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IIP_0005.md

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+ION Improvement Proposal 0005
+=============================
+
+[Back to main page](README.md)
+
+|         |                                    |
+|---------|------------------------------------|
+| IIP     | 0005                               |
+| Title   | Masternode collateral halving      |
+| Author  | Adam Mattlack and Michael Pfeiffer |
+| Status  | Draft                              |
+| Type    | Standards track                    |
+| Created | 01-06-2018                         |
+
+## Abstract
+
+This IIP halves the masternode collateral requirement.
+
+## Plain language tl;dr
+
+**“Halve masternode collateral requirement”** — 10,000 ION required to operate a masternode instead of 20,000 ION.
+
+* ***Effect:*** By lowering the barrier to network participation through a reduction in cost of masternode acquisition: ION adoption, distribution, governance, ecosystem diversification, and most important, the strength of the ION network, are advanced.
+
+## Motivation
+
+* Halve masternode collateral requirement
+ * By halving the masternode requirement, the barrier to network participation is reduced.
+ * A robust, extensive, and scalable masternode network is required to sustain the projected growth in demand for secondary token transactions. Lowering the collateral requirement increases the number of available masternodes in the network.
+ * Permeable network participation fuels the generation of new use cases for the ION blockchain, and decentralized governance has more checks and balances when distributed among more — and more diverse — membership.
+ * ION was developed not simply to be a protocol, but a protocol with uses and users. ION was envision not just as a cryptocurrency, but as a component in a thriving economy. Masternodes function as an incentive system for people and businesses who are interested in investing in the ION ecosystem by increasing its utility and thereby its value to other users.
+ * To this end, a gradually declining barrier to participation, structurally pegged to the rate of gradually declining rate of coin generation, should be considered in the future and could be designed to motivate new network participation and innovation dynamically. Such a proposal may synchronize collateral requirements with the block reward schedule. As block rewards decline according to the graduated schedule, the collateral requirement to operate a masternode could also decline. Until such a proposal can be specified, this halving proposal makes an important temporary adjustment.
+ * The proposed design would be an improvement over the white paper specification because a rising market price of ION would put network participation and masternode operation out of reach of most.
+
+## Specification
+
+Masternode collateral requirement halving.
+
+| Year | Collateral base level | Adjustment | Adjusted Collateral Requirement |
+|------|-----------------------|------------|---------------------------------|
+| 3    | 20,000                | -50%       | 10,000                          |
+
+This proposal will change the masternode collateral requirement from 20,000 to 10,000 ION. Implementation will require a hard fork.