Some Suggestions for Tokenomics

[sztanyel]

I haven’t been active in the forums much but it seems that price action is about to kill this project unless some precautions are taken. I will suggest a few things which I don’t really know how much hard would they be to implement. But I believe if these suggestions are implemented, price action can be brought back to normal without introducing burn. Getting serviced without paying a direct fee is one of the niche things about Pokt and introducing a burn would destroy this aspect. Taking direct fees via burning without being the single largest network of a certain niche like Chainlink (in terms of oracles) would be detrimental to the growth of Pocket network.

My suggestions:

1-Vested Node Rewards
Node rewards should be vested for 30 days, early claims should be penalized proportional to the vesting schedule.

eg: If someone claims in 10th day, they should only get 33% of the rewards and rest should be burned.

2-Stake-weighted job chances
-Current 15k POKT required for a node is too little but it might be too late and hard to change it at this moment. Instead of adjusting the minimum stake required, allowing increased stake is a better option. Stake-proportional chance of getting job according to the stake up to a certain stake limit would be much better. 150k would be a good upper limit. This means essentially that with running costs of a single node, you can mathematically expect to earn 15 legacy nodes worth of earnings. This would allow easy entry with 15k to help decentralization while decreasing overall running costs for larger stacks by a very significant margin.

eg: Kevin currently needs to buy enough node hardware to run 10 nodes, since he has 150k Pokt. He has to pay running costs for 10 node hardware each month so he is incentivized to sell some of his rewards to pay for expenses. After Stake-weighted job chances, Kevin can only pay running costs of a single node hardware while expecting his earnings to be 10 nodes worth of rewards since his single node is 10 times more likely to get jobs due to the increased stake.
Kevin can also now spin up a new node with his earnings and compound his earnings to this new node until it hits 150k stake limit. His running costs are decreased %90 on his first node so he is more incentivized now to restake instead of selling his rewards.

In any way, predictable rewards and easily calculable risk-reward decisions are still a long way ahead since Pocket network is still in it’s infancy. But I believe these suggested mechanisms would be suitable even for maturity phases. Also, I believe stake-weighted job chances would be fair way to increase stake limit without hurting people who already has 15k nodes who can’t afford more.

[iaa12 (Jim Smith)]

I agree with item 2, but worth noting node runners are already stacking nodes on the same piece of hardware via docker, so the ultimate effect on actual infrastructure fees may not be quite as impactful as predicted.

However you slice it, the network’s fundamental problem is the lack of income, the lack of actual money coming in from the app side. The only demand for POKT is from node runners, who keep stacking nodes, minting more POKT, and paying to run the network on behalf of apps by diluting their own stakes. Yes, the APR is attractive, but earning 100% while going down 80% in price puts you way in the red. We’ve all paid dearly with real cash to bootstrap the Pocket Network.

There’s a number of proposals floating around, all of them thoughtful. It’s great to see the community come together to debate and provide ideas. At the most fundamental level , our job is to offer our customers with a stable decentralized platform that provides high quality, affordable and reliable service. If you’re an application developer, looking to invest possibly millions of dollars in development time and build the next big web3 application with tens of millions of relays per day, do you look at Pocket and say, let me take a chance, save a few hundred dollars a month and build the next big thing on a new platform with wild fluctuations in token price, inflated node count and changing tokenomics? Maybe.

We have to get our house in order. We have way too many nodes, we are minting way too many tokens. We can fiddle with staking amounts and all that, but it’s all shifting things around. We must first and foremost strive for quality and efficiency as our number one priority. 46,000 nodes is not efficient. Minting million of tokens per day is not efficient. Stacking mostly idle nodes is not efficient, nor is it conducive to providing high quality service. We are enabling and encouraging waste and bloat within the network via very, very , very inflated rewards.

Back to the basics. The network has clear revenue potential, and it should have a clear growth strategy and forecast. Our number one goal now should be to get to a place of fiscal responsibility. We have clear earning potential based on current relays, projected growth, token price and competitor pricing - node runner rewards should be brought in line with that earning potential, with some padding for optimistic growth. Those who believe in the project long term will continue to support it and run nodes, including out of pocket if need be. Those who don’t, well there’s too many nodes anyway. And let the chips fall where they may, the free market will balance itself.