OBJECTIVE
Create a single repository for ideas related to coming up with a scientific approach to emission (inflation and burn).
At the first, this will contain copy and paste of relevent posts made in more transitory social media threads (e.g., the “Den”) but the hope is that all participants can transition and contribute directly to this thread so that the conversation can develop and not get lost.
The copy and paste below may contain off-topic messages - this will be cleaned up shortly
COPY AND PASTE FROM THE DEN
msa6867, [12/13/2022 4:51 PM]
Been wondering what happens after the last FREN emission reduction in about 2 weeks? To kickstart community discussions as to what comes next, I have uploaded a draft approach in the new “pre-proposal” section of the Forum. In a nut shell it proposes a modest 1.4% monthly emission reduction in emissions that results in an asymptote to a max possible POKT supply of 3.0B tokens. Captured in the dissention section is my attempt to accurately convey the objections expressed by @srndptm (Vitality) to this or any other supply-centric inflation methodology and outlines instead his suggested demand-centric methodology. Please check it out and share your thoughts. Sustainable Emission Reduction (SER) Pre-Proposal
Mingtopus | POKT, [12/14/2022 8:12 AM]
Wasn’t there already another proposal effort that’s been ongoing to create an equivalent ARB effect that will help to balance the supply/demand ratios until ARB is fully in place?
Mingtopus | POKT, [12/14/2022 8:12 AM]
Might want to check with that group as well to see how the two can be aligned and not conflict
Vitaly | Linen Wallet, [12/14/2022 8:41 AM]
I think the Dao needs to set business metrics prior to playing with any knobs. ABR, inflation are the knobs to achieve a particular metric and business objective. ABR and inflation reduction/increase are not mutually exclusive at all, but rather complementary. They solve for very different things. Examples of business metrics related to Pocket network can be: decentralization (define it and measure), network utilization (nodes utilization) - define and measure, cost of running the network - define and measure, cost to produce a relay - define and measure, cost to produce a paid relay - define and measure, etc. Once the right metrics are set and understood, it will be justifiable to make any adjustments. Until that time, there is no real business case to make any adjustments at all either via inflation or ABR.
Caesar, [12/14/2022 9:09 AM]
I reckon tokenomics for protocols wouldn’t and needn’t stay constant for eternity. They will have to evolve and adapt to changing realities. Hopefully those changes won’t be too frequent so that the market sees a stable and predictable monetary policy (talking in currency terms but is interchangeable). Predictable monetary policy doesn’t always have to be a fixed supply cap without a business case. Also doesn’t mean it shouldn’t be explored.
Such as we don’t know if Bitcoin’s tokenomics will never change. In fact there are more and more voices in favour of that (not talking about the big blockers). But even if that happens, the need and the possibility are really farfetched.
Will try to comment more on the forum.
Vitaly | Linen Wallet, [12/14/2022 9:22 AM]
Yes. It is about creating a structural model and make changes that enable to achieve certain output/metrics as dictated by that model. Tuning the model via knobs can relatively quickly prove/disprove the validity of the said model. If the model is not valid, creare a structural model with a new set of metrics. Iterate, util the objective is achieved. Most important, identify drivers that lead to the desired outcome.
msa6867, [12/14/2022 10:00 AM]
This idea was expressed in the Den about a month or two ago but not formalized yet in a proposal. The idea in a nut shell is to limit emission to what burn would be if all current demand were paid for (using PUP-23 pricing) and burned. (A more severe variation would be to exclude free relays from this calculation.) This is one approach to instantiate a demand-regulated emission strategy, and would fall under the extended “Dissention - Demand-Side Alternative” section of the proposal that attempts to capture the objections to this or any supply-centric approach to emission that @srndptme has previously objected to, which objection he repeats above. I am committed to working with @srndptme (and whoever else wants to join the fun) to try to create a viable demand-centric emission strategy, but this is no easy task, and potentially cannot be done for for Pocket Network prior to v1 (and possibly not thereafter) for the reasons I outline in the Dissension section.
Vitaly | Linen Wallet, [12/14/2022 10:06 AM]
Just want to point out that the demand side approach does not require any technical implementation at all. The knobs are the same what we are using today.
Most importantly, we should find answer to the question: “Why are we doing something?” and measure it.
Ramiro, [12/14/2022 10:11 AM]
I think that the current pre-proposal for inflation control is interesting in terms of marketing. It creates a MaxSupply that is far enough to cause any troubles but can satisfy the need of fixed supply that some claim for (not myself tho). It also will remain agnostic to the application burning rate. If the MaxSupply and the asymptotic growth is chosen carefully it can give some previsibility to the emissions until application burning hits.
It is not a bad idea and I cannot see many downsides, direct impact to the tokenmics wont be large (IMHO) but the marketing of having a max supply can be good.
msa6867, [12/14/2022 10:14 AM]
Re "Tuning the model via knobs can relatively quickly prove/disprove the validity of the said model. " The less liquid the supply, the less this works in practice… say you turn the knob one way, and in response node runners sign a 6-month cloud service contract and/or make $20k capital expenditure for high-end HW, then you remeasure and say “oops, that knob setting resulted in too much supply so we’ll dial the knob back”… now we’ve pushed those providers into unprofitable operations and the natural inclination - if supply was liquid - would be to shed supply… but they’re stuck in a service contract for 6 months and selling off used HW only returns pennies on the dollar. All this must be taken into account when embarking down this path
Vitaly | Linen Wallet, [12/14/2022 10:19 AM]
I expect this changes would not be drastic at all. I am less concerned which approach is chosen. I am mostly advocating for setting up business metrics first and then come up with the right approach to hit those business metrics. The car is without a driver at the moment.
msa6867, [12/14/2022 10:20 AM]
The other obstacle I raised to demand-centric approach is only having a single knob to control a very granular set of metrics. We may be way over-provisioned in Europe but way under-provisioned in Asia. Or way over-provisioned for Polygon but under-provisioned for Solana. I think that it is high priority to add capability to make RTTM a per-chain, per-region variable. If not for v0, then for sure in v1. Without that knob granularity I’m not sure we can make Vitality’s vision a reality
Vitaly | Linen Wallet, [12/14/2022 10:24 AM]
That is a separate issue in itself. Lava is solving this issue by setting up rewards per chain and per region. They will release the network with granular adjustments that would enable them mach the demand side more precisely. Hence, their network will be more efficient.
msa6867, [12/14/2022 10:26 AM]
Seems this is a must-have for our future… does anyone know if this is on the v1 roadmap? Or if not, how to push for its inclusion?
Jack Laing | Pocket Network, [12/14/2022 10:27 AM]
It is something that is already planned for v1
Jack Laing | Pocket Network, [12/14/2022 10:28 AM]
The only reason it doesn’t already exist in v0 is the reason a few other nice-to-haves don’t exist - it would be expensive for the chain and hurt scalability.
Vitaly | Linen Wallet, [12/14/2022 10:29 AM]
IMO: total supply cap is a marketing gimmick and would not fix the fundamental business issues that the network currently has. We dont have an understanding today as to what the total supply should be. Solving business issues and then capping the supply (if needed) is more prudent approach. Ethereum does not have a capped supply and is doing well because of its product market fit and tokenomics.
Ramiro, [12/14/2022 10:36 AM]
I agree that cap is just marketing, but doing nothing is bad marketing. We are already being punished for having “bad tokenomics”. FREN is over and I think that we must be proactive. I’m open to other proposals, but until then I think we can gain time with some fixed cap in the long term.
Caesar, [12/14/2022 10:37 AM]
Agreed
Caesar, [12/14/2022 10:40 AM]
I have to read it thoroughly before I endorse it more. But in general, driving the narrative that doesn’t conflict with overarching values and interests is paramount.
Vitaly | Linen Wallet, [12/14/2022 10:40 AM]
I think we should understand the cause of the punishment. Not having a cap is not the cause of the punishment. The cause of the punishment is that we do not know what we are solving for. Moreover, setting the max supply now can impair developing proper tokenomics later once we get smarter.
Caesar, [12/14/2022 10:44 AM]
Also guys we don’t have to lump everything together.
Just because X is yet to be figured out doesn’t mean Y can’t happen, as long as Y doesn’t hurt (and it might help), and Y doesn’t restrict X from happening over time.
We have to set the cause and effect relationships correctly here.
Vitaly | Linen Wallet, [12/14/2022 10:45 AM]
True that! But we do not know if X could impair our ability to do Y in the future.
Cryptocorn, [12/14/2022 10:46 AM]
A cap is not a panacea, but is helpful for the narrative, so I’m broadly in support.
- good to see we can set RTTM per region/chain in v1. More dynamic rewards will certainly be more efficient.
- @srndptme what would you propose as a solution to the issue raised? We be good to debate a pinpointed question + solution you recommend, msa6867 has very gracefully invited you to work with him, I for one would very much endorse that and like to see what you guys could come up with.
Ramiro, [12/14/2022 10:48 AM]
The problem is when are we going to get smarter… The PNI appointed someone to the tokenomics problem just a few weeks ago (not sure if months). It will take some time to get smart answers. Im not questioning the PNIs capacity, it just takes time to produce quality decisions.
The problem is that the FREN ends in January, we only have a month (January, December is gone already) to come up with a better solution.
If you ( @srndptme ) have some proposal please share it in the forum so we can analyze it further. I know from msa6867 post that you have some ideas, but I only know his view, not yours directly.
Vitaly | Linen Wallet, [12/14/2022 10:50 AM]
I am advocating for setting up business metrics and find a solution to achieve those business metrics. Whatever solution may be. Why decrease inflation and not increase it? Why not leave the inflation where it is today? We can’t credibly say that. Setting up metrics will provide answers.
Cryptocorn, [12/14/2022 10:51 AM]
-inflation, I’ve discussed with MSA in our chats and happy to suggest my view publicly: I’m broadly in favour of his 1.4%/mo reduction plan, but I think we should only enact after 3-6months after FREN finishes, give node runners some time to prepare and see how a daily emissions of 690k works before moving to lower. But in favour of a slow further reduction + cap.
msa6867, [12/14/2022 10:52 AM]
Re “Moreover, setting the max supply now can impair developing proper tokenomics later once we get smarter.” I have given this a fair amount of thought prior to posting the proposal and will continue to give it thought. I answered this objection in only the most cursory way in the proposal, but will flesh it out more in the coming days. Almost all the pressure at the moment from a “sound business” perspective is that we are over-provisioned, not under-provisioned… leading to a call for more drastic cuts to emission, not increases to emission… leading to less than 3B POKT not ever exceeding 3B POKT, hence the narrative is not broken if we decide to put the 3B cap narrative into the marketplace… by the time we have so much demand as to need to up the supply (infrastructure) and up the emissions to incentivize adding supply (infrastructure), it will be paid relays with ability to turn on app burn and thus still keep total POKT to < 3B… and the narrative stays intact, thus I do not see any incompatibility between defining a tokenomics now and improving on it later
Cryptocorn, [12/14/2022 10:53 AM]
Ok, so which metrics wouldn’t you want the DAO to follow and publish? Can you list what you think is necessary? If you can add what you think the solution to each is, we can start to flesh out an idea/proposal here 
Vitaly | Linen Wallet, [12/14/2022 10:53 AM]
How would you know if the 690K emission works? How would you measure it?
Caesar, [12/14/2022 10:54 AM]
I actually don’t disagree with this, in fact fully support that we should have the metrics. But why supply and tokenomics alone then? Lots of other aspects of the business (for the lack of a better term) become questionable then. So how to operate and proceed in anything in this case?
Vitaly | Linen Wallet, [12/14/2022 10:55 AM]
So, we can’t do all things at once, we would need to prioritise them, so we can measure them properly.
Cryptocorn, [12/14/2022 10:55 AM]
Maybe some kind of business metrics? 
.
I support what you are saying, better to have data than ‘gut feels’ of a collection of node runners
Vitaly | Linen Wallet, [12/14/2022 10:56 AM]
This Telegram: Contact @UnofficialPokt
Vitaly | Linen Wallet, [12/14/2022 11:00 AM]
So, long story short: we dont know the problem we currently have. Let’s formulate the problem, define success, turn knobs and see how closer we get to the objective. We dont even have a problem statement today.
Ramiro, [12/14/2022 11:01 AM]
I fear that this will be lost in this chat…
These are all good metrics, difficult to get tho… This deserves some forum post, in research at least, to keep track of what do we want to have visibility on
Vitaly | Linen Wallet, [12/14/2022 11:02 AM]
IMO, those metrics are on the surface today
Vitaly | Linen Wallet, [12/14/2022 11:02 AM]
at least for the current state, from there we just need to outline the desired state
Ramiro, [12/14/2022 11:03 AM]
I had a chat with the tokenomics guy from the PNI and I think that he is inline with this (so am I), but this takes time and I only have so many community time to give…
Ramiro, [12/14/2022 11:03 AM]
cost of running nodes is really dificult to get…
Ramiro, [12/14/2022 11:04 AM]
descentralization measurment is a hard graph analisi topic that I want to tacke since May, cannot find the time yet
Ramiro, [12/14/2022 11:04 AM]
Cost of relays vary wildly by chain (costo of server, data transfer, etc)
Caesar, [12/14/2022 11:05 AM]
Who is he btw, can be shared publicly?
Ramiro, [12/14/2022 11:06 AM]
I dont know if he is here… maybe someone from PNI can say? I dont want to do anything I am not suposed to do…
Caesar, [12/14/2022 11:06 AM]
Understood!
Vitaly | Linen Wallet, [12/14/2022 11:07 AM]
there are 2 costs: cost of running the network and cost of running nodes. From the network perspective we are only concerned directly with the cost of running the network. This cost is already known today (inflation). If we dont get the cost of running under control and no one is paying premium for decentralization, what would be the product market fit for the Pocket Network? IMO: this is a cost game foremost and decentralization is nice to have from the end customer perspective. Also, need to define who end customers are as I see there are at least 2 groups: apps and portals (enterprise cliens) and they are very different.
msa6867, [12/14/2022 11:09 AM]
@profishional , would love to have your voice be heard in this discussion thread
Vitaly | Linen Wallet, [12/14/2022 11:09 AM]
Awesome. What I am proposing (track business metrics) is different from tokenomics and are not mutually exclusive. Need to get business under control and then put tokenomics on top/
Ramiro, [12/14/2022 11:11 AM]
It is all part of the same ecosystem. You cannot analyze tokenomics without bussiness or relays metrics. The Pocket Network is not a simple thing…
Vitaly | Linen Wallet, [12/14/2022 11:13 AM]
I understand that. Good tokenomics can’t fix bad business metrics 
Vitaly | Linen Wallet, [12/14/2022 11:33 AM]
Awesome. It may make sense to split this whole thing into 2 separate parts/topics: 1) inflation - because it affects cost structure of the network and in my view the most fundamental thing and most impactful thing today that will move the needle and 2) burn - because it affects the revenue side and is related to tokenomics and not to operating the network (note: not the same as node running cost)
A V, [12/14/2022 12:32 PM]
one of the measures to reduce supply can be an increase of transaction fees (and burn) from 0,01 pokt, for instance, to 0,25 pokt
Vitaly | Linen Wallet, [12/14/2022 12:43 PM]
Transactions on Pocket Network do not drive economic value to the network as all value add activities (serving RPCs) are off-chain.
profish, [12/14/2022 4:32 PM]
Hi all ive been in the chat for a few weeks now but fail to keep up as there is alot coming through, and tbh the lack of structure in a tg channels hahah
profish, [12/14/2022 4:32 PM]
just saw the discussion on the forums, but always avail on tg and discord tbh
profish, [12/14/2022 4:38 PM]
so I agree with most of the things said here; e.g.
- Business metrics do need to be defined abit more, although we can make a decent guess as all business have the same objectives i.e. demand, cashflow, profit etc
- Burn mechanisms could be put into place without breaking everything if you can set burn to 0 which would just be the current state
- the timing is frustrating given the stuff im working on for these answers might not be ready before FREN
profish, [12/14/2022 4:40 PM]
having said that, the way im thinking about it is; the approach used for eth tokenomics (which is not simple either) was sufficient so it should work for pokt too
profish, [12/14/2022 4:40 PM]
yes this would be a repo of some kind to build the base models and play around with them to answer these questions
profish, [12/14/2022 4:47 PM]
not sure if that covers all the stuff that was talked about, but tbh a group call wouldn’t be bad. I have gone aroud and talk to some people but not everyone
