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Lowering Deposit Requirements on Polkadot and Kusama Asset Hub (#45)
RFC-00xx-assethub, proposes lowering deposit requirements for NFT collection creation on Polkadot and Kusama Asset Hub to make it more accessible for artists. It draws upon the discussion in the [Polkadot Forum](https://forum.polkadot.network/t/polkadot-assethub-high-nft-collection-deposit/4262). While there are concerns about state bloat, the RFC also considers future governance models to dynamically adjust deposit requirements. --------- Co-authored-by: Oliver Tale-Yazdi <oliver.tale-yazdi@parity.io> Co-authored-by: joe petrowski <25483142+joepetrowski@users.noreply.github.com> Co-authored-by: Viki Val <viktorko99@gmail.com> Co-authored-by: joepetrowski <joe@parity.io>
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| # RFC-0045: Lowering NFT Deposits on Asset Hub | ||
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| | | | | ||
| | --------------- | ----------------------------------------------------------------------------- | | ||
| | **Start Date** | 2 November 2023 | | ||
| | **Description** | A proposal to reduce the minimum deposit required for collection creation on the Polkadot and Kusama Asset Hubs. | | ||
| | **Authors** | [Aurora Poppyseed](https://github.com/poppyseedDev), [Just_Luuuu](https://github.com/justLuuuu), [Viki Val](https://github.com/vikiival), [Joe Petrowski](https://github.com/joepetrowski) | | ||
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| ## Summary | ||
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| This RFC proposes changing the current deposit requirements on the Polkadot and Kusama Asset Hub for | ||
| creating an NFT collection, minting an individual NFT, and lowering its corresponding metadata and | ||
| attribute deposits. The objective is to lower the barrier to entry for NFT creators, fostering a | ||
| more inclusive and vibrant ecosystem while maintaining network integrity and preventing spam. | ||
|
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| ## Motivation | ||
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| The current deposit of 10 DOT for collection creation (along with 0.01 DOT for item deposit and 0.2 | ||
| DOT for metadata and attribute deposits) on the Polkadot Asset Hub and 0.1 KSM on Kusama Asset Hub | ||
| presents a significant financial barrier for many NFT creators. By lowering the deposit | ||
| requirements, we aim to encourage more NFT creators to participate in the Polkadot NFT ecosystem, | ||
| thereby enriching the diversity and vibrancy of the community and its offerings. | ||
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| The initial introduction of a 10 DOT deposit was an arbitrary starting point that does not consider | ||
| the actual storage footprint of an NFT collection. This proposal aims to adjust the deposit first to | ||
| a value based on the `deposit` function, which calculates a deposit based on the number of keys | ||
| introduced to storage and the size of corresponding values stored. | ||
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| Further, it suggests a direction for a future of calculating deposits variably based on adoption | ||
| and/or market conditions. There is a discussion on tradeoffs of setting deposits too high or too | ||
| low. | ||
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| ### Requirements | ||
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| - Deposits SHOULD be derived from `deposit` function, adjusted by correspoding pricing mechansim. | ||
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| ## Stakeholders | ||
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| - **NFT Creators**: Primary beneficiaries of the proposed change, particularly those who found the | ||
| current deposit requirements prohibitive. | ||
| - **NFT Platforms**: As the facilitator of artists' relations, NFT marketplaces have a vested | ||
| interest in onboarding new users and making their platforms more accessible. | ||
| - **dApp Developers**: Making the blockspace more accessible will encourage developers to create and | ||
| build unique dApps in the Polkadot ecosystem. | ||
| - **Polkadot Community**: Stands to benefit from an influx of artists, creators, and diverse NFT | ||
| collections, enhancing the overall ecosystem. | ||
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| Previous discussions have been held within the [Polkadot | ||
| Forum](https://forum.polkadot.network/t/polkadot-assethub-high-nft-collection-deposit/4262), with | ||
| artists expressing their concerns about the deposit amounts. | ||
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| ## Explanation | ||
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| This RFC proposes a revision of the deposit constants in the configuration of the NFTs pallet on the | ||
| Polkadot Asset Hub. The new deposit amounts would be determined by a standard deposit formula. | ||
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| As of v1.1.1, the Collection Deposit is 10 DOT and the Item Deposit is 0.01 DOT (see | ||
| [here](https://github.com/polkadot-fellows/runtimes/blob/v1.1.1/system-parachains/asset-hubs/asset-hub-polkadot/src/lib.rs#L687)). | ||
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| Based on the storage footprint of these items, this RFC proposes changing them to: | ||
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| ```rust | ||
| pub const NftsCollectionDeposit: Balance = system_para_deposit(1, 130); | ||
| pub const NftsItemDeposit: Balance = system_para_deposit(1, 164); | ||
| ``` | ||
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| This results in the following deposits (calculted using [this | ||
| repository](https://github.com/vikiival/rfc-pricing)): | ||
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| **Polkadot** | ||
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| | **Name** | **Current Rate (DOT)** | **Calculated with Function (DOT)** | | ||
| |---------------------------|:----------------------:|:----------------------------------:| | ||
| | `collectionDeposit` | 10 | 0.20064 | | ||
| | `itemDeposit` | 0.01 | 0.20081 | | ||
| | `metadataDepositBase` | 0.20129 | 0.20076 | | ||
| | `attributeDepositBase` | 0.2 | 0.2 | | ||
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| Similarly, the prices for Kusama were calculated as: | ||
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| **Kusama:** | ||
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| | **Name** | **Current Rate (KSM)** | **Calculated with Function (KSM)** | | ||
| |---------------------------|:----------------------:|:----------------------------------:| | ||
| | `collectionDeposit` | 0.1 | 0.006688 | | ||
| | `itemDeposit` | 0.001 | 0.000167 | | ||
| | `metadataDepositBase` | 0.006709666617 | 0.0006709666617 | | ||
| | `attributeDepositBase` | 0.00666666666 | 0.000666666666 | | ||
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| ### Enhanced Approach to Further Lower Barriers for Entry | ||
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| This RFC proposes further lowering these deposits below the rate normally charged for such a storage | ||
| footprint. This is based on the economic argument that sub-rate deposits are a subsididy for growth | ||
| and adoption of a specific technology. If the NFT functionality on Polkadot gains adoption, it makes | ||
| it more attractive for future entrants, who would be willing to pay the non-subsidized rate because | ||
| of the existing community. | ||
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| **Proposed Rate Adjustments** | ||
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| ```rust | ||
| parameter_types! { | ||
| pub const NftsCollectionDeposit: Balance = system_para_deposit(1, 130); | ||
| pub const NftsItemDeposit: Balance = system_para_deposit(1, 164) / 40; | ||
| pub const NftsMetadataDepositBase: Balance = system_para_deposit(1, 129) / 10; | ||
| pub const NftsAttributeDepositBase: Balance = system_para_deposit(1, 0) / 10; | ||
| pub const NftsDepositPerByte: Balance = system_para_deposit(0, 1); | ||
| } | ||
| ``` | ||
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| This adjustment would result in the following DOT and KSM deposit values: | ||
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| | **Name** | **Proposed Rate Polkadot** | **Proposed Rate Kusama** | | ||
| |---------------------------|:--------------------------:|:------------------------:| | ||
| | `collectionDeposit` | 0.20064 DOT | 0.006688 KSM | | ||
| | `itemDeposit` | 0.005 DOT | 0.000167 KSM | | ||
| | `metadataDepositBase` | 0.002 DOT | 0.0006709666617 KSM | | ||
| | `attributeDepositBase` | 0.002 DOT | 0.000666666666 KSM | | ||
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| ### Short- and Long-Term Plans | ||
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| The plan presented above is recommended as an immediate step to make Polkadot a more attractive | ||
| place to launch NFTs, although one would note that a forty fold reduction in the Item Deposit is | ||
| just as arbitrary as the value it was replacing. As explained earlier, this is meant as a subsidy to | ||
| gain more momentum for NFTs on Polkadot. | ||
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| In the long term, an implementation should account for what should happen to the deposit rates | ||
| assuming that the subsidy is successful and attracts a lot of deployments. Many options are | ||
| discussed in the [Addendum](#addendum). | ||
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| The deposit should be calculated as a function of the number of existing collections with maximum | ||
| DOT and stablecoin values limiting the amount. With asset rates available via the Asset Conversion | ||
| pallet, the system could take the lower value required. A sigmoid curve would make sense for this | ||
| application to avoid sudden rate changes, as in: | ||
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| $$ minDeposit + \frac{\mathrm{min(DotDeposit, StableDeposit) - minDeposit} }{\mathrm{1 + e^{a - b * x}} }$$ | ||
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| where the constant `a` moves the inflection to lower or higher `x` values, the constant `b` adjusts | ||
| the rate of the deposit increase, and the independent variable `x` is the number of collections or | ||
| items, depending on application. | ||
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| ## Drawbacks | ||
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| Modifying deposit requirements necessitates a balanced assessment of the potential drawbacks. | ||
| Highlighted below are cogent points extracted from the discourse on the [Polkadot Forum | ||
| conversation](https://forum.polkadot.network/t/polkadot-assethub-high-nft-collection-deposit/4262), | ||
| which provide critical perspectives on the implications of such changes. | ||
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| Adjusting NFT deposit requirements on Polkadot and Kusama Asset Hubs involves key challenges: | ||
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| 1. **State Growth and Technical Concerns**: Lowering deposit requirements can lead to increased | ||
| blockchain state size, potentially causing state bloat. This growth needs to be managed to | ||
| prevent strain on the network's resources and maintain operational efficiency. As stated earlier, | ||
| the deposit levels proposed here are intentionally low with the thesis that future participants | ||
| would pay the standard rate. | ||
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| 2. **Network Security and Market Response**: Adapting to the cryptocurrency market's volatility is | ||
| crucial. The mechanism for setting deposit amounts must be responsive yet stable, avoiding undue | ||
| complexity for users. | ||
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| 3. **Economic Impact on Previous Stakeholders**: The change could have varied economic effects on | ||
| previous (before the change) creators, platform operators, and investors. Balancing these | ||
| interests is essential to ensure the adjustment benefits the ecosystem without negatively | ||
| impacting its value dynamics. However in the particular case of Polkadot and Kusama Asset Hub | ||
| this does not pose a concern since there are very few collections currently and thus previous | ||
| stakeholders wouldn't be much affected. As of date 9th January 2024 there are 42 collections on | ||
| Polkadot Asset Hub and 191 on Kusama Asset Hub with a relatively low volume. | ||
|
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| ## Testing, Security, and Privacy | ||
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| ### Security concerns | ||
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| As noted above, state bloat is a security concern. In the case of abuse, governance could adapt by | ||
| increasing deposit rates and/or using `forceDestroy` on collections agreed to be spam. | ||
|
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| ## Performance, Ergonomics, and Compatibility | ||
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| ### Performance | ||
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| The primary performance consideration stems from the potential for state bloat due to increased | ||
| activity from lower deposit requirements. It's vital to monitor and manage this to avoid any | ||
| negative impact on the chain's performance. Strategies for mitigating state bloat, including | ||
| efficient data management and periodic reviews of storage requirements, will be essential. | ||
|
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| ### Ergonomics | ||
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| The proposed change aims to enhance the user experience for artists, traders, and utilizers of | ||
| Kusama and Polkadot Asset Hubs, making Polkadot and Kusama more accessible and user-friendly. | ||
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| ### Compatibility | ||
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| The change does not impact compatibility as a `redeposit` function is already implemented. | ||
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| ## Unresolved Questions | ||
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| If this RFC is accepted, there should not be any unresolved questions regarding how to adapt the | ||
| implementation of deposits for NFT collections. | ||
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| ## Addendum | ||
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| Several innovative proposals have been considered to enhance the network's adaptability and manage | ||
| deposit requirements more effectively. The RFC recommends a mixture of the function-based model and | ||
| the stablecoin model, but some tradeoffs of each are maintained here for those interested. | ||
|
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| ### Enhanced Weak Governance Origin Model | ||
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| The concept of a weak governance origin, controlled by a consortium like a system collective, has | ||
| been proposed. This model would allow for dynamic adjustments of NFT deposit requirements in | ||
| response to market conditions, adhering to storage deposit norms. | ||
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| - **Responsiveness**: To address concerns about delayed responses, the model could incorporate | ||
| automated triggers based on predefined market indicators, ensuring timely adjustments. | ||
| - **Stability vs. Flexibility**: Balancing stability with the need for flexibility is challenging. | ||
| To mitigate the issue of frequent changes in DOT-based deposits, a mechanism for gradual and | ||
| predictable adjustments could be introduced. | ||
| - **Scalability**: The model's scalability is a concern, given the numerous deposits across the | ||
| system. A more centralized approach to deposit management might be needed to avoid constant, | ||
| decentralized adjustments. | ||
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| ### Function-Based Pricing Model | ||
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| Another proposal is to use a mathematical function to regulate deposit prices, initially allowing | ||
| low prices to encourage participation, followed by a gradual increase to prevent network bloat. | ||
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| - **Choice of Function**: A logarithmic or sigmoid function is favored over an exponential one, as | ||
| these functions increase prices at a rate that encourages participation while preventing | ||
| prohibitive costs. | ||
| - **Adjustment of Constants**: To finely tune the pricing rise, one of the function's constants | ||
| could correlate with the total number of NFTs on Asset Hub. This would align the deposit | ||
| requirements with the actual usage and growth of the network. | ||
|
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| ### Linking Deposit to USD(x) Value | ||
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| This approach suggests pegging the deposit value to a stable currency like the USD, introducing | ||
| predictability and stability for network users. | ||
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| - **Market Dynamics**: One perspective is that fluctuations in native currency value naturally | ||
| balance user participation and pricing, deterring network spam while encouraging higher-value | ||
| collections. Conversely, there's an argument for allowing broader participation if the DOT/KSM | ||
| value increases. | ||
| - **Complexity and Risks**: Implementing a USD-based pricing system could add complexity and | ||
| potential risks. The implementation needs to be carefully designed to avoid unintended | ||
| consequences, such as excessive reliance on external financial systems or currencies. | ||
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| Each of these proposals offers unique advantages and challenges. The optimal approach may involve a | ||
| combination of these ideas, carefully adjusted to address the specific needs and dynamics of the | ||
| Polkadot and Kusama networks. |