I personally think that other projects like Polkadot raise some sincere questions regarding the tokenomics and governance:
Here is the link on Polkadot’s governance mechanism.
To vote, a voter generally must lock their tokens up for at least the enactment delay period beyond the end of the referendum. This is in order to ensure that some minimal economic buy-in to the result is needed and to dissuade vote selling.
It is possible to vote without locking at all, but your vote is worth a small fraction of a normal vote, given your stake. At the same time, holding only a small amount of tokens does not mean that the holder cannot influence the referendum result, thanks to time-locking. You can read more about this at Voluntary Locking.
No with 10 DOT for a 128 week lock period => 10 * 6 = 60 Votes
Yes with 20 DOT for a 4 week lock period => 20 * 1 = 20 Votes
Yes with 15 DOT for a 8 week lock period => 15 * 2 = 30 Votes
So that raises for me the first question: Why are we afraid of shorter lock-up periods? Polkadot shows exactly how this could be solved.
If one doesn’t lock up his DOT for a vote, he’ll only get voting power with a factor of 0.1. = > 128weeks against zero delay equals a factor of 60(!) in voting power weight difference.
That means someone who locks up 1Dot for 128weeks has got the same voting power as someone with 60DOT.
In my opinion that should be enough to actually counter the argument: “Only long-term holders should be able to vote/benefit from staking etc.”
The huge advantage of a system like Polkadot is the that it actually let’s everyone benefit. ICP feels more like a punishment with the 6month lock-up atm. I understand the arguments, but in comparison with Polkadot we should ask ourselves: Why?
I don’t have a good answer for this. Polkadot differs between staking and governance voting. I know that it’s not the case here. However even staking is possible with a lock-up delay of 28days on Polkadot.
And I actually don’t see any argument why that shouldn’t be brought to ICP.
If we don’t find proper solutions to these questions, we’ll probably end up like cowards. The only argument I can find is that a minimum lock of 6month, brings stability to the price, since ICP are longer out of circulation.
That’s also the complete opposite of what we should oppose to the fiat system: If we make it hard to liquidiate, because we’re afraid that the price could go down, what does that say about the system and ourselves? Are we that afraid that the free market could punish us for some flaws?
It’s like a country embracing capital controls in order to prevent capital flight and help the exchange rate…
That’s normally a completely desperate act. Look at some countries with high inflation and ask yourselves how that turned out for them.
Next thing: 6month minimum lock up in combination with 1ICP treshold for spawning a neuron
Who benefits more? Someone with 1000 ICP or someone with 10ICP?
Someone with 1k ICP and an annual inflation rate of 10% would generate ~8.3 ICP a month or 2 ICP a week. With 7 days delay for unlocking the new neuron, he’d actually have much liquid ICP available. He could restake them again to earn interest on his interest (making him benefit even more), or he could also sell them, which completely counters many of the arguments. I’ve already described it here.
The staking guide explains it:
There is a “Spawn Neuron” button that is grayed out until I have at least 1 ICP in rewards. You can compute how many newly minted ICP you have by taking your maturity % and multiplying by the number of ICP you have staked in the neuron. Once your ICP rewards are greater than 1 ICP it will let you spawn a new neuron with the newly minted ICP staked in it. Once you spawn a new neuron it will have a 7-day dissolve delay after which you can either send it to a different wallet or add it to your existing staked wallet.
Someone with only 10ICP would have to wait much longer to be able to earn interest on his interest. Futhermore he would also have less liquidity than someone with a high stake, earning the 1ICP really fast.
What did the person with “only” 10 ICP do wrong? Right, he didn’t have as much money or wasn’t as lucky as someone else to get such a high amount of ICP that early. Now he is punished, and the whale benefits exponentially. I don’t have to explain that even the current banking system is more equal since we all get the same low interest rate.
I personally see it this way: A while could dump on the market with his freshly minted ICP (staking reward) while I still can’t spawn a new Neuron. Here you are clearly prefered if you have a high stake or to turn it around:
=> One actually gets punished for only having a small stake.
IMO this is an oligarchy on steroids.
Neuron age is an interesting concept, however if we bring it back to the inequality discussion it’s not clear if that isn’t exactly the opposite of the wanted effect.
Let’s take Dfinitys stake (Idk how high atm): Probably 20% of the Genesis supply
If that is staked => 10% a year.
20% on ~400Mio ICP => 80 Mio ICP
10% a year => 8Mio ICP a year (8Mio ICP @60$ are 480 Mio$ a year from staking only(!))
Now additional benefits due to Neuron age (one of the first stakers and 1ICP treshold liquidity, earning interest on interest) => Dfinity can easily pay staff from staking only. How should that thing ever become decentralized with that whale tokenomics?
I have to disagree with your statement:
we should not make significant changes the tokenomics.
You’ve written, that you wanted actual data first. Fair way to go. However I don’t read that there is sensitivity on this matter. I read many comments which say the following: Wait, let’s watch it. etc.
And that’s what really concerns me.
Having bad tokenomics is one thing, but not seeing the flaws is a whole other story. I’ve actually never seen a project like that: Without doubt the greatest tech. Without doubt horrible tokenomics, and I clearly stand to my opinion (my provided facts should speak for themselves). @Trevor wrote another great comment in here about some more flaws.
If ICP wants to succeed it will need great tech, great tokenomics and community support. Putting it on the long bench and thinking that this will somehow fix itself, will let the problems appear squared in a few years. By embracing an oligarchy, ICP loses points to tokenomics and this thing will come back like a boomerang after years. Benefiting the whales will let us lose community support (think of our fiat system). Maybe not today, but it will get worse with each year. Look at the wealth distribution in the US. ICP can do this within 5 years. If you don’t believe me, take some numbers and calculate them in Matlab via interest of interest on high stakes.
tldr: IMO ICP tokenomics is horrible. Without major governance/staking upgrades, the system could set itself up for failure.
- Polkadot governance should be studied and partly copied to ICP
- 1 ICP treshold for spawning a new Neuron should be lowered, or completely abolished (better).
- 6 month minimum lock-up period should be significantly lowered
- Neuron Following should be decentralized to more parties
- More transparancy regarding staking stats is required (already in discussion in here?)
- Discussion on how to avoid oligarchic structures is required
- Discussions about the treasury should be established (e.g. treasury votes with ICP?)