown in arguments as a justification to maintain status quo. POKT mainnet happened alongside Solana’s in 2020. I can come up with more such comparisons. So let us accept a few hard realities here.

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22

Thanks, everyone for chiming in! I want to be clear that I am not advocating for any specific solution. I support lowering the parameter value so wanted to offer considerations to help contributors coalesce around what timeframe and approach is best for all participants. Trying to do my duty as your friendly neighborhood protocol pm :saluting_face:

The validator/security argument raised by @jdaugherty could be a valid one, so maybe there should be a distinction there. But then, other projects are approaching this in many different ways.

More comfortable with this with the edit to 7 days, pending any numbers or missing info that convincingly argue 1 week is not enough time for the validator pool to react to any meaningful amount of unstaking.

ETA: the ideal value should balance security with user convenience.

Tendermint or not, it seemed there was sentiment expressed in the community toward interop with IBC. If that would require us to adopt 21-day unbonding, that would be a good thing to know.

Nope! That’s the beauty of IBC.

This is a worthy topic to explore post v1. Differentiating unbonding times is a consensus-breaking protocol change. I doubt it rises to the level of importance to garner serious willingness to execute during remainder of v0.

Aligned.

ETA: adjusting the parameter is also a good halfway step for V1 when applications are subject to the same conditions.

why should a retail staker be punished if a provider goes down or has bad performance, or raises their rates

We will be walking on a dangerous path if we start following the ponzinomics of those projects that suppress sell pressure artificially.

Go off :mega:

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23

It’s not a straw man, you’re simply missing the point. I can unstake 2.5MM in 24 hours and completely eat up all gains in price, then start the process of reaccumulation back at the floor. To quote the degens, your size is not size. The very mechanism that keeps slippage low in the small cap sales you’re describing disappears in larger sales, yes, but if I’m 4 cents up on 5 cent Pokt, I can pull 20-30% quickly in a large move, eating up liquidity, and the inertia of the down move in price likely gets me a head start on rebuying at a slightly lower point than my previous entry.

Whale movements in small markets can have big impacts, and the ability to trade at size is an advantage.

That’s not even the most important consideration here by a mile, which is why it was an appendix on my original comment, but it’s by no means a straw man.

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24

My opinion is that this proposals should not be considered as such.

Perhaps it should go to pre-proposals first so that the “rationale” can be developed in more than one sentence, and so the positive impact of its application can be better justified.
Or perhaps a discussion in ecosystem.

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25

Rest of the proposal should be updated to reflect the same, and all reference to current market conditions removed. I’ve taken the liberty to suggest an edit. Feel free to use this or do something similar

Summary

Reduce the Unstaking Period for nodes from 21 days to 7 days to keep the period only at that needed to secure the network.

Motivation

A 21-day unstaking period may have had merit at the beginning of the project when node running was nascent, but it creates unneeded friction today with a network that is 20,000 nodes strong including almost 10,000 nodes staked to 60k+ POKT waiting in the wings in case any of the current validators unstake. While some unstaking period may be helpful for the integrity of the network, all unecessary friction should be removed. A 7-day unstaking period strikes a right balance between reducing fruction and preserving network stability.

Rationale

1 day unstaking period was deemed by some as being too short a period for node providers to adjust to changing network dynamics. Further. a potential attack vector involving short-term POKT SWAPS among providers to wield protocol veto power caused others to also feel 1 day was too short. 7 days seems to be a reasonable middle ground for reducing friction while avoiding these potential pitfalls.

In v1, we may consider separating validator unstaking time from servicer unstaking time, as even shorter unstaking period may be possible for servicers, even if 7 dyas is good value for validators. However, such a change would be a consensus-breaking protocol improvement, while this parameter update could be put into effect immediately.

Dissenting Opinions

  • 7 days is too short; it compromises the integrity of the network by allowing nodes to unstake so soon

The UnstakingTime was set in a period of no open liquidity, and on a network with no established traction. Given the availability of liquidity through exchanges and such a robust network of node providers and relay chains, the network is at a place where such aggressive lockups are no longer needed to protect the basic functionality of the network. 7 days would still result in network stability while offering everyone reduced friction in unstaking.

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26

The 21 day cool down was explicitly to maintain network stability in a time when large unstakes could have literally taken the network offline by reducing QoS to absolutely unusable levels. The network is well beyond that core risk at this point, so we can reevaluate what a more flexible cool down looks like.

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27

Want to clarify- not trying to lecture on moral grounds here btw.

I am totally for “dis iz biznez” meme.

Totally understand the need for protection at infancy

However-

With age we could try to remove certain protections, towards more market friendliness.

And in this case- “reducing/controlling sell pressure” shouldn’t be the core argument defending status quo imo. That could certainly be a residual effect.

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28

100% agreed. The framing of this around the market concerns (which is where it started) isn’t a good one, but moving past what was a necessary stability strategy when the network was much smaller bears discussion.

@TracieCMyers was there for those original discussions, and I’d love to hear her take on the current proposed reductions.

I’d also love to see some analysis on validator impacts at various levels of unstake, as this has been my core motivation in concerns around unstaking, and I was the one who pointed out the flash loan risk on the Transfer stake proposal.

Three weeks unstake versus one week unstake probably has very little impact on sell pressure, whereas one day is much more likely to.

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30

I wish this narrative comes into voting. 1 day is definitely unacceptable to many, while 7 days should be acceptable until there is TransferStake put in place. Then unstaking can increase even to 28 days like in Polkadot. It would allow investors to jump from one provider to another service provider without actually unstaking, supporting the competition among node service providers to cut down their prices.

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31

After giving this a bit more consideration, I’m not in favor of a short unstaking window. Here is my thinking.

There are three kinds of buyers/sellers of POKT. They are speculative investors, node runners, and app providers. Speculative investors speculate that the price of their asset will be higher when they decide to sell. In the Pocket economy, most speculators also get returns from staking. Those rewards become “supply” that can be sold but those speculators aren’t really doing any work. They are still just investing/speculating but doing a rev split with whoever is actually running the node. It’s the node runners incurring the raw costs of running the servers who represent the true supply side of the market from my perspective. They are doing the work and taking the biggest risks.

Today, speculators who decide to stake are also taking a risk because of the unstaking period. If that was removed, why would rewards be paid? There is no risk being taken and no service being provided. Plus, a smaller unstaking window could have a negative impact on network security and/or performance.

All that said, the root issue is that the demand side of the market is missing. The primary demand is from node runners who we can’t really differentiate from speculators. But to clarify my thinking and position, if anyone wants the ability to sell without the risk of the unstaking period, they just should not stake.

Wanting the rewards without the risk is the part I’m hung up on. If you want to speculate then hold. If you want to earn rewards be willing to do the work or take some risk.

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32

I really like this breakdown, because it segues into where my motivations for such a change actually lie.

Before coming to Pocket, I was building web3 applications. The token was supposed to be of value to me because I would have been able to stake it to receive some form of service. I had previously received tokens from PNI vested from my employment at the organization, and have recently been interested in working with PNF to work on bounties to improve the ecosystem. I would like to hold these tokens until the day becomes available in which I can redeem them for demand side app service.

Here’s the problem with that; if I choose to hold those tokens liquid, they just get eaten away by the hyper-inflation that is the POKT tokenomics. My only option for these tokens not to decay out from under me, is to stake up nodes for myself.

I’m not trying to speculate, just rather hold onto the assets to participate in the demand side of this market, if and when it should emerge. I’m currently evaluating if it’s even worth my interest as a demand side consumer to hold these tokens given these dynamics. The 21 day lockup with a potential for losing retail friendly access points is a major hurdle, especially should I chose to convert those tokens into something where I could purchase infrastructure services with today.

If the real answer is to keep the tokens liquid, economics say that I should just liquidate out because of the nasty inflation instead of holding to wait to utilize the tokens as designed from the other side of the market. If it’s really the case that this 21 day period must hold firm for network protection, just understand the impacts that such a choice actually has to the demand side that the network is counting on activating.

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33

What you’re saying is you want to short the token. You’re betting that the value will continue to go down - because of the current tokenomis. I get it. The simple answer is to unstake and sell.

If your speculation is correct, you can buy back again at a lower price. You’ll avoid the inflation dilemma that you’re describing altogether. But if what you’re looking for is the option to be short and long at the same time. That’s a tricky one.

If you’re long on the price. Stake your tokens to increase the size of your bag. Not to keep up with inflation. Simple.

So, you just need to decide if your short or long on the price. Then make your bet. This is not an unstaking time issue.

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34

I’m not interested in having to devise buy/sell strategies to finally be able to utilize the token as it was designed as an app developer.

I’ll simply see myself to another project I suppose.

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I’m against this proposal.

It just helps mercenary capital and scalpers.

If people want to trade POKT, they are welcome to forgo interest and trade. If they want to accrue interest on their capital they need to move to a less liquid product that brings more stability to the network.

Given inflation will drop to single digits by September and keep dropping further after that, I reject the ‘hyper-inflation’ argument- at 8% annual inflation, those who want to hold liquid POKT are at a ‘reasonable’ opportunity cost compared to staking.

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36

you don’t know that to be fact. i disagree.

The 21 day unstaking time is dumb. Straight up.

We can go back and forth all day on the reasons why or why not to decrease and how much. But I see it as like inflation - little by little.

The correct answer is probably 10-14 days. I’d be more in favor of 10 days, some would pick 14, which makes the real correct answer 12.

12 days.

One big decrease to start, and then from 12 to 10 and 10 to 7 and then maybe 7 to 4.

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37

@blockjoe from conversations we’ve had, I’d say you’re one of the smartest and most talented people in the Pocket ecosystem. Genuinely. I hold a fair amount of POKT. So selfishly, I’d hate to see you move on to another project. But I also think staying with this project is likely the best thing for you also.

There are issues right now for sure. They could also get worse before they get better. But every other project will have issues at points too. If you time it right or get really lucky, maybe you can move between projects and avoid these realities. But that’s not usually how it goes.

Let’s consider a few possibilities.

First scenario.

Pocket implodes and goes to zero. Obviously the worst case scenario. But this could happen. So we shouldn’t be naive. It’s happened to other projects and much more substantial organizations. Just ask one of the 25,000 people who worked for Lehman Brothers before September 2008. If we all jump ship, this outcome is guaranteed. If that happens, all we have is the story of how we panicked and the ship went down. Of course we’ll tell the story differently to protect our egos. But inside we’ll know what really happened. To be clear, even with 100% commitment, the ship could still go down. Nothing is guaranteed. But unless you’re really lucky, nothing that could pay off like Pocket comes without a lot of risk and hard decisions.

Second scenario.

Pocket reaches a new ATH at some point in the next few years. When that happens we’re reading posts like this and laughing. The stories we tell are different too. Still likely embellished but much closer to reality. This scenario is as likely as the first. Because nobody knows for sure. BTC hit almost 20K in 2017 and then pulled back to 3.2K less than a year later. Then it went to 69K less than 3 years after that. Lots of people cut their losses near the bottom. They speculated that they could lose everything. Or that their attention and money would be better off elsewhere. Nothing wrong with that. I’ve made those decisions. That could have been the best decision. But it wasn’t. Again, we don’t know for sure.

Scenario three.

Pocket never sees a new ATH but provides value to enough of the market to be sustainable. I suspect most will have moved on because that’s not as exciting. But that doesn’t mean that the people who stay involved won’t see incredible returns. Today the best node runners are able to generate a 1 POKT for less than .02 USD. The current market value is .05 USD. That’s a very healthy profit margin. Those node runners and the developer community could also be providing portal services. We have not even begun to see what’s possible there.

Final thought. As I write this the market cap for POKT is $51,622,603 and the token price is $0.05094 - a 9.35% drop in the past 24 hours. Abysmal. Or an incredible opportunity. All depending on your perspective, tolerance for risk, and tenacity. I hope no matter what you ultimately decide that you’re incredibly successful and fulfilled. You’re smart, talented, and well intentioned. I’ll always be rooting for you and everyone else involved with the project who cares like you do.

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Hey @ethan, I’m not smart enough to figure out what you mean by “dumb”. Could you help me out and explain why you think 21 days is dumb? I mean, other than just because you think it’s dumb and that the “correct answer” is “probablly 10-14 days”? Is there any logic here? Or is your comment something I should just ignore?

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Its not dumb, its just arbitrary. We could fix that if we want to put some brains in it (I don’t think that we need to tho).
The same arguments can be said for your proposed 10, 12 or 14 days, they are also straight up dumb, or arbitrary, call them the way you want…

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Got it. So making no change is just as smart as making a change. I agree.

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41

(I replied before you edited your answer lol)

Yes (IMO).
Changing for another arbitrary number is the same, we could have this conversation again in 6 months and said that the updated unstaking time is also dumb…

I don’t think that the current 21 days is very wrong, it has worked so far, so I would not change it. Anyway, if the community think it is a bad, then I would need some convincing, proofs, that the new value is not also arbitrary and beneficial for the project.

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