We need developers to not think that developing on the ic is a high risk play. According to Enokis statement on their site, they didn’t want to take the risk so they stopped their project.
They could be lying and just using this as a cover for ending their project but the statements stated in the op should not be ignored. We all want the ic to succeed and should take this situation in front of us seriously to prevent scaring away more development.
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Sorta, but not really.
He indefinitely paused his project, that he was given grant funding for, by freaking out over flawed tokenomics info.
OP didnt do the needful he was paid for.
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Not sure why I would lie about anything, and there’s nothing to cover. We are both new to the IC, and Enoki was the result of our work during the hackathon. As with all startup projects, there is a balance between risk and reward. As we did more research into the IC, we started having some concerns that increased the risk side of the balance. And we decided we were not comfortable enough to quit our day jobs to focus 100% on Enoki.
We were promised grant money provided we submit a grant application. We did not submit the application, and we did not receive any grant money. We do not have any investors, and our decision to stop working on Enoki is simply a personal one.
I posted here to have an open discussion about some issues I see with the IC. I would really appreciate it if you could elaborate and correct my analysis. So far DFINITY has overall agreed with my analysis of a theoretical scenario, and we just disagree on the strength of some economic incentives:
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Broken Tokennomics will drive out more developers from icp
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@bjoernek, please help asking dfinity to release ICP tokenomics research paper like they’ve did for its protocol technology & cryptography academic paper. Convince community that the current tokenomic is still sustainable in the long run.
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So you basically are taking the grant money you were given and running away due to being afraid of the risks of developing on icp. So what are you doing with the grant money now? Did you even use it for the project?
Seems like the op you made is basically a front to prevent people thinking you’re not just taking the grant money and running away with an unfinished and undelivered project
- Most of us have full-time jobs and are working on the IC part-time. No one asked you to quit your job? Claiming you need to work on Enoki full-time to complete it makes us think other factors are at play.
- The cycles scenario is compelling considering yes it is difficult to calculate an accurate number on total spend however you’re ignoring that the total cost to develop on the IC is much lower than traditional Web2. Run-away inflation has been debunked multiple times. It seems to me that you’re simply just risk averse to long-term price movements in ICP
- You didn’t apply for a grant, but you got 4th place in the hackathon. You still made prize money for your work (albeit incomplete) but slightly dishonest you’re abandoning the project with money regardless.
I’m calling you out. My hunch is that there are other factors involved. You feel that developing this project is no longer worth your time or that you and your team became overwhelmed. The cycles scenario just seems a little contrived.
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The risk is a function of the quantum of leverage. This is currently extremely low and very unlikely to grow to unmanageable levels.
Dfinity has a certain amount of fiat reserves and a certain proportion of the total supply of ICP. If the Dfinity managers are wise, they will hedge against the kind of tail risk you mention by paying from fiat reserves when prices are low and from interest on their token stake when ICP prices are high. Also, when prices are high, they should bolster their fiat supply by selling ICP in the open market, thus preparing themselves for future downturns. Whether the payment to node providers has to actually be made in fiat or ICP does not matter, it is just a question of converting into the required mode of payment.
I am not sure why defi on the IC would focus on cycles rather than on the token itself. After all, XTC has a price ceiling and ICP does not. High leverage defi does magnify boom and bust cycles, and that will inevitably apply to ICP, but it seems to me that it will happen through the main token rather than through cycles. I might be mistaken, would like to hear why XTC rather than ICP will be the go-to for future defi on the chain.
Leverage in itself does not increase supply. If I have 1XTC which I invest with 100x leverage, that does not produce 100XTC.
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Why do you think the tokenomics is broken?
For this to work there will have to be a neuron that is known to be Dfinity owned which buys ICP to soak up supply equivalent to excess node provider related inflation when prices are very low, paid from Dfinity’s fiat holdings, and sells some of that to bolster the fiat holdings when prices are high. The exact prices at which this operates will need to be carefully calibrated.
As he said, they never received the grant money. Attacking people for making a fair decision to halt development isn’t a great look and does the opposite of what we should all want which is encourage more people to develop on the IC.
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He won prize money. I’m not attacking him but I am suspicious of everything stated in his op is just cover for him and his team to not look bad with an unfinished product and accepting the prize money.
Yes I agree we need to be more attractive to developers but the op can be sent any new dev thinking of deploying on the ic and be turned away from actually going through with it due to some of the info he presented is misleading.
@rudy, thanks for bringing up some important topics here. I’ve had a few of these in mind and, like you, am tracking progress on them fairly closely. No blockchain is perfect, but from what I’ve seen in the first year of the IC being live is that the Dfinity team moves way quicker to release major features and plug holes that the community brings up than any other I’ve seen. There are risks with building on any chain but at least I take comfort in the above.
Selfishly I’m disappointed to see you guys pause development since your product looked great and you seem like talented devs but respect the decision. Thanks again for bringing up these points and hope you stay active on forums at least 
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I am not accepting your resignation Come back and make a DeFi contract for loans/ shorting ICP with cycles maybe, if they are so broken, that will be a hit.
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He didn’t accept the prize money lmafo
It’s sad to see Enoki cease development, I was really hyped about the project and its potential.
I agree with everything you said, a little bit less on the cycle issue tho. The role of the NNS and node provider remuneration points are spot on, imo they are some of the less elegant aspect of the ICP as Dfinity seem to have steered away from the concepts of code is law and economic models based on supply/demand in favour of a utopic decentralized government and hardcoded remuneration scheme.
As you said paying providers a flat fee to bootsrap the network is fine, many other chains have chosen a similar approach, the difference here is Dfinity never specified a plan on how eventually the system would transition to a more sustainable and self balancing model, scattered on the forum there are some mentions of it but nothing too detailed. This is worrying cause so much depends on it for both devs and investors, I recently did some math and as it is the system might never become deflationary even without accounting for stakers’ APY:
The issue isn’t easy to solve cause even switching to a scheme based 100% cycle consumed, which would be a huge risk atm due to low profitability for node operators, we’d get rid of inflation generated by node providers rewards, but not the one from the NNS and with all cycles going to NPs there’d be none left for burning. On top of that the scenario you highlighted becomes much more concerning.
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Great points.
I think my biggest issue with cycles is that it brings a lot of complexity and risk but barely any benefits. It cannot be used as a stablecoin reliably, and I think we can find much simpler ways to reduce ICP price exposure for developers.
I said it was risky, not that there was a mechanism to exploit it
I agree with you. In general I am very happy with what the DFINITY team has been working on. And I think the IC remains a great place to build a lot of different dApps. For example, I think being able to use threshold ECDSA to interface with Ethereum will be amazing. You can combine this with a multisig wallet and have convenience and relatively good safety. If this works well, the IC will be invaluable in a multi-chain world. And the IC remains a great place to host things, I think.
Right now I just feel uneasy about using the IC for a lot of value stored in a canister. This feeling may definitely change when the IC evolves within the next few years.
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From what I understand, Internet Computer is fantastic to build a decentralized internet at scale, without the average user having to pay to play, much like the classic internet. This is in contrast to Layer 1 chains, where a user owns an asset of tangible value to participate in the network, if users agree that they want to use it for the exchange of value, just like Nations do with fiat money.
If I understood the tokenomics of ICP correctly, it’s real value is 0, because it is just an intermediary to convert XDR to cycles. Therefore I find it confusing that ICP is traded as if it was an asset. The token model implies it purely is a utility token and should be used as such. A developer ideally buys it and converts it to cycles immediately.
So for investors and payment users, Layer 1 blockchains are the way to go, but not the ICP token. For developers, both Internet Computer and Layer 1 chains are great. And for everyday internet users, Internet Computer is ideal.
Please correct me if I am wrong.
Consider using Ask ICP.AI at https://internetcomputer.org
What purposes do ICP coins serve?
The ICP utility token serves several purposes in the Internet Computer blockchain:
Computation and Storage: ICP tokens are used to pay for computation in the form of cycles. 1 SDR of ICP can be converted to a trillion cycles. Cycles are burned to pay for computation, storage, and serving of web pages. As more dapps are hosted on the Internet Computer blockchain, more ICP tokens are converted and burned [source].
Governance of the Internet Computer: ICP tokens are used in the Network Nervous System (NNS). If you want to vote and earn voting rewards in the NNS, you have to stake your ICP tokens in a neuron. When you vote, you receive voting rewards in the form of newly minted ICP tokens [source].
Rewards to Node Providers: ICP tokens are also minted as rewards to node providers. The total supply of ICP is deflationary because the tokens are converted into cycles and burned. However, it is also inflationary because rewards are minted for node owners and neurons [source].
Node Provider Rewards: Node providers that offer compute/storage infrastructure to the Internet Computer blockchain receive ICP rewards. Each node receives a flat monthly reward calculated in fiat and paid in the form of ICP tokens. The rewards are paid by minting new ICP tokens, causing inflation [source].
Participation in DAOs: ICP can be used to participate in token swaps of decentralized autonomous organizations (DAOs) on the IC [source].
Medium of Exchange: ICP can also be used as a medium of exchange to pay for goods and services such as NFTs, subscriptions, etc [source].
User token/NFT transactions, fees are paid in ICP, akin to other blockchains. Notably, these fees are extremely low, even more so than those on Solana for example.
So, when you say ICP is not for investors, one could argue that, in that case, no other blockchains coins have any value at all, since they have fewer use cases, and the only one worth anything is BTC as a store of value.
ICP and BTC are not created equal. These tokens have different properties, and therefore cannot be used interchangeably. BTC is as valuable as users agree upon. With ICP this is not possible, because no matter the price, new ICP will be created with a peg to XDR. And depending on ICP to XDR (cycles) valuation, more or less ICP are created. ICP could be worth 0.01 USD, which would just mean that more ICP are created for Node Providers to compensate for the lower XDR value of ICP.
My expectation is that all classic blockchains with tokenomics similar to Bitcoin will have a collective worth, as they eventually will achieve a state of interoperability, where one token can be used swap or wrap another to access a foreign smart contract without requiring the user to juggle different coins manually.
The way I see it Internet Computer greatly complements the Layer 1 Blockchains, but is something entirely different, and so is its token ICP.
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