Proposal to Reduce Massa Blockchain Yearly Inflation to 2.5% ( Block reward 0.4)

Massa Improvement Proposals
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Proposal to Reduce Massa Blockchain Yearly Inflation to 2.5%

1. Introduction: Ideal Inflation

Ideal inflation plays a vital role in maintaining economic stability and growth.

In Islamic finance, the principle of moderation is central, as reflected in the concept of Zakat, which mandates a yearly contribution of 2.5% of wealth. This approach ensures sustainable wealth distribution without excessive accumulation or devaluation of assets.

In modern economic systems, such as those governed by the Federal Reserve and the European Central Bank (ECB), target inflation rates are typically between 2% and 3%.

2. Other Blockchains’ Inflation Adjustments

Good Example:

Ethereum (ETH): ETH successfully adjusted its inflation models to ensure sustainability, decentralization, and liquidity. It reduced its inflation from 4.5% to 0.5-1% after transitioning to proof-of-stake and introducing EIP-1559, which burns transaction fees. This improved value preservation and network security.

Bad Example:

Flow (FLOW): Flow has faced challenges with high inflation, leading to token devaluation.

  • Initial Inflation: Initially 20%
  • Effect on Price: Flow (FLOW) has experienced a significant price drop since its all-time high of $46.16 in April 2021. As of today, the price of Flow has fallen to around $0.52, representing a staggering 98.87% decline from its peak.

3. Current Situation on Massa Blockchain

  • Total Circulating Supply: 176,370,719 MAS
  • Staked Supply: 138,002,100 MAS (78.2% of circulating supply)
  • Unstaked Supply: 38,368,619 MAS (21.8% of circulating supply)
  • Annual Inflation: 6.14%
  • Block Reward: 1.02 MAS/block
  • Yearly Emission: 64 million MAS
  • Top 20 Stakers: Hold 83,491,270 MAS (60.5% of staked supply), earning 60.5% of total rewards
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Massa currently operates with a yearly inflation rate of 6.14%, with 78.2% of the circulating supply staked. While a high staking rate may suggest network confidence, having 78.2% of the circulating supply staked is not healthy for the ecosystem. This excessive staking leads to low liquidity, leaving only 21.8% of the circulating supply available for trading, DeFi, and other ecosystem activities.

The top 20 stakers hold 83,491,270 MAS, representing 60.5% of the staked supply and earn 60.5% of total staking rewards. These large stakers dominate the staking rewards, further concentrating power in the network and limiting decentralization.

4. Problems with Current Inflation Model

  • High Inflation Rate: The current 6.14% inflation dilutes the value of MAS tokens, reducing purchasing power.
  • Concentration of Staking Rewards: The top 20 stakers control a significant portion of the supply and rewards, which leads to centralization risks.
  • Low Liquidity: With 78.2% of the circulating supply staked, only 21.8% is available for trading/Defi/ others , severely restricting liquidity.
  • Centralization Risk: High rewards for large stakers create an imbalance in network control and governance, reducing decentralization.

5. Proposed Solution: Reducing Yearly Inflation to 2.5%

To address these issues, this proposal recommends reducing Massa’s yearly inflation rate to 2.5% by adjusting the block reward from 1.02 MAS to 0.40 MAS per block. This adjustment would lower the total yearly emission from 64 million MAS to approximately 26 million MAS, ensuring a healthier inflation rate that preserves value and promotes decentralization.

In addition to block rewards, stakers will also earn transaction fees, which will supplement their reduced rewards, maintaining strong incentives for staking and securing the network.

Key Adjustments:

  • Block Reward: Reduced to 0.40 MAS/block
  • Yearly Emission: Reduced to 26 million MAS
  • Inflation Rate: Capped at 2.5%
  • Transaction Fees: Earned by stakers to offset the reduction in block rewards

6. Impact on Staking and Rewards

If 50% of the circulating supply is staked under a 2.5% inflation rate, stakers would earn an annual return of 5% on their investment from inflation alone. Moreover, with the introduction of transaction fees, stakers could earn additional rewards, further increasing their overall returns. This 5% reward rate, combined with transaction fees, provides a balanced return that incentivizes staking without overinflating the token supply, ensuring long-term value preservation, network security, and improved liquidity.

Projected Staking Data:

  • Overall Inflation: 2.5%
  • Current Yield: 46.4% (based on the current 6.14% inflation rate and current staking data)
  • Proposed Yield: 18.9% (based on the proposed 2.5% inflation rate and assuming a similar staking participation, excluding transaction fees)
  • Yield with 50% Staked: Approximately 5% (derived from inflation rewards) + additional returns from transaction fees
  • Staking Rate: Expected to decrease from 78.2% to around 50%, which would help improve liquidity and decentralization.

This reduction in inflation and staking rewards will help decentralize the network, increase liquidity, and reduce the influence of large stakers.

7. Ideal Inflation Rate

A 2.5% inflation rate aligns with economic principles, ensuring that the token supply grows at a sustainable pace. This approach protects the long-term value of MAS tokens while maintaining a healthy balance between liquidity, decentralization, and network security.

8. Conclusion

Reducing Massa’s annual inflation rate to 2.5% by adjusting the block reward to 0.40 MAS/block will address critical issues such as high inflation, low liquidity, and centralization risks. With transaction fees supplementing staking rewards, the network will continue to incentivize participation while promoting decentralization. A 5% annual reward from inflation, along with additional transaction fees, offers a sustainable and balanced return for stakers, ensuring long-term value preservation and growth for the Massa blockchain.

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In brief

Current Situation on Massa Blockchain

  • Total Supply: 1,041,394,204 MAS
  • Circulating Supply: 176,370,719 MAS
  • Staked Supply: 138,002,100 MAS (78.2% of circulating supply)
  • Unstaked Supply: 38,368,619 MAS (21.8% of circulating supply)
  • Overall Inflation : 6.14%
  • Current Yield with 78.2% Staked : 46.4%
  • T-Yield with 78.2% Staked : 7.86%
  • Block Reward: 1.02 MAS/block
  • Yearly Emission: 64 million MAS
  • Top 20 Stakers: Hold 83,491,270 MAS (60.5% of staked supply), earning 60.5% of total rewards

T-Yield (Theoretical Yield) is the projected staking yield assuming the entire total supply is in circulation, with a fixed percentage staked

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output (10)2801Ă—1013 187 KB

Projected Staking Data:

Total Supply: 1,041,394,204 MAS
Circulating Supply: 176,370,719 MAS
Staked Supply: 88,185,359.5 MAS (50% of circulating supply)
Unstaked Supply: 88,185,359.5 MAS (50% of circulating supply)
Overall Inflation: 2.5%
Current Yield with 50% Staked: 28.44%
T-Yield with 50% Staked: 4.82% + Transaction fees
Block Reward: 0.4 MAS/block
Yearly Emission: 25.088 million MAS
Staking Rate: Expected to decrease from 78.2% to around 50%, which would help improve liquidity/ decentralization/ price of Massa .

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A burn mechanism could also prevent the supply from growing too much however there needs to be enough activity for it to work.

DeWeb & ASC could be a part of this by locking/burning coins to deploy websites but it is not live yet and not enough people know about it.
Some big privacy/anti-censorship websites need to be deployed at the launch. This could increase Massa’s visibility and create new partnerships. In the long run, this will help reduce the circulating supply.

Did the Massa team already reach out to some or are present are some privacy-oriented events?

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Good ideas. May you create seperate thread for this? These are not relevant to the current topic.

About proposal, I support the decreasing inflation rate and I think It should benefit us much more on the long run.

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I agree with the idea. Few of us created a proposal, see here: Proposal to Reduce Massa Blockchain Yearly Inflation to 2.5% ( Block reward 0.4) - #4 by Nirnaeth

I would like to have your opinion if you think that the proposed apporach could support your proposal.

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I don’t agree with that. Establish a token burn mechanism from the total resource. We, who have suffered from this work, have been together since the beginning. Let us make some profit as long as we run Nodes. In my opinion, let’s look for another remedy.

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i don’t agree with you,the high apy just in the beginning,since the holder increase ,staker more ,the apy will reduce itself. the whitepaper have explain clearly,i think there is no necessary to change.

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Although I’m generally not against reducing the reward % I do not think it’s the right moment.
It would have more impact with more users and advertized long before it’s implemented to let ppl hop in and maybe run more nodes.
I’m not in favor of this now, but am not opposed to it in the future.
Also, there may be other solutions than just reducing the %, we could have burning that could cover part of it, that should be discussed too in the future.
Who will be excited for a % reduction today? The majority won’t, no one likes tokenomics change especially about rewards.
Let’s have deweb, an ecosystem, more users, advertize massa, price increase and then we could talk how to mitigate x% rewards, maybe burning can answer that who knows, it’ll be easier with more tools, but right now, reduce it and see the backlash.

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I understand your concerns, but I believe the solution lies in taking a long-term view. Many of us, including myself, are currently facing losses (my investment is down 70%), but maintaining the high inflation rate or focusing only on short-term gains isn’t sustainable for the overall health of the network.

You suggested a token burn mechanism, but the reality is that there isn’t enough transaction volume to generate significant fees to burn. A burn would only have a limited impact in this case. Without a high transaction volume, burning won’t be effective enough to counter inflation or raise the token price in a meaningful way. That’s why reducing inflation is a more effective and long-term solution to stabilize the token’s value.

It’s also important to realize that with the existing reward system, even if node operators like us continue earning rewards, those rewards won’t compensate for the losses as long as the token price keeps going down. More tokens don’t help when their value keeps dropping. The current system allows inflation to grow unchecked, contributing to the constant decline in price.

What we need is a fundamental solution, not just temporary fixes. Simply accumulating more tokens or relying on burns won’t address the core issue of the falling prices. By reducing inflation, we can help stabilize the supply and, in turn, help stabilize or increase the price over time. In the long run, it’s more beneficial for all of us to protect the value of the tokens we earn, rather than just accumulating tokens that are worth less every day.

Apy is not actually 6.4 % .
It will stay for years above 12% atleast . ( since not all supply are staked )

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I agree that we should act on the core problem: increase usage and demand. Everything else in my opinion are temporary fixes that might backfire quickly.

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I support the proposal of reducing the block reward. As a node runner, like many others, I know we will be affected by the reuced reward we getting daily, but in the long term, the value MAS is likely going to increase if the inflation is reduced. So this approach is good for every community member.

So I suggest Masa lab and Massa foundation to seriously consider and support this proposal and if possible be implemented in the next version of mainnet.

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I think going this way rn could be very risky without Massa adoption this will badly affect node count specially small nodes. This proposal will be perfect to adopt but it is risky to do now, I will go with the other route to find other ways to reduce circulating like DeWeb, lending protocols and all potential ideas proposed in other topics like making Massa a full cloud provider, so I really like reducing inflation and even burning and reducing total supply bot not on the cost of decentralization

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Hi

I support solution 2.5 it can slow down inflation while we wait for the MASSA ecosystem to become mainstream.

This solution serves as a brake that allows for deeper reflection on the issue. Reducing inflation does not immediately solve the problem, but it can be beneficial for the price of the token, and therefore also for those who hold nodes.

One thing is certain this inflation will need to be reduced further in the future.

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Hey everyone !

I just wanted to highlight Seb’s recent proposal regarding our new governance system. If you’re interested in the proposals being discussed, make sure to check it out here :

This system will allow everyone to vote on the proposals, making our community even more engaged and impactful.

Let’s keep the conversation going !

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Regarding Lower Inflation

Massa’s system already includes a built-in mechanism to reduce inflation over time, contributing naturally to long-term stability. Adjusting this further, especially before Massa achieves a strong ecosystem and adoption base, could have unintended consequences and risks.

On Liquidity

Liquidity will increase organically as the ecosystem develops and more dApps are built. With greater adoption, we’ll see rising innovation, liquidity, and Total Value Locked (TVL). Forcing changes prematurely could stifle this natural growth.

Decentralization and Reward Mechanisms

Reward mechanisms should respect the level of investment and risk each participant undertakes. Equal rewards regardless of input aren’t feasible or effective. If one participant stakes 100 rolls and another stakes 1,000, the latter receives more reward, reflecting both their higher commitment and risk. Major blockchains like Ethereum and Bitcoin don’t operate on an “equality” model for this reason.

True decentralization is best achieved organically. I’ve proposed a sustainable solution to foster healthy decentralization and resilience: Massa Fusion Nodes Proposal. Fusion Nodes could lead to a stronger network and fairer incentives for all participants.

Token Burn Mechanism

A token burn within the protocol itself could discourage dApp growth by reducing incentives. To truly become deflationary, we need a thriving ecosystem of 100+ dApps, high community engagement, and millions of daily transactions. Look at Ethereum and Solana: robust activity has naturally led to deflation. Even ICP has become deflationary recently, despite still being in early stages with a few active dApps.

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Hi @Bosamer thank you for the proposal!

A few comments:

  • When you compute the actual APR for nodes, be careful with the formula, it should be : inflation * total_supply / staked_supply, so a 2.5% inflation with 50% of the circulating supply being staked would lead to approx. 25% of APR nowadays with 20% of the total supply circulating.
  • In the FLOW example, it would be interesting to know how much of the decline can be attributed to the high inflation
  • On the centralisation risk, I don’t understand your point: whatever the inflation percentage, bigger nodes will get more rewards, proportionally.
  • How big of a problem is it really that only 20%/30% of the circulating supply is not staked ? I think we could further dig into this question.
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I think anyone who is hesitating to buy MAS because of the high inflation rate would be.

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I think this is the main argument for this proposal: less inflation = less circulating supply in the future = higher price in the future = more attractive for people outside of our community and for people not willing to run a node.
FYI the APR for node runners would still be around 15-20% if we change now to 2.5% inflation rate (instead of ~45% now).

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Obviously but will those buyers in the wait boost PA today? I’m not so sure.
It’s too common to see reasonings such as less inflation = less circ supp = pump
It’s over simplified and is not always true. Rather it’s all about demand.

When a coin/token has demand (whether it’s due to hype only or real utilities), no one cares about inflation (plenty of ex: in the market), they buy the market presence (already existing demand) in the prospect of higher PA or for utility reasons.
SOL is a good one, started with 8% (some argue it was even higher in reality) and aims at 2% in 10 years, yet demand never been so high.
CAKE also has had initially a huge amount of inflation and demand was high so PA mooned. Came the bear market and the community blamed PA on inflation for 2 years so they made it deflationary now and guess what, still no demand, no PA. In this case reducing inflation has had the opposite effect (ppl sold more than they bought).

I’m all for reducing inflation, I just don’t think it will have today the PA increase we hope for. More chances of a higher positive impact when main features/products are released and massa has a market presence.
Basically I wouldn’t touch it right now until:

  • PA pushes us back close or above ICO price (we already did +100% this month alone)
  • deweb and as many critical features/tools are released (we create demand)

Reducing inflation can be a silver bullet, it just gotta be used at the right moment (and not so early before we have a market presence). Let’s not waste that bullet yet and secure demand for use cases first. After that, we could even be more aggressive on the inflation reduction.

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If we continue to setup the governance process and try this proposal first, it won’t be effective before 3 months from now anyway, so this might be a good timing in fact.