Economic Growth Incentives

Ecosystem
15

@alice_und_bob Interesting take on supply caps—let’s dig deeper.

  1. Skin-in-the-game & concentration. If non-stakers (potential new on boarders + sitting DOT holders) have zero-skin on the staking system, why assume they share the interests of early stakers and market concentrators? Today, the top 10 DOT addresses hold ~25% and the top 50 hold >50% of supply, which is exactly the kind of concentration that turns token voting into plutocracy risk, not broad alignment. Staking economics amplify this: platform quotes and aggregators show ~12–13% native APR (varies by provider), a structural tailwind for large, compounding holders. Historically, Polkadot’s implementation stack has also been stewarded through a Foundation (W3F)–to–core dev company (Parity) pipeline, with sizable initial allocations to the Foundation—useful context for why “reduced managing hands” and high rewards have tended to favor concentration over time.

  2. Issuance ≠ inflation. Reducing issuance is a monetary-supply lever; inflation is a price-level outcome. Calling “redirected issuance” a “reduction in inflation” conflates the two. In economics, inflation is the broad rise in prices of goods & services (CPI), not a token’s emission schedule. If we look at price this year: DOT is down roughly ~45% year-to-date (from ≈$7.0 on Jan 1 to ≈$3.9 on Aug 15), which is better described as asset depreciation (or loss of purchasing power for holders), not “inflation falling.” So yes—reducing issuance may improve long-term value accrual, but redirecting issuance (e.g., from staking to other uses) isn’t the same as reducing inflation in the economic sense.

  3. OpenGov without an economic mission. OpenGov is token-weighted, conviction-locked voting—a governance mechanism, not an economic model. Without an explicit monetary/economic mission, it risks ossifying into “staking governance” where big tokenholders set policy, a pattern the DAO/PoS literature repeatedly flags as plutocracy/collusion-prone under high concentration.

  4. The core problem is concentration. Polkadot’s “economic experiment” stalls if a small set of wallets can entrench control and harvest issuance indefinitely—regardless of whether rewards are paid to validators, parachains, or treasury grantees. That’s not just vibes; token-holder concentration + token-weighted voting is a well-documented capture vector in PoS/DAO systems. Anti-trust logic in traditional markets exists for a reason: to prevent dominant actors from perpetuating dilution/exclusion of late entrants. This includes concentrated hands on grants managements (Web3 Foundation + Parity Technology collusive operations). There are already global impact anti-trust concerns on “Algorithmic Price Fixing”, and active legislation on this direction which introduces itself as a risk in any collusive activity on Digital Tokens ( Klobuchar, Colleagues Introduce Antitrust Legislation to Take on Algorithmic Price Fixing, Bring Down Costs - News Releases - U.S. Senator Amy Klobuchar ). I am talking about coordinated global economic regulators here.

  5. Where we could likely agree—make demand real and broad. Your post says only ~2% of DOT is “captured by parachains,” ~half staked, ~half idle—that’s the demand gap. Economic Growth Incentives (EGI) aim to fix the incentive mismatch (staking APR vs. real DOT usage). I’m supportive if the design avoids reflexive, insider recycling. Two concrete guardrails:

• Proof-of-Acquisition: EGI eligibility only for DOT acquired on open markets or via end-user deposits, not pre-grants; on-chain proof paths (DEX fills, CEX proof-of-reserve attestations, or custody attestations) can reduce “circular grants” risk of reinforcement-loops of capital concentration, which reduces the chance for new or unaffiliated builders/users to gain meaningful access to either attention and/or funding (Your thread already surfaces the “granted vs. bought” concern.), masks value creation of DOT not circulating on market’s usage (insider economy) and makes OpenGov look participatory while outcomes remain non-redistributive (affecting new on-boarder’s value).

• User-first distribution: A hard minimum share cap of EGI must flow to end-users providing DOT liquidity or collateral.

  1. Blend caps + EGI, accurately referenced. On caps: Wish-For-Change referenda proposing capped & stepped supply (Soft/Hard/Growth Pressure variants: #1709–#1711, Aug 15, 2025). Great venue to bind a cap with an EGI budget that decays over time. Couple of concrete tie-ins:

• Dual-track stream: Split issuance into **Security (staking) and Growth (EGI) streams with independent, declining schedules** (e.g., halving-like steps for both), so we don’t just redirect—we actually reduce net issuance over time while bootstrapping real DOT use.

• Demand-responsive throttle: Make EGI **counter-cyclical to staking share**: when staking APR is high and share is above the ideal rate, EGI gets a temporary boost to help DeFi/real-use compete; when staking drops below target, EGI tapers. (Polkadot already models an staking_reward_curve.ideal_stake parameter that nudges rewards vs. treasury; EGI can piggyback on that signal.)

  1. Quick reality checks to keep us honest.

• Distribution today: top-10 ≈25%, top-50 >50%. This is the alignment constraint to solve.

• Staking share & APR: ≈49% of supply staked (varies), APR commonly ~12–13% native—DeFi must out-compete that.

• Price context: DOT ≈$3.9 today (Polkassembly header), down ~45% YTD—holders feel dilution even when issuance is redirected.

Bottom line: Supply caps alone won’t decentralize who benefits with the current concentration scenario. Blend a cap with EGI designed for broad, provable user acquisition and explicit anti-concentration, anti-trust, guardrails that aligns parachains with global compliance, DOT demand and reduces net issuance over time—without entrenching the same whales. For those following caps specifically, the current proposals are #1709–#1711 (WFC)—worth aligning your EGI mechanics there so we ship one coherent monetary policy instead of parallel experiments, thus creating real governance over an aligned economic mission.

@ChrawnnaCorp curious how you see Proof-of-Acquisition and decaying EGI fitting alongside the Soft/Hard/Growth-pressure schedules you just posted.

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