Hello Polkadot users, happy to be here!
I am an Italian private user, owner of $DOT and participant in the governance.
I am writing this topic for informational purposes only.
I am happy with the functioning of the governance and the rewards for those who participate in staking.
However I am concerned, and I speak as a user and an investor, about the future regarding inflation.
I could not find, perhaps my mistake, a clear tokenomics regarding the inflation of $DOT.
I’ve noticed that it’s currently around 10% or so. And the rewards of about 15% for those who participate.
But isn’t the inflation too much?
How will the project move in view of inflation?
Is there a future fix? Both inflation and rewards?
Isn’t there a danger that $DOT will lose value over time or struggle to maintain a medium-high price due to too much inflation?
Thanks to anyone who can give me answers on this.
There is a brief description of the economics of DOT in section 5.2 of the whitepaper. In particular, it says that
While monetary base expansion typically leads to inflation, since all token owners
would have a fair opportunity at participation, no tokenholder would need to suffer a reduction in value of their holdings over time provided they were happy to take a role in the consensus mechanism. A particular proportion of tokens would be targeted for the staking process; the effective token base expansion would be adjusted through a market-based mechanism to reach this target.
In other words, the inflation is completely planned and controllable. As far as I am aware, the current target is 50% staking and 10% inflation, and the inflation occurs through new tokens issued to stakers. If only 10% of the tokens were staked, the staking rewards would be at 100% to achieve 10% inflation. Because staking rewards are so high, more people would stake. If 100% of tokens were staked, staking rewards would be 10%. In that case, less people would stake, as they get less rewards.
Regardless of how the rewards are, stakers on honest validators will never lose lose $DOT, as measured by a percentage of the total value of DOT. i.e. if your share of all DOT ever issued is 0.001%, by staking your share of the total DOT issued will never fall below 0.001%. The actual price per DOT will fall if the ecosystem doesn’t achieve 10% growth year-over-year, but as long as the total ecosystem value remains the same, you will not lose money by staking.
Of course, the value could still fall if the ecosystem loses value overall. However, that is separate from the inflation, which is an intentional feature of polkadot.
But also this is currently good for people inside the ecosystem, but for growth we need new people from other eco and web3.
Current Dot tokenomics does not reflect what was being anticipated as the drivers are falling behind ( Auctions ).
The amount of Dot issued and in circulation its just too much and people require less Dots anyway to participate in Governance, Auctions, and even Staking. Because for a project to be sustaining it needs also price per token to be reflective on user demands to participate in protocol provided services.
In an Ideal world it works but for the ongoing market and eco it just dont work. Rob and Kian were discussing that the tokenomics will be revised when Parathread are up and running. But the issue is why shouldnt the current tokenomics reflect the current state and not what will come in the future.
If the current token drivers arent working we will loose even the stakers because apart from getting rewared Dots, stakers also want those Dots to have higher value than what they staked.
Polkadot support forkless upgrades so I think its better to iterate on this issue.