Hey ICP fam – Imagine checking in.
As I’m sure many of you In-Tune ICP folks are aware, there have been several discussions recently about the inflation of our protocol. Specifically referring to comments @chepreghy & @Kyle_Langham had regarding the most recent episode of the neurotic podcast.
I’m surmising here from personal judgement, but essentially, the premise is something of the sorts:
- “Rewards should be limited by X amount until the IC reaches profitability”
- “Rewards should be limited unless they are directly, or indirectly, contributing to the growth of the network.”
I must admit, my initial thoughts on this made me infuriated. After thinking about it for some time, I decided to just look at the data the Dashboard already hosts. Let’s make this black and white folks:
Circulating supply of ICP as of 5/11/2021 - 123,103,469
Total supply of ICP as of 9/29/2022 – 469,213,683
Circulating supply of ICP as of 9/29/2022 – 262,243,167
Total Supply of ICP as of 9/29/2022 – 489,975,184
Staked dissolving as of 11/6/2021 – 121,235,398
Staked dissolving as of 9/29/2022 – 86,307,380
Circulating supply increase: 113% (Horrible)
Total Supply Increase: 4.42% (Very solid honestly)
Staked dissolving neurons: -28.56% (Very, very solid)
Using the simple math above, one could reasonably assume the tokens are becoming sufficiently distributed amongst holders. Staked dissolving quantities have been trending downwards, and Total Supply is barely moving upwards in proportion to the rapidly growing circulating supply. However, over this time, the price of the underlying token has taken a nosedive. This leads me to believe supply is simply outpacing the demand for the token. And thus, we can reason a few things:
- How can we reduce the supply? - How can we increase the demand?
I believe the latter is self-explanatory – System adoption, Robust applications people are using, novel features that drive adoption, marketing efforts, etc. Fairly straightforward – and which I believe the Foundation and Developers are overwhelmingly doing an outstanding job (Maybe excluding marketing lol. But been MUCH better as of recent)
Arguably more important for the short to midterm - How can we reduce the supply such that the inflationary mechanisms are more muted? Some half-baked thoughts:
- For Neurons who have had zero system activity since genesis, do not provide rewards. A proportion of rewards should be burned, and perhaps a proportion of rewards should go into the Treasury. (There are clearly a million more questions that arise from this, but just fancy the thought for a moment in respect to the supply situation)
- Please note – when I say zero system activity I’m directly referring to those who have had staked neurons since genesis, have not logged on, have not actively/passively voted, have not staked, have not raked, etc. They’ve quite literally done nothing.
- Consider linear reduction in the inflation rewards, EXCLUDING 5-6-7-8 year neurons. (As a means to incentivize those to stake longer. One can assume this supply will always be locked and is essentially eliminated from the supply forever. Yes, I realize the protocol is “Mutable” – just consider for a moment)
- I believe those who stake LESS time should be rewarded, but why does my 6-month neuron get 10% when my 8 year gets 20%? Seems totally ridiculous. This should be a MUCH more extreme difference. If I was a LARGE genesis holder (Disclaimer, I’m not lol. Not even genesis) I would just front run everybody in a 6-month stake for 10%. I literally have a percentage of my holdings in a 6-month neuron for this very reason! If price appreciation DOES occur, I would just dump at the highs. You understand the dilemma? REDUCE them (Me!) to an even smaller proportion. They can either dump it down here, hold it and eat the passive inflation effects, or stake it into a longer neuron.
- Increase transaction costs from .0001 to .001
- Rewards are a direct proportion of a moving average of burn rate (Excellent idea by @Mancopter / @varon1980 on Twitter! )
These are just some half-baked ideas. Rather, I hope to encourage the community to come and join in on some civil discourse. (Whoever, you are on that Subreddit, well done… ) It is unfair for me to verbally attack those who have taken it upon themselves to propose a mere question. Some of the responses to Kyle and Andrew are just nauseating. Think of the time both have poured into making this community, and the ICP great. You mock them for making one claim you disagree with? Heck, I personally disagree with them both. But shame on us for ostracizing them with half ***** strawman arguments. The other half just tries to strong arm the discussion with their so called Insightful [antics] replies. Their motive was clearly to force the community into discourse on this subject …Smell the roses people, our community is lacking somebody in a leadership capacity right now. Food for thought…
Much love ICP Fam.