I don’t think anyone (or at least not a significant number of entities) votes manually on proposals that are not Governance, and as far as I am aware onboarding node providers fall into a different category.
Therefore they are onboarded by DFINITY.
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We’re all human. People make mistakes. It’s a flawed logic to assume that they can do no wrong.
The data shows we’re on the brink of an inflation spiral, with very little limiting where it actually stops: according to current parameters, we’ll settle at ~30% Inflation annually between Nodes & Neurons.
It’s very possible it was simply an oversight.
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Humans can make mistakes indeed, 100% agreed on that.
What doesn’t make sense in my mind is why isn’t someone at DFINITY (especially someone from the higher ranks who should be completely aware of this) pulling the plug and preventing this inflation spiral if it’s an impending one.
I’m not trying to be a contrarian here, but for me to see this as a threat, the answer to my question above needs to make sense.
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They’ve stated within this thread they recognize this is a valid concern & that solutions should be explored further.
Why haven’t they done it internally? I don’t know. Again, maybe it was an oversight.
Regardless, it’s in discussion now.
An oversight in this situation doesn’t make sense. If the inflation spiral is real and upon us, it means this is a life and death situation and internal oversight is unacceptable, imo.
I’ll make sure to read the whole thread to get a better idea on the topic since I just joined the discussion.
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For the purposes of illustrating that deflation doesn’t lead to increased price (at least short term). I would like to submit this eth 2.0 supply chart showing the eth supply post merge. Likewise, if ICP seeking to avoid an inflationary spiral brought on by NP provider rewards, through increase of price by becoming deflationary, that is not sufficient to result in price increase. The balance of buyers to sellers must also be adjusted so there are more buyers.
That is to say, that as I described here Node Provider rewards should be aligned with appreciating ICP rather declining ICP. How can NP incentive structure be adjusted to coincide with an appreciating ICP price rather than a declining ICP price? Because currently, If i were a node provider, i would prefer for the ICP price to temporarily decline in value so I could receive more ICP, and then sell it for a profit when the price of ICP goes back up. Over time, NP would gain increasingly large control over the network.
This is why so many node providers are seeking to be onboarded despite a declining ICP price. One option would be if the NNS allocated ICP and deposited an insurance fund which allocated a certain amount of ICP dedicated for NP compensation into a covered call option strategy, in the event of a ICP price decline, the covered call options returns would be used to pay for the node provider rewards without having to sell or mint any new ICP . On the other hand, if the price of ICP appreciated, and the covered call strategy was in the red, then new ICP could be minted to pay for NP rewards.
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Cross posting this forum post with analysis and suggestions for next steps here.
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This is a great point. I’m not sure anyone is really paying attention to these proposals and voting on them independently. The proposal topic still falls under All Topics catch all, which means most of the NNS votes when Dfinity votes. A problem we have is that there is no incentive for anyone to put in the extra work it takes to review and decide if a new node provider is really needed. Sure we can say that we should all have a vested interest to prevent over inflation, but that just means most of us need to follow someone with suitable expertise. Of course, Dfinity has this expertise, but if the community wants an alternative there is nobody who is incentivized to contribute to the IC in this way.
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Please don’t interpret DFINITY’s silence as a sign that we haven’t talked about this topic internally. Rather, it’s strategic silence to allow for fruitful and expansive conversation. We are aware that once we propose a solution it tends to sway the conversation, which early in a conversation is a non-optimal approach. The conversation on this topic has been extremely constructive and many community members have expressed ideas that show an innovative approach towards a solution.
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Thank you very much for your wonderful inspiration and works！
Let’s continue to discuss and explore these solutions in more detail or address any specific aspects you have in mind regarding the ICP token economics.
Rebuilt and Reimagined the ICP Customized AI-enabled real-time updates Economics(The economic base determines the superstructure!)Avoiding inflation and death spiral!
I don’t intend to imply that DFINITY has not discussed it internally (@bjoernek recent post certainly shows it has been contemplated within the Foundation), I was rather responding to @BasedGiant semi-rhetorical question implying that the situation is not deemed a threat unless DFINITY is raising the thought that an inflation spiral is imminent. However, I’d have to imagine leading into this conversation, the “Inflation Spiral” subject was not too hot of a topic within the foundation.
Regarding the foundations reasoning to avoid public discussion amidst solutions being weighed against each other - I can completely understand. Typically when the Foundation gives its opinion it sways the sentiment of the ecosystem rather swiftly.
Just wanted to add that I really appreciate how active & critical the Foundation has been in regards to this (& a few other topics) as of late. Changes like this do not go unnoticed🤝
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Very pleased to see a lot of thought going into engagement with community from dfinity as well as the receptive and engaging behaviour I’ve seen this whole thread which has been a historic moment for the forums
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Two small impacts that could assist in solving this issue without side effects based on a mundane comprehension of this evolving, complex system.
- Properly charge/burn for queries.
- Pay node providers 1 month from their unique start date, as opposed to all at the same day to distribute liquidity.
There is likely other factors that could be modified without consequence for marginal efficacy.
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I’ll start voting against new nodes. Good call, friend.
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It’s true that contraction of supply does not simply increase price, and that expansion of the supply does not alone decrease price. As an obvious example, the federal reserve is presently extracting US Dollars from the global economy but there is still inflation in terms of USD.
But if the federal reserve were still expanding the supply of money we can be sure inflation would be higher. There is definitely a relation between change in supply and inflation.
Anyways just a thought. I appreciate this conversation taking place and that Dfinity is listening.
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If we are creating this inflation spiral by onboarding new NP for decentralization then it seems as we assign new nodes to subnets to increase decentralization in a subnet the nodes that are removed from a subnet that CANNOT be allocated to decentralize another subnet should get removed completely. This would help mitigate inflationary pressure from onboarding to decentralize.
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I don’t think 5% increase in supply is a death spiral
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As an early observer and participant, I’ve witnessed ICP’s growth and its journey in fostering decentralization. Last year, there was a noticeable lack of NP, especially from non-Western regions. A true sense of decentralization seemed elusive, with the majority of NPs originating from the Western world, predominantly the USA. Dfinity’s decision to offer rewards based on geographic location was a commendable one. This made many eastern parts of the world invest in ICP for nodes. The cost usually starts around 100,000 USD and above. Opex from the Eastern region for connectivity is significantly high and comes with long term contracts, thus NP’s have who have already deployed and are deploying have signed up for long term contracts with connectivity partners. Thus my suggestion is to have a good strategies on a short term solution with a balanced solution.
Suggestion #2
From the perspective of Node provider, the current hardware and data center requirements set by ICP are spot-on. They shouldn’t be altered. Lowering the bar, say by allowing any standard computer to participate, risks compromising system uptime and reliability. This is a key reason why many decentralized computing platforms haven’t sustained. ICP stands tall, but we must remember that it’s in competition with industry giants like Amazon, Google, and Microsoft in the cloud sector. ICP’s decision to anchor in Tier 3 data centers is a strategic masterstroke. Using non-enterprise hardware should be avoided to maintain the platform’s integrity.
Suggestion #3
Drawing from my experience as a software service provider, I’d urge Dfinity to increase its marketing strategies. There’s a ripe opportunity to reach out to SaaS companies(Software companies that build software for clients as a service), encouraging them to develop and deploy on ICP. While ICP offers brilliantly simple tools for deploying static sites, Vue, HTML, Angular, and more, there’s still a considerable gap when we compare deployments on platforms like Firebase to ICP.
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Thanks for sharing your suggestions.
This is a good point that is important to remember. Diversity of node providers helps advance decentralization and there was a big push to on board node providers from under represented areas of the world.
This is a common request by the community. I think it’s perfectly valid for the community to want DFINITY to increase marketing strategies. I also wonder if DFINITY is constrained in ways that we don’t often recognize as a community. For example, DFINITY is a non-profit organization that stood up a crypto token that many people want to believe is a security or could be designated as a security. If they apply significant resources for marketing and promotions, especially if it moves ICP price, then I wonder if it will have a negative impact on their non-profit status or government rulings on the security status. It seems to me that we need other organizations to fulfill a role for marketing of ICP. I’d like to see the community support multiple large and professional organizations that can fill this role.
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This is a great thread and it has raised a huge number of interrelated issues. I’ve been thinking about this a ton over the past week and reading through all of the responses. I have also gone back to look at currency hyperinflation - what causes it and what happens.
My reaction after having thought about it is that there are a ton of things to solve but the issue that was raised was hyperinflation and the idea of an existential risk caused by a collapse in token price. The answer to that problem is to cap the inflation rate/defer and break the dependence on price and the idea of a spiral. We actually don’t know what level causes a runaway problem but looking at other examples, something like 12% per annum and 1% per month as a guess for illustrative purposes might be reasonable.
I haven’t checked Tromix’s numbers (on post number 5, something like a $1.25 per ICP) is where the problem occurs. So at that point, monthly NP rewards would be capped/deferred. If ICP keeps dropping beyond that level, at some point maturity might take a portion of the impact.
One element that has not been extensively discussed on the thread is the issue of trust and community confidence. Dfinity/ICP has to be one of the most ethical and trustworthy networks out there and with the best tech/technical talent. Yet the network has been under siege from the beginning from others - it hurt the launch a lot (FTX, lawfare attacks, manipulators). I am not sure that a lot of the actions that have been discussed will actually reduce sell-side pressure and that to the contrary, they could dramatically accelerate it. We keep ignoring the fact that there are something like 250 million unlocked tokens and if you diminish trust in the network and people wash their hands of ICP that will hurt the network more than the inflation issue we are discussing. So things like just locking maturity, and canceling rewards need a lot more thought and really aren’t part of the issue that this initial thread was launched to discuss.
I think most stakeholders and fans of the IC can get their head around trying to take the idea of an accelerating downward spiral off the table (who wants that other than people that hate the IC?). So, I would propose that we focus on an inflation cap.
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