Thank you for your patience, everyone. As I dug deeper and allowed myself the space and time to speak with as many folks within and outside the POKT ecosystem, I wanted to ensure I gave this as much thought as possible.
I have the urgency to make changes before Shannon, and there is some low-hanging fruit we can capture. With Shannon on track, we will have an opportunity to reset things for ourselves when it launches. But first, let’s start with some macro perspectives and facts about POKT alongside similar tokens that should inform the decisions we should be making.
Market Cap, Price, and Volume
While BTC and ETH are not included in this chart (as I wanted to focus on comparables for POKT), an important point to note is that their charts have followed the ones described below. BTC particularly reached an ATH as the tokens described below (AR, POKT, GRT, AKT, and HNT) began crashing. It’s safe to say there is some price correlation here. There is more detailed data that informs these charts in the appendix section.
Inflation
- POKT has dynamic inflation, reaching well past 100% in 2021 and 2022 and since then a steady decrease to ~5% (lower lately due to not touching RTTM) through various governance proposals.
- AR has a relatively low inflation rate compared to many other cryptocurrencies. The total supply of Arweave tokens is capped at 66 million AR, with the majority (around 55 million AR) pre-mined during its launch. The remaining tokens are released gradually through mining rewards over an extended period. This gradual release means that Arweave’s inflation is minimal, generally falling in the range of 0-2% annually.
- HNT initially had a high inflation rate of around 50% annually during its early years, driven by large rewards distributed to hotspot operators to incentivize network growth. In August 2021, the first halving reduced the rate of new token issuance by 50%, bringing the inflation rate down to around 25-30%. By 2022-2023, the inflation rate further stabilized at approximately 10-15%. Helium follows a two-year halving cycle, meaning future halvings will continue to reduce inflation, making HNT more scarce over time. This deflationary model mirrors Bitcoin’s, with inflation decreasing significantly after each halving.
- GRT has a controlled annual inflation rate of 3%, designed to maintain a predictable supply growth. This inflation supports the network’s operations by providing rewards for indexers, curators, and delegators who contribute to the decentralized data indexing ecosystem. The inflation mechanism ensures that enough new GRT tokens are issued to incentivize network participation without causing excessive supply growth.
- AKT operates with a dynamic inflation model that adjusts based on the percentage of tokens staked within the network. The inflation rate typically ranges from 10-20% annually. This inflation incentivizes participants to stake their tokens, as the reward structure is closely tied to the network’s staking activity. When fewer AKT tokens are staked, the inflation rate increases to encourage more staking, whereas a higher staking percentage reduces inflation. Over time, this mechanism is designed to balance network security and participation while keeping inflation within a controlled range.
My Analysis
Reviewing this data, there are some clear throughlines here. With the exception of POKT, every token hit an ATH in 2H 2021, where POKT hit it very early in 1H 2022. I would attribute this to the timing of listing. With the exception of GRT, every token hit a low in 2H 2023.
There is a clear macro market effect here at play. March 2022 was the end of the Zero Interest Rate Policy (ZIRP) in the United States, where rates began increasing up to where they are today.
All five protocols saw increases in market cap near the end of 2023. This was part of a wider market trend, again related to the macro markets. The Fed signaled that it would no longer be raising interest rates and kept them steady, leading to a short boom. AKT was the only protocol that eclipsed its previous ATH in market cap — 3.5x the previous.
If you look at the AKT price chart, it looks very different from the market cap chart; the price hit $6, roughly the same as the previous run in late 2021, despite the market cap ATH being 3.5x.
The price similarity was due to relatively high inflation of AKT, which was also perfectly positioned to be at the front of the AI narrative that overtook web3 last year. Sincere kudos to Greg and the AKT team for being prepared for that.
That said, price is what the market looks at, and very few protocols hit ATH’s during the recent run in late 2023. Notable exceptions include Bitcoin and Solana, which had a lower price but higher market cap through inflation.
Helium may be a better comparison for POKT. Despite relatively high inflation, they have seen an increase in price relative to the rest of the market, primarily because of usage and adoption. This reinforces for me that nothing is stronger than legitimate growth, particularly for infrastructure protocols in web3.
Traders trade based on the price indicators of charts and market cap, and successful coins tend to have a “two steps forward, one step back” price chart. Indicators need to show some level of consistency that provides traders with confidence. Very few coins managed this through the last run.
I do believe the US presidential election will play a big role in what direction we as an industry move long term. The Fed has signaled the potential to lower rates later this year or early next year. For better or worse, crypto — and by proxy, POKT — is linked to the macro markets and has not proven to be resistant to those trends.
So, How Is POKT Looking Moving Forward?
POKT had a non-traditional approach in how we entered the broader crypto market with exchanges. POKT was live on non-public telegram OTC’s a full 1.5 years before we got listed on exchanges. Early prices were in the $0.10 range — there is a historical price chart that more or less maps to other tokens since 2020. Very few people looking at the price chart of POKT today have that understanding and context.
We have not had a steady “two steps forward, one step back” chart either. We were fairly quiet until relays drastically increased from 10 million a day to over a billion a day within 10 months between 2021 and 2022. We’ve seen nearly nothing but down until last year.
There are some silver linings to POKT being correlated with the market. While I would love to delete our price chart before summer 2023, it is what it is. We are anchored at that $3 price, and for existing and future POKT holders, I would reset all expectations. In the last year, we have seen a small improvement in the chart. Our low in price was nearly $0.02 last year, and now we are sitting steadily around $0.04. You have to squint, but even with higher inflation than most, as of today this is a higher high than last year.
We have the potential to create a “new” chart come Shannon. Given it is truly a new network, similar to how MATIC has transferred to POL or how we have the Artificial Superintelligence Alliance (Fetch, Ocean, and SingularityNet) coalescing on the FET token (I am not suggesting a merger); there is precedence for creating a new chart through a new ticker and token. This is something we will evaluate as we get closer to Shannon.
My Recommendations and Rationale
It’s important to note that I am aiming to minimize instability. We’ve seen GANDALF introduce some to the network, and we should be sensitive to this with respect to gateway traffic. Some general thoughts before getting into details:
- We need to minimize instability on Morse.
- I am less sensitive to inflation as long as it’s not excessive.
- The more venues POKT is listed on, the better.
- More advanced capital market structures such as lend/borrow markets, derivatives, and liquid staking are good for liquidity and price.
- While wPOKT contributed to the 1Y high, I am less convinced that it was the core reason for that.
- The market and world will be chaotic for the next 3 - 7 years, and we should prepare to thrive in that environment.
- World events will affect markets outside of fed rates.
- Nothing matters more than surviving and driving real adoption.
- We want to be prepared for when the macro changes positively.
So, where can we make changes that will help us in the short term while we see the markets play out?
Target Non-DAO Treasury Emissions
- Rationale: As written in PIP-38: To leverage reflexivity and market dynamics. RTTM is currently adjusted weekly regardless of network traffic. By adjusting RTTM when the protocol grows, we can take advantage of increased rewards for node runners as traffic grows. Non-DAO treasury emissions will map to what today’s are — so node runners should not realize any significant changes in their rewards until traffic begins to increase.
- Timeline: Reset when aggregate inflation reaches 20%
- Expected Output: On-chain parameter: RelaysToTokensMultiplier Target Start Value: 20% Target Reset Value: 10%
Increase Rewards for the Long Tail of Chains
- Rationale: Pocket Network’s main value proposition today is the long tail of chains. Create opportunities for existing and net new node runners to continue operating in the network. While there may be consolidation on the major supported chains, this opens up opportunities for existing node runners to profitably support less-trafficked chains. Rewards will reflect the cost of the node and the amount of support we want for a given chain. Initial calculations can be found on the Chain Comparison spreadsheet.
- Timeline: September 30, 2024
- Expected Output: More opportunity for existing and net new node runners. Stable support for gateways and continued expansion of new chains.
Create an Incentive Program for Long Term Staking
- Rationale: Reduce the amount of current unstaked POKT on Morse by creating incentives for time-locked staked POKT. For example, if someone’s node is staked for one year, there is a 10% increase in their rewards at the end of the period. This incentive should have an extended time release to avoid many tokens hitting the liquid market. See Filecoin’s implementation.
- Timeline: September 30, 2024 for feedback on initial long-term incentives
- Expected Output: To reach over 60% of liquid POKT staked on Morse. At the time of writing, we are at 38% including currently unstaking POKT.
Increase the DAOAllocation Parameter to 75% Total POKT Owned by the DAO Treasury (Not Exceeding More than 20% of Total Supply)
- Rationale: Between the existing PNF treasury and the DAO treasury, the Foundation has about 46M POKT. As explained in PIP-38, we need to capitalize the Foundation and the protocol for future incentives. We have an example supply schedule (a couple months out of date) to see the impact on inflation projected node runner and DAO treasury rewards. This will not reduce the existing liquid rewards for servicers. We will increase the baseline RTTM to ensure that servicers are earning a similar rate to what they are today.
- Timeline: September 30, 2024
- Expected Output: DAOAllocation: 75%, Validator: 5%, Servicer: 20%
Conclusion
These changes are in line with the expectations of PIP-38. We will not adjust GANDALF any further, nor will we adjust any other parameters that are not addressed above. The goal is to reward those who are long POKT and not punish those who have continued to support. Through my research and conversations with the community, I came to the conclusion that we need to ensure stability and create opportunities for others as we drive more traffic to the network.
Outside of these changes, I would like to begin research on what it looks like to more concretely align Pocket Network’s economics with the broader macro market. Due to having dynamic inflation, we have the opportunity to create higher incentives when capital is cheap, and vice versa when it’s not.
That said, any changes we make now will impact us on the margins but help lay the foundation for future growth. While positioning the network for future narratives gives us a potential large increase in market cap, I have yet to see this be sustainable over the long term.
Ultimately, what will impact our higher lows and higher highs will be:
- True usage and adoption
- We have our clear metric — relays. This could change to something like data transferred over time.
- Clear messaging about where POKT sits within the broader ecosystem.
- Marketing that message across the world.
- Catching fire with future narratives and creating our own.
Solana, ETH, and POL all became behemoths not because of narrative, but because of their true usage. The focus on adoption and usage is our greatest strength. By making these changes, we have a stronger chance for the current prices to be the new bottom and enable future growth.
Ultimately, the bet that anyone who purchases POKT will be making relative to other tokens is the following:
Can we launch Shannon and execute on the gateway strategy by expanding outside of just RPC?
Appendix
Here’s a historical breakdown of the market cap price and volumes for tokens similar to Pocket Network (POKT) including Arweave (AR), Helium (HNT), The Graph (GRT), and Akash Network (AKT):
POKT Summary
| Year | Max MC | Min MC | Max Price | Min Price | Max Volume | Min Volume |
|---|---|---|---|---|---|---|
| 1H 2022 | $1.7B | $138.5M | $2.95 | $0.16 | $9.7M | $1.7M |
| 2H 2022 | $195.5M | $54.1M | $0.18 | $0.04 | $7.5M | $191.1K |
| 1H 2023 | $86.9M | $51.3M | $0.09 | $0.03 | $9.7M | $384.6K |
| 2H 2023 | $63.2M | $34.1M | $0.09 | $0.02 | $2.9M | $111.2K |
| 1H 2024 | $462.8M | $138.5M | $0.30 | $0.09 | $8.6M | $659.0K |
| 2H 2024 | $69.4M | $50.7M | $0.13 | $0.03 | $959.8K | $443.6K |
AR Summary
| Year | Max MC | Min MC | Max Price | Min Price | Max Volume | Min Volume |
|---|---|---|---|---|---|---|
| 1H 2021 | $530.8M | $412.8M | $32.46 | $2.06 | $64.4M | $12.1M |
| 2H 2021 | $4.1B | $2.1B | $84.85 | $36.66 | $577.8M | $31.8M |
| 1H 2022 | $3.3B | $1.2B | $66.39 | $12.95 | $95.5M | $13.9M |
| 2H 2022 | $826.6M | $398.9M | $16.54 | $7.98 | $79.2M | $5.4M |
| 1H 2023 | $679.4M | $309.4M | $13.54 | $6.18 | $79.8M | $4.0M |
| 2H 2023 | $591.8M | $246.8M | $9.04 | $3.78 | $51.8M | $2.4M |
| 1H 2024 | $3.1B | $1.6B | $48.04 | $24.47 | $650.3M | $33.5M |
| 2H 2024 | $3.0B | $1.3B | $46.40 | $19.46 | $60.1M | $23.8M |
HNT Summary
| Year | Max MC | Min MC | Max Price | Min Price | Max Volume | Min Volume |
|---|---|---|---|---|---|---|
| 1H 2021 | $319.3M | $288.8M | $4.62 | $1.17 | $170.9M | $1.0M |
| 2H 2021 | $5.3B | $1.6B | $52.99 | $16.70 | $408.9M | $5.1M |
| 1H 2022 | $4.2B | $2.1B | $41.74 | $21.23 | $72.1M | $6.5M |
| 2H 2022 | $739.7M | $285.4M | $5.70 | $2.14 | $91.2M | $1.4M |
| 1H 2023 | $447.6M | $172.6M | $3.28 | $1.23 | $434.1M | $376.2K |
| 2H 2023 | $416.4M | $171.9M | $2.89 | $1.19 | $573.2M | $359.2K |
| 1H 2024 | $1.4B | $408.6M | $9.24 | $2.84 | $66.5M | $2.2M |
| 2H 2024 | $1.4B | $1.2B | $8.43 | $3.06 | $52.0M | $1.9M |
GRT Summary
| Year | Max MC | Min MC | Max Price | Min Price | Max Volume | Min Volume |
|---|---|---|---|---|---|---|
| 1H 2021 | $2.9B | $148.5M | $2.34 | $0.12 | $977.4M | $120.2M |
| 2H 2021 | $6.0B | $3.1B | $1.21 | $0.49 | $820.4M | $41.8M |
| 1H 2022 | $4.6B | $2.1B | $0.92 | $0.13 | $753.0M | $38.0M |
| 2H 2022 | $948.4M | $399.5M | $0.17 | $0.05 | $205.4M | $18.5M |
| 1H 2023 | $1.8B | $1.0B | $0.21 | $0.06 | $230.8M | $21.5M |
| 2H 2023 | $1.4B | $718.8M | $0.15 | $0.08 | $329.0M | $12.2M |
| 1H 2024 | $4.2B | $1.3B | $0.46 | $0.14 | $856.7M | $31.9M |
| 2H 2024 | $2.9B | $1.2B | $0.30 | $0.13 | $45.8M | $21.5M |
AKT Summary
| Year | Max MC | Min MC | Max Price | Min Price | Max Volume | Min Volume |
|---|---|---|---|---|---|---|
| 1H 2021 | $331.9M | $16.0M | $7.32 | $0.65 | $8.6M | $346.0K |
| 2H 2021 | $450.6M | $145.0M | $5.76 | $2.06 | $9.4M | $283.0K |
| 1H 2022 | $337.1M | $140.0M | $2.68 | $0.39 | $9.9M | $230.9K |
| 2H 2022 | $73.6M | $32.6M | $0.44 | $0.18 | $2.0M | $350.9K |
| 1H 2023 | $136.1M | $36.6M | $0.64 | $0.19 | $3.5M | $383.7K |
| 2H 2023 | $417.3M | $100.4M | $1.88 | $0.47 | $9.5M | $589.1K |
| 1H 2024 | $1.4B | $357.7M | $6.22 | $1.61 | $161.9M | $2.0M |
| 2H 2024 | $632.0M | $516.7M | $4.66 | $2.10 | $56.7M | $2.8M |