lets say crypto has a huge wipeout suddenly and price drops massively to something like 1 cent per ICP. If node provider monthly costs are ~400 dollars, that means 40,000 ICP printed per node machine, 500 node machines, thats 20 million ICP printed for one month’s costs, and those 20 million are instantly sold because they need to be converted to USD to cover the fees incurred by the node providers and machines.
The dashboard says there are only 44 node providers, but 500+ node machines, thats seems extremely centralized if those machines are provided by only 44 different entities and I’m not sure I would want to re-appoint the current ones, at least not all of their machines. Let other people have a chance instead of the obvious and excessive cronyism.
I’m not worried about the mythical run away inflation “death spiral”, that seems unlikely, fixable (off boarding and reducing rewards), and also doesn’t seem to matter for other blockchains…
I’m not worried about minting a ton of ICP in order to bootstrap the network. This seems to be an entirely sensible strategy to grow the network capacity to the level where it can support significant usage and claim market share.
What concerns me is whether the ICP has a sustainable business model long term as usage increases, or whether costs will just be subsidised by minting more ICP than is burned forever. We need to be able to say something like “In 5 years time when usage is > 60% of capacity operating revenue will greater than operating costs and more ICP will be burned than minted”
This is a relatively simple matter of ensuring the economic parameters are set correctly so that a subnet operating at some achievable level of usage is profitable.
If a subnet has 13 nodes and each node provider is paid say $2000 then costs are $26,000 a month.
So filling up the capacity of that subnet should cost significantly more than $26,000 a month.
It really is that simple.
If this is already the case. We just need some simulations which prove it is the case. (What usage level corresponds to profitability?)
If it is not the case we need to either increase the usage costs (msg, compute, storage), increase capacity, reduce the node rewards, or some combination thereof.
Edit
Perhaps I am being dumb here but this looks like we are valuing 100% usage of the compute capacity of a subnet at $36/month, which seems insane.
What you describe is (at least theoretically) possible, I am not saying that it isn’t. What I was trying to say is that we’ll have about one month to react, even if things would go that way.
Hi @Hashimoto, for calculating the cycle burn/compute capacity of a subnet one would need to consider update call cost, storage cost, canister installs and Xnet messages (number & size). In addition one would need to consider potential pricing of operations which are currently still free (e.g. query calls).
According to calculations, the death spiral is unlikely to happen. However, we should also have a plan to prepare for that situation (no one is sure what can happen) so anyway prepare a plan in advance to be able to react quickly when the worst case happens.
Absolutely true. That decision was absolutely horrendous and I think we have yet to see the price the network will pay for such an illiberal economic policy.
But what you describe is a death spiral. What you describe is a company that issues shares to cover the costs of producing some service which it sells at a discount to the cost, each round the company needs to issue more shares at a lower price point to cover the costs.
Hence death spiral.
Also what you ignore is that a lot of the other coins out there well at least many of the top tier ones are able to sustain higher prices because of a fan base and hype as prior generations of investors have made money off the ponzinomics so to speak. That’s not the case with dfinity because of the way the seed was locked up it ensured a long period during which investors are losing money and that had a negative social loop that scares away new investors because people jump in when their friends are making money and do the opposite when they see their friends lose 99%. There is definitely a sort of luck component in crypto where the successful networks are bootstrapped from positive crowd outlook of speculators that icp lacks which unfortunately we have to deal with and I personally think is a significant handicap.
So some people here might call that fud but I call that reality.
Anyway I’m going to start unlocking my 8 year neurons this winter. If the price continues downward well into next year I will stop voting as the costs of doing accounting paperwork (book keeping, various govt/tax filings, other costs running a corp related fees) and paying taxes on the income while the underlying asset continues to lose value just don’t make business sense.
I don’t know who else is in the same boat as me but I’m taking a wild stab in the dark here that unless you have the money and lawyers to set up some offshore company and also have connections to invest in node operations this just doesn’t add up as a serious business money making opportunity for others.
Combine that all with this systemic risk albeit small overall there just isn’t anything attractive to continue to invest time and money into this
I have to admit I have also been devastated by this coin, why does Dfinity seem to completely avoid addressing it? Every point @superduper has raised is valid.
I have been in crypto for a decade and have never seen a coin like this, where it only crashed violently, where all loyal supporters were ripped apart and fleeced. And nothing was done to address it. You could at least say sorry for creating this situation.
They can easily solve this death spiral problem but decide not to. I still think this project has potential later on but the tokenomics are trash. The idea is great but how dfinity treats its backers and the terrible tokenomics will be the fall of this project.
I think something Johnny Depp’s lawyers said about why the jury believed him and not Amber Heard is relevant: they said Depp accepted many flaws while denying the central charges, while Heard refused to take accountability for doing anything wrong, which is why the jury ended up disbelieving her about everything.
If Dfinity would only say, “We are sorry we messed up the launch, we were unfair to seed participants, and our predictions of network uptake were way out of whack” most people will believe them when they deny the worst accusation, and frankly the only one that weighs on ICP’s reputation and price, which is that the whole thing is a deliberate rug pull.
I can only assume Dfinity’s stance is a result of being scared of lawsuits if they admit any wrongdoing. That’s the only cause that rationally explains their obdurate refusal to come clean. At least I hope that is the reason.
Indeed maybe it is the lawsuit thing but they could pull a Janet Yellen. A little bit of humility goes a long way. Don’t think we will see it happening here and then 3 yrs on people at the foundation will be scratching their heads wondering why other networks are seeing explosive use.
An apology won’t fix much in the situation we’re in. It could change the publics light on the project. But I also think changing the tokenomics and paying out node providers with a stable coin rather than ICP would fix a lot.
Based on what I’ve read through these forums the devs haven’t given up on the project. I don’t want this project to die in two years when dfinity runs out of funds to support the project. If they can fix the tokenomics I think this project will stay for good.
You are absolutely right on the adoption front. The devs have NOT given up on this project. The adoption curve is increasing. Hard work in the bear markets (overall macro) does pay off in the long term.
On paying the node providers in stable coins instead of ICP. Are you suggesting that the NNS convert a massive amount of ICP to Stable Coin right now; in anticipation of a negative price correction in the future so that NNS has enough stable coins to pay the node providers for the next year or so?
Would you please clarify why Dfinity needs to apologize to seed investors? They bought at $0.04/ICP about 5 years ago and were given 48 monthly allocations of their ICP starting a year ago, of which 1 installment was fully unlocked on day 1. The price of ICP in the first month ranged from $500ish to $66 with average around $140. Hence, they could have sold just the entire first allocation at over a 72x multiplier of their entire investment…and they still had 47 more installments waiting for them with tokenomics that
heavily favor dissolving those neurons because of the vesting schedule that delays liquidation of seed investors. It seems like a very impressive return for a 5 year investment…at least I wish I had that opportunity. I personally think the tokenomics have been incredibly beneficial to seed investors even if the vesting schedule was not expected or desirable to many. I guess I don’t really understand how seed investors were treated poorly by Dfinity when they have benefited so richly. I look at this from a post genesis personal investor perspective, so I can only wish I were one of the seed investors. I would trade places with any of them any day if that were an option.
Everyone had a vesting schedule. My understanding is that only the very earliest contracts didn’t have a vesting schedule and there were very few of them. At least that’s what I’ve heard, but TBH don’t have personal knowledge. That info may be in the original Messari report, but I’m not certain.
In calculating the value of an investment over time one needs to factor in not only profit but opportunity cost. In this case, how much would a person have made if, instead of putting money into the seed fund, they had invested it in other crypto assets over the same period. For instance, Binance launched its coin around the same time, and had provided a 500x return at the point Dfinity launched on exchanges.
Secondly, it was the manner in which the whole episode was handled (or not handled) that was worth an apology. The entire mess is described on a couple of threads on this forum, so I do not need to repeat it.
The vesting is used in the whole crypto space and always announced before the fundraisings. I never understood the general critics against Dfinity as if they were the only ones to use vesting mechanisms and as if they did it without warning people (if such a warning is still needed…).
