Node Provider Inflation Spiral

Governance
3

Hi @Accumulating.icp thanks for posting. I’ve been interested in this topic for a LONG time (here’s a blog I wrote back in May '22 prior to joining DFINITY: Death By Node Rewards?, Part 2 - by Kyle Langham). I love that we have a community that is engaged in these topics and is as passionate as I am to analyze tokenomics from a data perspective.

I’d love to work on improving your model as I think the approach to understanding NP rewards in the context of exchange liquidity is novel and provides another perspective on the topic. Prior to that though, I want to express to everyone reading my perspective that ICP sent to exchanges from node providers is still small relative to the amount of ICP sent to exchanges from neurons dissolving or maturity. For this reason, I still have no concerns over the sustainability of the current tokenomic approach.

Regarding the analysis in the OP, a few things pop out:

  1. For those who don’t know, you can track node provider rewards on this page: Circulation - ICP Dashboard. Last month there was ~580k ICP in node provider rewards.
  2. The claim that 50.5% of NP rewards are sent to exchanges matches a recent calculation I performed that suggested 65% of NP rewards are sent to exchanges (differences are most likely due to chosen timeframes). Many NP chose to receive their rewards in their Coinbase or Binance accounts, so it’s hard to tell if they are selling the ICP or if they are using Coinbase or Binance as the custodian.
  3. @Accumulating.icp - I’d be interested in knowing more about how you chose your date ranges for “Pre Distribution” and “Post distribution” calculations. It seems random from what I can tell:
    Feb [-14 days, +18 days]
    Mar [-14 days, +74 days]
    Apr [-0 days, +25 days]
    May [-17 days, +9 days]
    June [-5 days, +60 days]
    July [-2 days, +5 days]
    Or perhaps I’m misunderstanding the analysis?
  4. The list of hot wallets for exchanges is missing a few. I’ve identified a total of 14 highly-likely hot wallets for exchanges. In addition there are ~20 cold storage wallets I’ve identified as likely owned by exchanges. I’m happy to share those addresses if desired. Nathan Scotland has done great work in this area as well. Net result is I believe there is 66M ICP in wallets controlled by exchanges.

I’d love to keep this conversation going to flesh this analysis out more. Let me know how I can best help.

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