Request for comment: Redesign Darwinia Tokenomics in the philosophy of Ethereum EIP1559 #1163
Replies: 9 comments 14 replies
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Hi! I think it is time for community to discuss Darwinia tokenomics adjustment. I had concerns that we are not taking different variables in equasion when we did 60:40 reward split. What is happening is as predicted we get double the rewards but token price keeps on dropping. I have to admit since that decision has been made I am selling my Ring rewards weekly into DOT as I fear token price will go to many zeros. I am being honest for the love of project,not to stab it in back. I still haven't sold any Ring or Kton prior to that decision. And will switch DOT back to KTON if I belive in improvement. |
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Also to add I would suggest rewarding voters as having active governence is very important on proposals. I also suggest we add a quorum that must be reached for proposal to pass. For start we could have 5% as I think only few vote. Ammount of Kton could be used for voting and rewards could be in Kton as well(the one we get for staking Ring from community pool). Let's start giving Kton more utility. I haven't been active there yet too... |
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So I have done some more thinking. This is my opinion where I see the problem and the solution. This was my post on TG when we discussed how much should go to stakers and how much to treasury. "" I think if team provided some decent calculations on why they chose the ratio,and what would the actual drop be,as so many stakers that do nothing the numbers would be much better.Now it feels as these numbers are chosen randomly. I am sad to see it went exactlly like this. I am receiving twice the rewards(so 20% should actually be ok) and Ring price keeps tanking. Decent math calculations based on many variables should be made. One variable math does not work here and calculations were proven wrong. Let me explain. So Ring is minted from staking. What can we use it for:
What else? We have no deep liquidity pools on DEXs(hopefully incentivesed from both sides), it is not traded on many exchanges, no Defi with Ring, no NFT market....So I see the issue here. We need to make Ring more usable/functional. People are not willing to lock tokens for few years any more...crypto evolves too quickly...most don't want to lock it for Crowdloans and that is 2 years. They want massive returns in Crowdloan rewards to give it up for 2 years, which is hardly feasible nowadays.... Our APY for staking I also think is not sustainsble on the long run and it is another factor driving price down. So I would consider looking into making us use Ring for other purposes where we can see it being taken out of market and put into different uses. |
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Been doing some more researching regarding our inflation. Astar gave great idea about dynamic inflation (below at the thread) https://forum.astar.network/t/astar-tokenomics-2-0-a-dynamically-adjusted-inflation/4924 Astar has its dApps staking so different model, but maybe we could think in that direction too, to have it price orientated. I think Cosmos Hub has it too,but its inflation is too high to take into consideration... Let me know if we could go down that path,will do more research... Imho Megan would be a great person to discuss this with too.... |
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Hi , great conversation you guys are having. My thoughts are you remove the staking yields or reduce them dramatically you will get the biggest wall of selling. I don't know the stats on how many people sell their yield or if they re-lock them , that would be the most important stat. I personally just re lock so I'm never selling, but if you reduced the yields I personally would then be a seller permanently. Only one solution and that's for Darwinia to have a product, chain people actually use , and then burn the transaction fees. Hopefully the chain is used so much, the burn outweighs inflation. Right now Ring price is irrelevant , bar the treasury funding. Everything needs to be about USE CASE and burns; then token automically flies. This world we lived in where tokens could go up no matter what is done, and crypto will evolve into tokens that actually carry real value; that can derive value from actually being useful and that use awarded to token holders in the form of burns. Dot has a massive problem in terms of no one needs the DOT token, the system they have designed is totally flawed in terms of its own token. Ethereum have thought and created real use, along with a burn and hence people love it. |
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All valid points. Inflation could definitely be reduced, don't think it would be a major issue. Even though I don't see the token going up. Token only goes up once darwinia have a product people actually use. The guys involved with Darwinia are clearly real developers and that's always what I have loved about this project, its not been about the talk, or pushing price, its been about developing actual product. Just need people to use it. The fee discussion is always an interesting one, and it can be argued from both sides. I personally think at this stage higher fees is better, because I think the burn is more important. Eth is the most expensive chain on the block and its only that expensiveness that actually creates its value. But then the chain is also running close to max at times and therefore can be expensive. Not saying Darwinia should be expensive but fees have room to be increased if they burnt. If a blockchain can really scale, then fees could be reduced but no one has been able to achieve that so far. Suppose you have to work out what the worth of your chain is in terms of fees and get it to the max people are willing to pay. |
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I agree. Imo at current price levels I think reduced inflation wouldn't make a difference too. |
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I feel that it is intuitive to burn the transaction fee like ethereum. ![]() |
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Make a periodic summary, this RFC basically includes two points. First is to draw lessons from EIP1559 by introducing a burning mechanism, and second is to indirectly reduce the inflation rate by adjusting the annual new issuance. Currently, there are still disagreements in the community about the second point, which requires further discussion and review. Regarding the first point, it has already been adopted and accepted in the latest Genepaper V4 and DIP-3. Although DIP-3 and EIP1559 have minimal impact on the current economic data, they represent a significant change in the token economic design philosophy. This will affect narrative expression and expectations. By providing more data analysis and motivation through the community, it can promote and guide the community to allocate resources and invest in areas that can help burn more tokens or contribute to revenue, achieving a return to long-term token economic balance. Ref: |
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Introduction
This is to propose a new design of the tokenomics for Darwinia's native token RING, to better fit the network's economic, incentive and utilitity purpose of the token and the competition in the free market of tokens.
The ideas and lessons was learned from Ethereum's improvement of tokenomics during switch from POW to POS, especially from EIP1559 (Ref.2).
Problem and Solution
Current tokenomics is described in Darwinia's genepaper V2 (Ref.1) as following:
The largest problem of current implementation/design is that it introduced a model of target supply, to be more specific, no matter how many gas or tokens are used and burned in the network, the current supply design always set the target supply to be one had cap, and the supply and inflation in specific year is set by that formula while they have no relationship with the performance and value capture, this will make the network activities very hard to be reflected to the token economic. To resolve this problem, the new design inspired by Ethereum EIP 1559will separate the token supply changes to two part, the burn part and new minted part, in one hand, all the gas and tokens fees captured by the network should be directly burned from the supply, in another hand, there will be a simple and fixed block reward which will be minted as new tokens to support the security and growth of the network, this block reward in every year or every day will be a fix amount to support following parts:
There should be sufficient budget to support the security of the network regardless of the gas fees and value capture of the network as that is is a prerequisite to ensure the normal operation of the network against attacks, while the income of the network is greatly affected by the market and external influences as the market cannot be good or bad from time to time.
Another problem of the current design is that, we can see from the above curve chart, the inflation rate in beginning years is relative high and arbitrary, this will lead to a decline in attractiveness and competitiveness in the token market, which in turn will affect community and ecological development. So the redesigned model should be have less/comparable inflation rate and supply compared to the existing design, at least in the next 100 years.
Based on the above two problems and solution constrains, here we propose a new design for the Darwinia.
Here is a summary of the maximum token supply and inflation rate over time for the given token supply design with an initial supply of 2.275 billion tokens and an annual minting of 80 million tokens, extended to a range of 100 years:
Actually, the maximum curve is the worst case with no RINGs being burned, tokens being in that year will reduce the supply and inflation rate, if there are more than 80M RING burned in that year, the inflation rate will be below zero, and become deflation, just like what happened with the Ethereum network, you can experiment with the parameters using ultrasound.money(Ref.3) to learn how the network activities affect the token economic.
References:
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