Hey.
I’ve just seen how the current staking system might prefer whales. The problem is not the staking reward, it’s the staking reward of the staking reward, via the 1ICP treshold of spawning a new neuron.
If a closer look on the calculation is made, there is a huge imbalance problem which further prefers whales in the system. Let’s take a 2y lock up period with a fictional 20% staking reward (idk what the exact amount is after 2y now):
Person A: 1 Neuron 100 ICP (2y, 20%)
Person B: 2 Neurons 50 ICP (2y, 20%)
Person C: 1 Neuron 10 ICP (2y, 20%)
That would be 10% a year, or ~1% in 1.2 months (~36d).
Now let’s take the 36d with 1%:
Person A is already able to spawn a new Neuron with 1 ICP after 36d of staking.
After ~43d (7d lockup) Person A is already staking 101 ICP earning the full interest rate now, while Person B is stuck with a bit more than 0.5 ICP in rewards in each of the 2 neurons.
Person C (a small fish) only has got ~0.1 ICP more and it takes him a full year to spawn a new Neuron. Within this year he can’t earn staking reward on his staking reward.
Next timestep: ~79d
Person A earned 1% on 101 ICP (1.01) and can spawn another neuron. (Also 7d of staking reward between spawning and lockup of the new neuron, I didn’t consider that here).
Person B can spawn 2 ICP at once, leaving him a bit behind Person A.
Now Person A earns staking reward on 102.01 ICP. Person B followed up and stakes 102 ICP now.
Both earn not only on their initial stake, but also on their staking reward.
Person C is still not able to spawn a new neuron and is staking 0.2 ICP.
Just to get a few numbers (not exact now, 7d lock up makes it a bit more complicated), I calculated 1% over 36d recursively.
=> Person A has got 110.46 ICP after 1 year, while Person C could mint 1 additional ICP (10.46% vs 10%)
Either I missed something, or that really prefers whales.
If we make the stack higher, we can see the problem even more.
Imagine 100k ICP and calculate it with 0.46%. =>That’s 460 ICP (atm. with 66$ => 30.36k$ extra).
What exactly for? For beeing a whale? Well if we calculate that 10y up, we’ve got a perfect system which further prefers the rich.
Furthermore what I didn’t mention is that the period for reaching the 1 ICP gets smaller and smaller, the higher the staked amount gets. => That even puts more dynamic into the exponential curve for whales.
Imagine an automatic script which does that after a few votes/days.

I’d really like to get some community input here. Did I miss something or am I right?

Possible Solutions:
Lower the 1 ICP treshold. That wouldn’t actually let the problem disappear, but make it smaller.
A better step would be an approach like Polkadot, with automatic restaking of staking rewards.
Everyone earns staking reward on the staking reward via that. However if you do that, you’ll probably have to cancel neuron spawning. That would put the question on the 6month minimum lock up period.