Polkadot's Economics: Tools to Shape the Forseeable Future

Governance
22

Polkadot is governed by it’s community and there is already the ability to change everything (including inflation parameters) through OpenGov on it’s root track. This proposal and the technical additions mentioned do not change this fact. Instead, it makes accessing the parameters more straight forward and safe, if the community deems it necessary.

Every change to these delicate parameters should be shielded behind an OpenGov track similar or equal to root (or even the whitelisted caller that requires a minimum support towards the end). This would require to rally a large share of the community and go through a lot of debate, something that I doubt will happen too frequently.

2 Likes
23

Thanks for your quick response! I understand your point, but I still insist that predictability is of utmost importance. It hasn’t even been five years since Polkadot was launched and we are already jumping to conclusions. It may seem exaggerated, but monetary emission, inflation and future supply to the treasury should be guaranteed for many years without changes. The mere fact that anyone can propose a change of such magnitude discourages investment or business around the protocol. Let me give you three examples among many others:

Someone creates a pool without charging any commission to gradually attract users, with the intention of charging a commission in the future. Without a guaranteed constant and safe emission, they cannot make long-term projections.

An investor takes advantage of the value of compound interest, calculating that in 10 years he would achieve a certain profit.

A validator starts by covering his costs without charging any commission, knowing that in the future he will earn a certain amount of DOT.

These are just some examples. Invariability in these issues is essential. They should have at least minimum and maximum ranges.

Thank you so much!

24

Wow, thank you for the super thoughtful & detailed reply! It is very reassuring, actually. I hope the popular UI builders add the unbonding time notice that you suggest. I’m sure Nova, Talisman, and Subwallet will do so, at least.

25

I can understand where you are coming from and that stability of the monetary system is very desirable and I agree that we shouldn’t be changing these parameters lightly (and frequently). But the point I am trying to make is that there is no such thing as “guarantee”, because ultimately every single line of code can be changed through OpenGov. That includes any minimum or maximum value we’d put into the code as you proposed. Putting in these bounds does not add any benefit, because if there is a sufficient driving force within the community to set the parameters outside these bounds, then the old minimum and maximum ranges can just be overwritten with code that does not have these bounds. The point is, however, that I think it is very unlikely that there would ever be a “significant driving force” within the community for unreasonable parameters, because that would mean the majority of the community wants to harm Polkadot. So, regulation does not happen on the protocol level, but on the social layer.

In the examples you are giving, you already mention one important device that will help operators (nodes & validators) adjust to a potentially changed inflation, which is commission. It’s specifically designed to be a variable part to make sure operators can cover their costs while still remain in competition with each other to try to minimize the costs.

This initiative, to openly discuss potential changes to the inflation model, is largely the result of a (what seems) significant portion of the community that has the opinion that reducing inflation would greatly benefit Polkadot as a whole. The things presented here are just allowing us as a community to express and discuss concrete changes and make it possible to decide on it.

Whether there will be (any) change to the current system is eventually decided through OpenGov, which is used to aggregate the various opinions in the community in a measurable and actionable form.

1 Like
26

It’s true. Ultimately, it could still change again. Maybe it’s my wishful thinking or my naivety, but triggering a referendum where values ​​change automatically doesn’t seem the same as requiring a code change involving developers. This last one seems to be a last barrier that is more difficult to overcome. As the years go by and software stability is achieved, each code change will solidify, leaving no room for significant changes.

Throughout history, governments have tried to put barriers to the exploitation of a population’s resources through inflationary taxes, and the only thing that has worked is the absolute impossibility of being able to emit.

The mere fact that 10 whales could agree to finance the treasure at the expense of their owners would not necessarily be a terminal damage to the network, but it is an irreversible privilege. At this point, no one would think of going against the smaller investors because that would be the end. But in the long term, if Polkadot finds a way to thrive and is no longer dependent on investors, but instead works despite them and creates value, the whales won’t care what the community thinks.

I hope I don’t have to revisit this post in the future to prove myself right, but this is my long-term prediction of what will happen if Polkadot succeeds and creates genuine value (which I believe it will, potentially even creating a monopoly ). ). in your business).

Act 1: An inflated treasury where spending occurs without considering the consequences because it seems inexhaustible.

Act 2: An exhausted treasure that needs financing because it wants to continue spending what it does not have. Thus, they look for a way to recharge it, in this case at the expense of the holders’ rewards.

Act 3: Friction begins with the holders who cannot access the large treasury funds that only finance what the whales want. This could cause a reaction on the matter and the community would be “heard” because Polkadot will not yet be mature enough to generate genuine wealth.

Act 4: Polkadot generates genuine income due to the need for different players in the ecosystem to purchase DOT for use, making small investors unnecessary. This leaves the field open for the whales to reach a “consensus” on behalf of the community but for their own benefit, increasing permanent treasury funding at the expense of Polkadot wealth generation. Small players in the ecosystem are excluded, creating a parasitic bourgeoisie that does not care about the “community”, since Polkadot generates income despite the “community”.

Perhaps this is the true intention behind these implementations; I don’t know. But at least I tried to raise the alarm on this issue.

Thank you very much again for listening to me without any commitment to do so.

Sincerely!