My thesis is that current “tokenomics” are broken for investors. They work wonderfully for builders but not for investors. Many or most builders need investors to use their products, and so what is bad for investors will in the long run be bad for builders and therefore the network.
Assume we’re burning about 18 billion cycles per second right now. At that rate we burn about 20 ICP per hour, or 480 per day, assuming that we are burning at these prices. And we’re minting approximately 111,000 ICP per day through voting/staking rewards.
Now we have about a year and a half of the VC 1.5 million ICP monthly dumps left. This means at current prices we need to burn 6700 ICP per hour to keep up with this along with staking rewards, which is 335 times higher than we’re burning now. And that would keep our circulating supply from increasing.
If ICP increases in price the number of cycles increases proportionally. At 10x the price we need to be burning not at 335 times our current rate but 3350 times our current rate just to not have increasing supply, assuming only 1.5 million ICP unlocks per month.
This is obviously broken for investors, as there remains significant downward pressure on price until usage increases immeasurably. Now I know many people here don’t care. You may have been an early investor who bought at $.03. or may be benefiting from how cheap it is to build on ICP. But a lot of us are not.
As a representative for retail investors I believe this is at least worthy of discussion. I am suggesting that we significantly overhaul tokenomics for the time being to alleviate the downward pressure on price. I am not sure how to do this but here is one set of ideas:
- Proposal: unlock all neurons immediately.
- Staking rewards are to be set to equal half of the cycles burned daily in terms of ICP, split proportionally between voting neurons.
- Neurons are never locked. To vote you simply have your ICP in a neuron which can vote, and the rewards for voting are (as stated above) a weighted proportion of ICP equal to half of the cycles burned in the previous day.
- Node provider rewards remain on their current schedule, unless somebody has a better idea.
This change would be disastrous obviously. Why would I propose a disaster? Well, I am trying to start a discussion. We would have almost 200 million ICP unlocked immediately, after which the tokenomics would become more favorable.
I understand that there could be backlash, anger and shock at these suggestions. But my goal is to propose a set of incentives that don’t just benefit the “VC investors” and builders, but also lead to sustainable price movement for investors. Right now we have two of the three, which I believe is harmful for the ecosystem as a whole.
Please discuss. I am not making a proposal (as I did once with suggesting all seed investors’ neurons be locked for 8 years) but want to foment discussion and draw attention to the significant financial toll ICP has taken on investors. To dismiss these concerns is naive and short-sighted, as the project cannot thrive if investors are scorned.
Thank you.