Below lies an example of a Capped & Stepped inflation model that exerts Hard Pressure on DOT holders to replace inflation with revenue, reduce expenses & maintain Market Cap valuations on an expedited timeline!
→ The Green line shows Total Supply under this model.
→ The Blue line shows Inflation by year under this model.
→ The Grey line shows Supply under current model.
→ The Yellow line shows fixed inflation of 120M DOT (current model).
This model in fact never reaches the psychological 2.1B Cap target with inflation falling below 10,000 DOT/year by 2054! If this is deemed unsatisfying, this can be solved by stepping down a % of remaining supply to be minted or by picking a less-memorable Cap.
Let’s see what sort of Market Cap we would need maintain maintain the USD value of current expenses ($450M) by switching to a Logarithmic Scale and adding a purple line.
The New Red Line (sorry for the colour confusion ) Shows maintenance of expenses reduced to $90M.
This chart (The Network Revenue Pessimist’s view) reflects the above the MC Goals by year with approximate MC of other industry projects for reference:
When setting a new Capped & Stepped inflation schedule we must consider realistic expectations on the network to reduce expenses, increase revenues, and maintain Market Cap valuations.
Only hard pressure would work. We all, and especially big DOT holders, need to work out other strategies, not just focusing on inflation, but also on improving the following:
Interaction with exchanges and infrastructure (to lobby to add hydration and other successful networks to exchanges, direct withdrawals to different parachains, DeFi infrastructure, DOT visibility and promotion, on exchanges in return for validation rewards).
Reducing the number of multi-account validators (10–30 validators from one entity or individual is nonsense).
We also need to engage key industry players and financial institutions (sell DOT to the right people to form ETFs and companies with DOT/Web3 treasuries, let them have skin in the game ).
DOT distribution is still poor; we need more highly motivated entities involved!
Taken together, these measures could produce positive results.
Meaningful work on increasing buying power/pressure needed. We cannot ignore this and focus only on creating technology. Someone also needs to sell this tech.
As stated here, it’s primarily about the psychological effect.
It’s absolutely important to keep that in mind. That’s why it’s important to make the action as public and advertise it as effectively as possible before it’s actually taken.
A campaign must accompany the whole thing. If it only happens behind closed doors, it’s unlikely to have the effect we hope for.
I would also welcome it if, in order to perfect the narrative, there was a change or expansion to the burn mechanisms, even if it was only symbolic. For example, you could say that instead of 80% of the transaction fees, 90 or even 100% will be burned in future.
It’s likely that some large accounts, and perhaps medium or small ones too, will pull out, but that’s not a bad thing. They will be replaced by either committed market participants who are increasing their holdings or newcomers who are essentially building a new base in this way. It’s never a bad thing in an ecosystem if tokens change hands as frequently or regularly as possible.
The measures here are certainly tough and effective, but only if they are publicly advertised and explained, and if their implementation is as radical and concise as possible.
A mild, unnoticed or half-hearted action won’t generate any psychological momentum, but will still lead to the rather undesirable side effects that we naturally buy into.
As Crane said, the lower the native staking apy is, the easier it will be for Polkadot’s defi platforms to compete and attract more volume, with ETH currently at only 3% apy.
Under this model, it is competitive with ETH until about 2029. By that time we would need to have some serious revenue streams producing rewards for our validators.
If Polkadot/JAM hasn’t landed by 2029, we’ll have other problems.
In the worst-case scenario, we could still counteract it.
What we need now is momentum for the narrative. We must end the vicious cycle of declining top ranking and, also effectively address the real problems.
Say we hard cap now and then in 4 years time worst case scenario, we don’t have the sufficient revenue streams for our validators to compete with ETH, what are our options?
Right, you hit on the important consequences of this exercise. While none of the models would put us in a position where we can’t compete with ETH in 4 years, if we do not eventually reduce expenses and increase revenues the network will gradually buckle under reduced income from inflation.
We have to ask ourselves, however, if the current situation is not just as or more dire. As right now staking APY is not keeping up with falling value of the network.
An obvious and perhaps sensible, yet somewhat mitigating, option would be to set the halving cycles (as with BTC) every four years instead of two.
This would have the same psychological effect, would give us significantly more space and time, and the short-term effect (until 2028) would be identical anyway, since the first different change would occur here (or then later, in 2030 with 4-year/halvings).
This is excellent on how to increase the demand for DOT, and incentivizing parachains to capture DOT, not just incentivize staking. Gives me hope that DOT’s value will turn around.
I built a simulator that can simulate all the proposed model but with % of the remaining supply is issued as suggested by Gav and Jay. This way, the remaining supply will never run dry like the step method.
hi. You’ve seen for yourself what kind of inflation people voted for beforehand. Post a question on opengov and the sooner the better, or is it a year of discussions again? excuse me for being a bit harsh in my words, but I really don’t like discussing some issues for half a year or a year. Crypt is fast, but polkadot solves issues slowly.
You’ve just run into one of the latest balance feature updates that’s been around for a while. I call it the Schrödinger balance — at the same time you both have transferable DOT and you don’t.
To keep it short, the issue lies in how the new balance calculations are done.
In your case:
Total balance: 226,229 DOT
200,000 DOT locked in staking
205,641 DOT reserved for referenda, preimages, etc.
20,588 DOT transferable
And yet, you both do and don’t have that ~20k available for a deposit. To actually make the deposit, you’d need to have 425,641 DOT = 200,000 + 205,641 DOT reserved/locked, plus another 20,000 DOT free on top.
That’s why it looks like you can use it, but in practice you can’t
This model in fact never reaches the psychological 2.1B Cap target with inflation falling below 10,000 DOT/year by 2054! If this is deemed unsatisfying, this can be solved by stepping down a % of remaining supply to be minted or by picking a less-memorable Cap.
) Shows maintenance of expenses reduced to $90M.
