I submitted this proposal to the governance: https://mip.massa.net/proposals/2
This was done following the discussion at Proposal to Reduce Massa Blockchain Yearly Inflation to 2.5% ( Block reward 0.4)
Here is the reasoning about why I prefer this proposal:
I’m not sure cutting rewards by this much will have the expected effect, for several reasons already discussed in the other thread, including:
- Smaller stakers will struggle to remain profitable, and might leave the network and sell their coins.
- Larger stakers might leave too, with a proportionately larger impact.
- Stakers don’t represent the biggest amount of tokens being put in circulation, we have vesting too, as has been pointed out.
- Without matching adoption, it would have no effect on token price.
- Other chains have had enough time for adoption before cutting rewards, and even then it was rarely immediate, more of a gradual change. Young chains need to bootstrap themselves.
- We already have a mechanism that reduces the APY over time, the inflation is constant while the supply changes. That means inflation will be divided by 2 with respect to the circulating supply once we reach double the current circulating supply. Note that Im talking about inflation, not APY, as APY depends on the % staked too.
- Higher bar to entry: this relates to some of the previous points, but I feel is worth mentioning on its own. A lower APY also means that you need more capital to remain profitable, which in turn can lead to validator centralisation. One of the main benefits of our chain is that low barrier to entry, it makes us accessible to anyone. It’s harder to justify low hardware requirements when the minimum capital to be profitable is high.
I also doubt it would be reversible if we apply the reward reduction proposal, there is little chance of people who left coming back.
I feel a cut of 2/3 of rewards is a bit too much.
Instead, I believe the Dynamic Inflation proposal aligns everyone’s incentives:
More usage on chain lead to less minted tokens entering the market.
This gives an incentive for everyone, both stakers, holders, and the team, to push for more adoption and on chain usage.
It has 2 cases:
- low chain usage: smaller stakers remain profitable which keeps the network secure and decentralized. Holders probably unhappy.
- high chain usage: stakers are more profitable, they can afford a small cut in rewards in this situation without hurting their bottom line.
Now, compare it to the reduced inflation proposal, same 2 cases, different results:
- low chain usage: small stakers leave until only profitable ones remain. Holders still unhappy, low usage means noone wins.
- high chain usage: stakers still earn a bit less than otherwise, holders slightly more happy.
Notice that, with a reduced inflation, incentives are a little more blurry on the high chain usage case, and dont look much better on the lower chain usage case.
In both proposals, on low chain usage everyone is hurting, but stakers will likely not come back after leaving due to not being profitable. That means that over time, we have more stakers leaving with a lower apy than with a dynamic inflation.
All in all, I feel like this proposal is better, specifically because of the new incentive it adds, and with a much lower impact in the negative scenario. Its also not too hard to revert if we decide to (although I don’t see why we would want to).
Note: It can of course also be applied independently of the other proposal’s success, it just felt like a reasonable compromise to the situation, on top of being a great proposal on its own.