Possible Optimizations of NNS Tokenomics (Updated!)

[CA1]

@justmythoughts

If a “grandfathered”, two-tiered approach does end up passing and allows investors to keep their >5 year neurons, we’d undoubtedly soon see 8 year neurons going for significantly higher prices on these secondary marketplaces.

So what if the price for 8-year neurons increased; the people who are early (and probably planned to never unstake anyway) should be rewarded regardless. What is your actual argument against having a two-tiered system, because I couldn’t actually find any arguments besides the secondary market one, which doesn’t even directly refute the point of rewarding early investors and people who never planned to unstake.

Addendum: in most intellectual forums it is given that the person with the positive claim has to provide evidence for their claims. In this sense, I think it is completely fair to assume the burden of proof (I.E providing good reasons) for changing the entire system from 8-years to 5 lies with the people who make the claim. I don’t think it is reasonable to simply provide an opinion (even if you are part of the 8-year-gang), if you are on the side of changing the entire system, if you are not willing to provide substantive arguments for those changes. Keep in mind that there are people (not me) who have staked 10k+ ICP with the understanding that they are in this for the long hall.

[justmythoughts]

@CA1

So what if the price for 8-year neurons increased; the people who are early (and probably planned to never unstake anyway) should be rewarded regardless.

There is no way to anticipate what people plan to do in terms of staking and dissolving.

And there is no “early”. We already have neuron marketplaces now, and it will become even easier to transfer neurons in the coming months. I wouldn’t be surprised if someone creates a wrapped neuron token and ledger canister to be honest.

I ran this poll in mid-March (before the neuron restriction changes were proposed). Having neuron marketplaces is overwhelmingly influencing ICP holders’ decision to stake funds for a longer period of time.

justmythoughts

We can pretend these secondary effects don’t exist, but there have already been others in this thread mentioning the immediate rush to create said 8-year neurons before the change is implemented. Being able to both create a “bonused” neuron & then sell it later on a neuron marketplace (after collecting rewards for awhile) is getting to “have your cake and eat it too”.

I believe newcomers to the ICP ecosystem would see this system as unfair as well.

There’s also the simplicity of the absolute solution without exceptions. How is this system maintained if the NNS wants to change tokenomics yet again in the future, but maybe lower the maximum to 4 years? Are the 5 year holders now second-level OGs?

@CA1

Addendum: in most intellectual forums it is given that the person with the positive claim has to provide evidence for their claims. In this sense, I think it is completely fair to assume the burden of proof (I.E providing good reasons) for changing the entire system from 8-years to 5 lies with the people who make the claim. I don’t think it is reasonable to simply provide an opinion (even if you are part of the 8-year-gang), if you are on the side of changing the entire system, if you are not willing to provide substantive arguments for those changes. Keep in mind that there are people (not me) who have staked 10k+ ICP with the understanding that they are in this for the long hall.

I think this makes my earlier point quite clear about how this proposal change is flipping the tables on short-term vs. long-term thinking for stakers.

And in this case, I believe most 8-year neuron holders thinking with short-term interests in mind. It’s not a bad thing to be profit driven, I’m a capitalist myself. I purely feel many of the 8-year stakers are looking at their short-term APY and not looking at the serious inflation issues the network and ecosystem are facing, especially given the current imbalance against ICP → cycle burn (which will come in time as computation increases on ICP).

[CA1]

I never said that the secondary effects don’t exist, IDGeek is definitely a thing, and you could argue that it is potentially a problem.

BUT

These are early days, we are all early adopters, and we should be rewarded for it.
The solution I think most people actually want in terms of grandfathering would create a very finite supply of 8-year-neurons in long-term, and with wallets increasing globally the number of grandfathered neurons would always be decreasing. Obviously we could argue inflation numbers all day, but again, you are making the positive claim to change the system, and there are other ways to deal with inflation besides slicing the 8 year cap.

EDIT: To be clear: I am not even against adjusting the APY to combat inflation, if this is done correctly. If for instance the APY is rescaled so that only the 8-year-neurons get what the 5-year neurons currently get. My principal issue is that you are gutting some long-term investors (mainly the 8-year-gang) in the proces.

[AmSpeed]

I agree with this. The APY will only go down by like 3% that’s not bad at all! Even if your 10k ICP turns to 8k ICP, wouldn’t it be better to have a 8k ICP that’s worth 8 million than a 10k ICP that’s worth 1 million because if inflation?

This proposal will:
Reduce inflation significantly, increase the price of ICP which will reduce the amount of ICP minted for node provider rewards and to top it off, AI requires a lot of computational power which will burn a lot of cycles hence further increasing. That’s not even taking into account the enterprise adoption or any other adoption.

We have to zoom out a little to see the big picture.

I’d say keep the initial proposal.

[tcpim]

One benefit to give stakers time to think and decide is that many people with with < 5 years neurons may increase the dissolve delay from <5 years to >5 years to lock in the benefits of higher rewards ratio that will never be seen again after the proposal kicks in. So, many new 8 year gangs will be created! Saying this because, I myself, am considering to increase one of my neurons to 8 years if this proposal is about to pass, to achieve higher rewards that no new stakers will be able to achieve in the future.

I think this is another pros for this proposal, although this is a side effect

[AmSpeed]

Further increasing deflation*

[justmythoughts]

@CA1

These are early days, we are all early adopters, and we should be rewarded for it.

This is one of the things that the neuron age bonus already accounts for. If you’ve been staked since genesis, you already get a significant boost to both rewards and voting power.

@CA1

Obviously we could argue inflation numbers all day, but again, you are making the positive claim to change the system, and there are other ways to deal with inflation besides slicing the 8 year cap.

Inflation is the primary driver for this proposal. The NNS can make one-off improvements like a periodic followee reset, but in the long term reducing rewards across the board (to Node Providers too) is the most sustainable solution.

Countries and currencies all around the world are dealing with inflation right now. It’s painful, and the solutions usually require some short-term pain (interest rate hikes, etc.).

@AmSpeed

We have to zoom out a little to see the big picture.

[CA1]

@justmythoughts

Inflation is the primary driver for this proposal. The NNS can make one-off improvements like a periodic followee reset, but in the long term reducing rewards across the board (to Node Providers too) is the most sustainable solution.

Okay then, so how do you feel about a grandfathering system, where all we do is rescale the APY so that the 8-year-gang gets the current max of 5-year, and everything inbetween scales linearly?

[Heihachi]

For old 8 year gang stakers there should be an option whether to choose conversion to 5 year for their neuron or remain 8 year non dissolving stakers.

[justmythoughts]

@CA1

Keep in mind that there are people (not me) who have staked 10k+ ICP with the understanding that they are in this for the long hall.

Keep in mind that the person who created this post, @dominicwilliams, probably has a longer-term ICP vision and more ICP staked in an 8-year neuron than the collective ICP of all posters in this thread combined.

You may feel rugged, but this affects him just as much (if not more than) any other 8-year staker.

ICP Inflation → depressed price of ICP → bad looking chart → less investors → node provider rewards inflation → further ICP price depression.

[FranHefner]

@dominicwilliams @aiv

I believe both ideas can coexist together. If there is true trust in ICP, why not add the option to 'Lock forever’?

Then you would have half of the 8-year neurons transitioning to 5 years and half of the neurons opting to ‘lock forever.’ (We don’t really know if it’s exactly half, but let’s consider this scenario).

So, all investment funds/big investors that are prohibited from locking their assets forever would transition to 5 years, and people like us who truly believe in ICP can lock them forever (maintaining the % reward).

Everything else, as Dom mentioned, would proportionally decrease from 5 years to 3 months in terms of reward percentages, thus reducing inflation.

Scale:

• 1-5 years (with reduced rewards)
• Locked forever (with the current rewards we deserve for locking it forever)

What do you think of this idea?

• Good
• Bad
• I’m not sure

[wpb]

Hey @dominicwilliams thank you for starting this conversation and staying so actively engaged in it for so long. There are some excellent points that have been made by many people and it is very interesting to see how several iterations on proposal 1 have evolved. Personally, I’m not excited about reducing the dissolve delay by 5/8, but I’m willing to consider it. Offering a one time option to leave a neuron at 8y or reduce it to 5y makes the idea more palatable. I even like the further tweak that was discussed of giving people an extended time period to make the decision and it only reverts to 5yr if they don’t make a selection. That said, I also agree with the arguments that we shouldn’t have a 2-tiered system between OGs and new neuron owners. I like the idea of treating all neuron owners equally and I don’t really want to create more drivers for neuron markets. Hence, I’m still undecided on proposal 1 and look forward to seeing how the idea develops in the coming days.

Regarding proposal 2, I think it is a great idea and I would like to see it move forward. I haven’t really heard any arguments against it yet that would make me reconsider.
Proposal 2 seems like it would provide a lot of benefit to neuron owners and the ecosystem.

[AmSpeed]

We should have a pole to kinda see where everyone’s head is at between keeping the initial proposal that Dom had plus what @LightningLad91 says (perhaps add an auto or manual restaking option to stake for another 3 years or even 5 after the initial 5 years for the OG 8 year gang that will build on top of the aging bonus?).

OR

The edited version where only new stakers are affected. (I think this is a little half a***d)

[antodugrenyc]

@dominicwilliams

I am in for proposal 1. Think it could have the potential to significantly enhance profitability.

The reduction in token supply resulting from Proposal 1 will create a more balanced supply-demand dynamic, potentially driving up the market price of ICP tokens. Increased scarcity makes us more attractive to the market who are seeking assets with limited availability. With Proposal 1’s deflationary effect, coupled with the existing utility for services on ICP, I see it strengthening the network and hopefully instilling investor confidence.

I’m willing to sacrifice a bit in token rewards to potentially gain a lot more in token value. Let’s face it, having a lot of tokens is worthless if they hold little value.

[ICPewPew]

I was also gonna say if it helps as well with inflation making it so that there is no auto stake feature with >5 Year neurons if its for the better of the eco. Maturity would be placed into a auto dissolve neuron and then you can either restaked into a 5 or less year neuron or do as you please with.

[Kick1776]

Agree. It seems the “reduction of required staking” is supposed to be a benefit to justify lower rewards. Many of us staked max without plans of dissolving…at all. So to reduce the maturity rate of our neurons is a slap with no benefit.

[Robert_Hon]

1. Reduce the dissolve delays of all neurons by 5/8th (to 62.5% of what they is today)

This is an absolutely wrong proposal that prioritizes collectivism over individual private property rights. We signed an 8-year NNS contract precisely because the value of locked neurons will be much higher than the ICP inflation in 8 years, believing in the long-term value of Dfinity and the ICP. Now, arbitrarily changing the 8-year lock-in to 5 years through a collectivist vote is a serious mistake, akin to Keynesianism. This logical error places equality above private property and trust, violating integrity.

However, I don’t oppose community decisions on whether to limit new staked neurons to 5 years, as this pertains to new contracts.

Frankly speaking, DOM, you should focus more on driving the impact of the ICP on the real world, focusing on DeFi, stablecoins, and helping to promote more SNS projects to CoinBase, Binance, OKX, and other CEXs, even if it means expanding ICP’s influence through meme marketing. Your focus is misplaced on tokenomics! Currently, all SNS projects have fallen below the price of ICP at the time of SNS, which is the biggest blow to the 8-year stakeholders, as the community is completely doubting the value of ICP and SNS.

All tokens on public chains, whether it’s ETH, SOL, DOT, NEAR, or ICP, will not have any cash flow income in accounting terms. Including Dfinity, as a non-profit organization, it won’t have any cash flow income either. Then, what’s the point of public chain tokens? Besides being decentralized commodities and internet currencies, public chain tokens have no other value. If public chain tokens cannot become widely recognized commodities or internet currencies in the real world, then the public chain is a complete failure.

DOM, please don’t evade the mission of ICP becoming a widely recognized commodity or internet currency. There are still many high-quality fiat currencies in the world: Pound CHF, GBP, EUR, JPY. For ICP to develop in the RWA and DeFi fields, it must face the competition from fiat currencies head-on, strive to face the free market, actively market itself, attract more stablecoins from around the world to come to ICP, only then will ICP have value. If blockchain cannot promote free trade, what’s the point of blockchain protecting private data?

Since World War II, with the abolition of the gold standard to the present, fiat currency inflation has been severe, and centralized fiat currency systems have been harvesting individuals’ savings and wealth. This is why BTC and ETH were born. If ICP is truly the third-generation blockchain, please don’t prioritize collectivism over contract credibility, please don’t make such foolish mistakes, uphold the value vision of BTC and ETH, integrate into the real world based on ETH DeFi’s experience, develop more RWA and stablecoin assets. Only then will the third-generation blockchain network have value; otherwise, ICP is just a small toy for a few geeks.

[Kick1776]

Starting to feel like Taggr over here…

[Scottsummersicp]

Everyone needs to stop bitching about change and learn how to adapt. Dom let’s change it up and tighten up like you said. You’re the boss around here so let’s run it. No matter what you do someone’s gonna bitch. If someone is 8 years let them stay 8 years but let people have a choice to drop to 5. For new people no more 8 year gang it’s over that was for OGs. Maybe have an even lower minimum to attract noobs like 1 week minimum at whatever 1/52 the year rate is. Not everyone is gonna be happy about anything but your chief scientist. So they need to respect the title. LFGROW

[Scottsummersicp]

And I agree. I’ll sacrifice a small portion of reward percentage if the token value has potential to increase by more of a percentage