Proposal for Adjusting Polkadot's Inflation System: Reducing Issuance and Complexity

[jonas]

Introduction

In my previous post, I outlined a roadmap for technical changes that allow us as a community to adjust key economic parameters directly through OpenGov. With these updates about to be deployed in the next runtime upgrade, we should start discussing specific sets of parameters that are reasonable going forward.
In this post, I aim to educate how changing different parameters affect the economic situation of Polkadot and offer a reasonable package, formed by numerous discussions with community members, of updated parameters and illustrate their impact on inflation, staker APY, and Treasury inflow. Additionally, I propose to eliminate any penalisation of stakers when the staking rate does not match the ideal rate and thereby simplify the inflation system, avoiding unnecessary (additional) inflow to treasury and reducing general confusion around the system.

The data was generated using the Polkadot runtime, with thanks to @ankan and @gpestana for their assistance. The code is available here. I encourage everyone to verify and replicate the results.

Going forward

Simplifying the Model

As discussed in my previous post, the mechanism around the ideal staking rate was initially designed with the expectation that a significant share of all DOTs would be locked in parachain slots. To influence the ratio between staked, locked, and liquid DOTs, diverting tokens to the Treasury from stakers was considered useful. However, with agile coretime and the burning of their revenues, this consideration is largely obsolete.

Thus, I’d argue that maintaining this system no longer makes sense and might even be detrimental. Therefore, I propose to abolishing the system of reducing inflation diverted to stakers relative to the gap between the ideal staking rate and staking rate. The primary reasons are:

1. Redundancy: We no longer need this system, because we no longer aim for a specific ratios between tokens staked, bonded, and liquid. As a consequence, we can remove it to obtain a more simple system.
2. Simplicity: In countless discussions about the token economics of Polkadot I experienced that many people are very confused by how the inflation curve works. Reducing complexity leads to a better understandable economic system.
3. Independent Treasury Funding: With updates discussed previously, the Treasury will be funded independently and we are no longer dependent on diverting additional parts of the inflation away from stakers to the Treasury.
4. Unnecessary Lower APY: While keeping the current system with new parameters would not negatively impact the security of Polkadot, it could lead to frustration of stakers, because an already lowered APY by reduced inflation might be amplified by additionally diverting funds to Treasury from the share of inflation dedicated to stakers.

Importantly, there is a natural mechanism that prevents the staking rate to be too low or too high. The following relationship holds true:

• Low staking rate → Higher potential APY → Enter staking to profit.
• High staking rate → Lower potential APY → Exit staking to use DOT otherwise.

This mechanism leads to an equilibrium for the staker APY, influenced by a flexible staking rate. With a shortened unbonding queue, as proposed in RFC0092, the system can freely adjust.

We’ll see later in the concrete proposal that this simplification can be achieved by setting min_inflation == staker_inflation, i.e., setting the minimum inflation parameter to the inflation that goes to stakers (which is calculated by max_inflation * maxStakerReward). This has the huge benefit, that we can simplify the model but leave all ingredients intact to quickly revert to the old system in case of unexpected situations.

Baseline case

Below, I present a baseline case with 10% total inflation, the inflation curve intact, and a fixed 20% Treasury inflow. After that, I argue why there is room for optimisation and propose a set of parameters that lead to a more balanced outcome in terms of inflation, Treasury inflow, and staker APY.

Ideal_stake: ~60% (flexible, decreasing with number of parachains)
staking_rate: exogenous (but ~58.5% right now)
fall_off: 5%
min_inflation: 2.5%
max_inflation: 10%
staker_inflation: variable
maxStakerReward: 80%
total_issuance: 1.444688e+19 (plancks)

Outcome

Staking Rate	Staker APY
40%	15.52%
45%	14.83%
50%	14.27%
55%	13.82%
58.5% (~currently)	13.54%
65%	7.7%
70%	5.36%
75%	4.17%
80%	3.52%

Treasury inflow: ~1’925’899 DOT per spending period (24 days), growing at 10% p.a.

The red curve illustrates the inflation that goes to stakers. The maximum of 8% (with 13.54% APY) is only reached if ideal_rate == staking_rate. As mentioned above, this situation appears to be not ideal. First, the Treasury inflow is rather large (remember that tokens are minted from inflation and therefore come at an inherent cost to all token holders), and that any deviation from the ideal situation would quickly reduce staker APY and even further increase Treasury inflow.

From these numbers it appears that we have room to decrease inflation, a sentiment frequently stated among community members.

Futher Adjustment

In the following, I present a set of parameters that takes into account the previously mentioned points and achieves a lowered inflation, competitive staker APY, and sufficient Treasury inflow. A good starting point might be to work backwards from a “sufficient Treasury inflow”, taking a look at historical data.

Historical Treasury Inflow

Historically, the Treasury inflow was mainly driven by the gap between the ideal staking rate and the actual staking rate. Inflow from Fees and slashes were largely insignificant. I’ve shown this graph before, it holds data until July 2024.

Historically, and subject to some volatility, the inflow was on average 1.209M DOT per spending period (24 days).

With the maxStakerReward parameter introduced here, we can rid ourselves from the uncertainty of inflows and the large volatility and fix it to a specific share of the inflation. In this regard it is crucial to understand that the token are minted from thin air, i.e., they contribute to the dillution of the total supply of DOT. Therefore, we need to properly evaluate the trade-off between dillution and having a potent Treasury so that the Polkadot DAO is able to fund its growth and development.

Notes on the calculations

Without the complex system (by setting min_inflation == staker_inflation) that diverts funds from stakers to the Treasury depending (sometimes non-linearly) with the gap to the ideal rate, the calculations become much more easy for everyone to understand and replicate. The following ingredients are necessary:

Variables to set or observe:

• max_inflation: Maximum yearly total inflation (stakers + Treasury)
• maxStakerReward: Percentage that goes directly to stakers.
• staking_rate: A result of the individual choices of every token holder (58.5% right now).
• total_issuance: Total supply of DOT (~1.444688e+19 as time of writing).

Variables to calculate:

• staker_inflation: max_inflation * maxStakerReward
• staker_APY(staking_rate): staker_inflation / staking_rate
• treasury_inflow_per_spending_period: total_issuance * max_inflation * (1 - maxStakerReward) / 365 * 24

New Model and Parameters

Ideal_stake: irrelevant
staking_rate: flexible (but ~58.5% right now)
fall_off: irrelevant
min_inflation: 6.8%
max_inflation: 8%
maxStakerReward: 85%
staker_inflation: 6.8%
total_issuance: 1.444688e+19 (plancks)

Outcome

The staker APY naturally depends on how much of the total issuance is staked (i.e., staking rate). With the parameters above, the relationship is as follows:

Staking Rate	Staker APY
40%	17%
45%	15.11%
50%	13.6%
55%	12.36%
58.5% (~currently)	11.62%
65%	10.46%
70%	9.71%
75%	9.07%
80%	8.5%

Treasury inflow: 1’155’539 DOT per spending period (24 days), growing at 8% p.a.

Evaluation

The parameters as presented above result in a reasonable outcome:

• Reduced complexity with a fixed Treasury inflow by setting min_inflation == staker_inflation.
• Sufficient staker APY around 11.6% (~3.6% after inflation) that is competitive compared to other blockchain networks.
• Sufficient Treasury inflow similar to the historical average that is growing with 8% p.a…

Pallet inflation (RFC89)

In the previous sections we have shown how to achieve a new and simpler curve using the current implementation of the era inflation calculation in Polkadot. The same curve can be implemented using the pallet-inflation (link RFC#89), potentially with different parameters.

Origin

While it is important to extend the flexible upgradeability of Polkadot also to it’s economic parameters, these changes have significant impact on the overall network and the community. Therefore, upgrading parameters should not come lightly, because having a stable and predictable economics is an important part for all token holders.

Changing the state should only be possible with sufficient drive from the community and the token holders of Polkadot. The question arises which OpenGov track (and which curves) determine the vote on these parameters. While it is technically possible to add a new origin with its own requirements and parameters, the root origin appears to be the most suitable choice. This is because the decision deposit and the fact that only one proposal can be active at a time helps prevent spam. Since changes are not expected to occur frequently, using root further ensures that these changes are given the appropriate level of importance by making it necessary to meet the stringent criteria for approval and support that they deserve.

Next Steps

Off-Chain Consensus

Finding consensus on this topic is very challenging, because the large number of parameters result in many degrees of freedom, leading to a lot of different “packages” of parameters. In this post, I tried to give some reasonable parameters that result in reduced inflation (not too drastically), sufficient staker APY, and sufficient Treasury inflow. There are, however, many other options available. Our best choice is to see how the off-chain discussion is going and whether we’ll already find a solution with sufficient support, before going to an on-chain vote.

On-Chain Consensus

Since the fellowship is planning to release all necessary technical upgrades already in the next runtime upgrade, I don’t think it is necessary to parallelise finding consensus on upgraded parameters and already inject a changed set of parameters into the upgrades directly at the time of the runtime upgrade. Instead, we as a community should go through the “normal” process of changing the parameters through an OpenGov referendum on it’s respective track.

Summary

In this post, I gave some background information about the inflation system and proposed a set of new parameters going forward. The choice of changing min_inflation == staker_inflation would effectively simplify the model, having several advantages as discussed.

Further, we could reduce the inflation to a total of 8% p.a. with a fixed Treasury inflow of 15% of that. The specific parameters are:

• min_inflation = 6.8%
• max_inflation = 8%
• maxStakerReward 85%

which result in:

• ~11.62% APY (with staking rate == 58.5%).
• ~1.155M DOT inflow to Treasury on a 24-day basis.

Simplifying the system would also render other parameters such as ideal_rate and drop_off insignificant.

This post should be regarded as a suggestion and starting point for further discussions around whether and how to adjust Polkadot’s economic system. It’s important to have extensive off-chain discussions and try to find ways to reach some consensus before going through the complex and long process of on-chain voting.

[eskimor]

Can we stay on topic? How treasury funds are being used is pretty much orthogonal to the proposal. Except if your remark is we should have a slimmer treasury to incentivize more considerate spending, but that could be phrased more constructively.

If you want to discuss treasure spending, please open a separate topic.

[coco]

I did not address the way in which the spending is used, but the fact that inflation (staking rewards) is to be reduced but the inflows to the treasury are to be excluded. So it is an attempt to support the token value (which may or may not succeed) by charging investors but not the treasury inflows. As I understand it, it would be appropriate to either treat both proportionally equally or even to propose the opposite. Why are the salaries of developers, influencers, ambassadors, etc. not adjusted to achieve the goal?

I would also care less if we had not seen in the past how DOT was sometimes distributed absolutely generously to channels that have probably never bought a single token, so far without much success.

To compensate for this harmful behavior, it seems that those from whom the money originally came are to be punished.

[Kingston007]

I’m not in favour and see the following risks:

1. The timing of reducing Polkadot’s inflation is particularly detrimental for investors who rely on staking rewards. In a bearish market environment, staking rewards become a critical lifeline for maintaining liquidity. A reduction in these rewards during such periods can exacerbate pressures on tokenholders, potentially leading to a decrease in their continued engagement and support for the network.

2. Adjusting inflation rates can significantly impact perception and tokenholder confidence. A reduction in inflation may be perceived as a signal that the network is attempting to artificially control token supply, which could lead to skepticism. This skepticism might increase token value volatility, as tokenholders and potential tokenholders react to the perceived uncertainty surrounding the network’s economic policies.

3. Sustainable ecosystem growth relies on a careful balance between incentivizing participation and maintaining token value. Drastically reducing inflation could hinder the long-term growth prospects of Polkadot by limiting the rewards available to early adopters and contributors. This limitation could result in reduced development activity, fewer network improvements, and a slower rate of adoption.

In conclusion, while reducing inflation may seem beneficial in terms of preserving token value, it carries significant risks for Polkadot’s network security, staking participation, economic balance, perception, tokenholder stability, and long-term growth. Careful consideration and comprehensive impact analysis are essential before making any adjustments to the inflation rate to ensure the continued health and vitality of the Polkadot ecosystem.

[jonas]

@coco and @Kingston007: I appreciate the comments and these are generally valid concerns.

But they neglect the potentially large positive benefits that a reduction of issuance can have on the network. The initiative to propose a lowering of inflation comes from countless discussions with parachain teams that point out that the high APY on the Relay Chain for stakers make it very difficult to compete with suitable products and use-cases that bring people to use their DOTs. I want to remind that, while staking is crucial for the economic security, it is not a use-case in itself. It’s only useful if there is something to secure, i.e., a thriving ecosystem offering a wide range of applications. So, in that regard, (slightly) reducing APY should make it more attractive to use the applications, which drives its value to the network. I want to point out a few more things:

• RFC0092 (given it passes through governance processes) aims to compensate stakers for a lower APY with higher potential liquidity.
• The Treasury has always been funded from inflation and (see the graph) for example the year 2022 saw very high cuts into staker rewards, effectively leading to similar APYs (after inflation) than we’d see after the change.
• I think that having a Treasury that can fund large-scale expansion and efforts into growth is important and should yield positive impact for every token holder (or the “investors” you are referring to). While many people regard the previous spending cycles as not optimal, there is a lot of momentum and initiatives in the community to improve the spending process and make sure that tokens are deployed much more efficiently.
• In my proposal, the inflow to Treasury does not appear to be excessive and it would not sustain the current outflows. This means, that the “other side” also needs to adjust to this change, again exerting pressure to only fund reasonable initiatives.
• A lowered inflation ultimately also means lower dilution for people/entities that can not / do not want to only stake but put their DOTs to use otherwise, potentially making it more attractive to hold DOT at all.

[filippoweb3]

I think what is proposed here is very much needed and addresses the following points:

• Create an inflation model that is simple
• Create a fixed stream to the treasury
• Slightly decreases inflation as requested by the community

This last point is connected to the unbonding queue of min 2 days (max 28 d). In the context of lowering inflation (and thus the stakers APY) makes sense to lower the unbonding period as well and stay competitive with other ecosystems’ native solutions and centralized exchanges.

I am highly favorable to this, and I would not aggressively cut inflation now. We still need to see Polkadot running at full speed, where 80% of fees are diverted to the treasury. We got a glimpse of it last year in December with inscriptions.

Anyway, the first proposal for changing the inflation model will (hopefully) be separate from that of lowering inflation.

[coco]

I absolutely agree with @Kingston007. (To be honest, I use staking rewards as a life income.) Paradoxically and ironically, the proposal aims to secure the token value in order to prevent or contain this. However, it overlooks the fact that investors have specific interests of their own, which would be carelessly called into question here.
The interests of the vast majority of people who support the proposal are not dependent on the income from staking rewards, but often on those of the treasury, which is why a special path is to be taken here. Smart.
@Jonas
You are looking at the matter from a fundamental technical perspective when you claim that staking is not an end in itself. The reality, or the reason why people stake, has nothing to do with it. Stakers do stake for profit. Take it as it is. You can’t like it or argue around it. If you don’t acknowledge the matter and change the circumstances, the theory won’t help.
What do you think the average or institutional staker would do with their DOT if they stopped generating returns (or not enough)? Use them in the ecosystem? In the thousands of ways that exist? Be honest.
The proposal would perhaps be risk-free in a bull market, if at all.
There are enough free DOT that could work on the parachains if there were tempting offers here. But that’s a completely different topic. And I also think the argument is hypocritical.
The treasury’s spending is mainly decided by those who benefit from it, not always of course, some of it also goes outside (mainly through G-guy).
This would go against the interests of real investors and I think the claim that the majority of the investor community would be in favor of it is a pure claim. (Of course, those who receive their salaries in the same amount of DOT like the proposal.)
Last but not least, I absolutely doubt that this measure will have a positive impact on the value of DOT. But that will be seen in case of doubt.

[jonas]

Anyway, the first proposal for changing the inflation model will (hopefully) be separate from that of lowering inflation.

I think it’s most reasonable to integrate the code upgrades that make the necessary parameters adjustable through governance, but without any effective change. That would mean the only “new” parameter, maxStakerReward, would be initiated with 100%, leading to exactly the situation we have now.

Then, in a separate referendum, we can propose a set of new parameters (potentially the ones I describe) and go through OpenGov.

[coco]

At least please let`s wait for the proposal to the point when poolstakers have a vote.

[coco]

Edited due to violation of forum rules. I hope that’s legal now:

So, if everyone is sure that reducing inflation will automatically have a positive impact, why does the treasury need a special status? The truth is that this claim is pure speculation and the regulation is intended to ensure that if the desired effect does not occur, the treasury inflow is still secured. Confidence in the desired success does not seem to be absolute, otherwise one could stick to the current model and leave the ratio of inflation to treasury income at 10% while simultaneously reducing inflation (which I would not find optimal either but would be better and more honest). It seems to me that in times when DOT is suffering from a downtrend in market top ranking, pompous events with star DJs and croissants (just as a symbol) are inappropriate. This trend seems to me to be exacerbated by this proposal, while regular tokenholders who are already in the system are penalized proportionally. The actual benefit that the treasury is supposed to bring, value growth for everyone, does not seem to have borne fruit so far. So why amplify the effect that has not been achieved? Beneficiaries of the treasury will continue to be sponsored here at the expense of token holders. I am repeating myself, of course. And it is clear that all the people who collect their 30-40 likes from the insider bubble on X may like this development, as they will benefit. We will see whether the change that will be waved through will lead to the predicted effects. I say it won’t or at least it’s not sure. Only the bleeding of the system will of course be slowed down, as stakers will have less to dump and the treasury will have proportional more funds for it.
If we are going to reduce inflation, then please do it fairly.

[mister_cole]

Everyone in this thread:
I’ve messaged many of you individually to give you a chance to edit your posts to adhere to the rules, which explicitly prohibit price and investor talk. The posts will be deleted soon if those edits aren’t made.

Everyone joining the thread:
I understand that this topic makes those prohibited topics tempting, but any comments referring to price or investor issues will be deleted from here on out. Mods/Admins don’t have time to engage every poster directly to request edits.

If you are unhappy with the Forum’s current rules, feel free to post in the appropriate topic.

Thanks for understanding!

[ZouYang]

I don’t know if I’m the only one who thinks that.

Since the blockchain is a highly integrated application of science and technology and finance, and the discussion of economic models will certainly involve affecting the price, but the price can not be discussed in the forum, which is like making bricks without straw.

This is so weird.

We should support rational discussion of prices and prohibit discussion of market conditions, instead of blindly banning all discussion of prices, which is too irrational.

[coco]

To be honest, this is a bit frustrating. As @mister_cole correctly noted, a price discussion is not allowed here and is difficult to avoid, especially on this topic. My first post has now been deleted, even though I edited (or deleted) about 50% of it. I must have overlooked something. (Admittedly, it was perhaps still somewhat aggressive and contained accusations that were not proven but nevertheless corresponded to my understanding.)

I would like to say something in closing. I consider myself an investor in the stock market, gold, real estate, BTC and, yes, also in Polkadot, although I use the term token holder here because it is more appropriate, as it is software and not a classic financial product.

For me, the decision for the latter was based, among many other things, on the excellent and unparalleled inflation that the token offers. I strongly suspect that other token holders share this view.

We will see what the changes ultimately aim to achieve, if implemented. If the desired effect does not materialize, for whatever reason, and the previously positive and unprecedented effect of high inflation has also disappeared, this could have devastating consequences for the entire project. Of course, adjustments could then be made again. But once the damage has been done, well…
There are also some areas in this system that are subject to a certain degree of economic efficiency, unfortunately. What will validators do who have been able to offer excellently low commissions so far? Will pool operators charge commissions? How will providers of staking pool ETNs react who already have DOT in their package in some mixed products (21Shares and others)?
The adjustments that are being made here are massive.
And yes, as has already been correctly mentioned here, the topic is polarizing and has been discussed for a long time. I have also followed it and have repeatedly read that such decisions should be delayed. Firstly, to give participants time to adjust to a change and/or to wait for the right general market environment.
Especially with regard to the possible approval of a pure Polkadot ETF by the SEC, our current inflation would perhaps be the decisive factor that would set us apart from the competition when it comes to participation in staking rewards.
The discussion here refers to a very technical view of things, which is important, but also has other important factors.
I ask you to consider this carefully.
Perhaps I am wrong in my concerns, it is even quite possible in the end, admittedly. However, I would like to point out that decisions by Open Gov in the past have sometimes led to undesirable effects as well.
This change may seem logical on the surface, but it has deep and fundamental aspects.
(If, despite careful consideration, I have violated forum rules, I ask that you make a gentle change and not delete it completely. Thank you)

[jonas]

That would be great, I checked the status of voting for nomination pool members and it seems the code is largely there and audited. They did, however, find some issues found but hopefully those are fixed soon and the update is launched in time (@ankan).

[cpiccard]

As one of our esteemed VCs said, Polkadot will only be successful if we all work towards a common goal.

However:

• Traders want 0% inflation on Polkadot and don’t care about staking rewards.
• People relying on the treasury want all inflation directed towards the treasury.
• Long-term investors/stakers want high staking rewards and probably wish to reduce excessive spending by the treasury.

The planned changes only go against the interests of stakers. I believe those relying on the treasury have the most influence and are able to push changes through in open governance. However, this will only increase the already existing rift within the community.

I urge the community to find a compromise that everyone can accept.

[alice_und_bob]

I agree with Jonas and share a few additional ideas here:

Get rid of the 24-day spending cycle

Like the ideal staking rate, it is a historical artifact that is no longer necessary.

The 24-day spend cycle determines when spend_local() spends are executed and when the burn is applied. With the introduction of the new spend() extrinsic, the 24-day spend cycle has become obsolete. Additionally, the 24-day waiting period is very unpopular and there doesn’t seem to be a good reason to have it.

Action Items:

• wrap spend_local() such that it executes a local spend() immediately.
• to maintain the burn, introduce 2 parameters. One for burn frequency and one for burn amount of the Treasury.
• remove all other code artifacts that relate to the 24-day spend cycle

Transition to linear or sub-linear inflation

Currently, Polkadot has slow exponential inflation. This is completely fine if you understand the economics behind it (and inflation is constrained). The problem is that people do not understand the economics behind it and it is impossible to sufficiently educate them about it.

To me, it has become evident that a theoretically sound model is still not fit for the market if people reject it.

Exponential inflation has a very negative perception. It is a bad meme. Thus I strongly believe we should transition to a linear inflation that emulates current values but makes them more tangible.

Example

Total Inflation: 100m DOT per year (~70% of what we have now)

• Stakers: 75m DOT per year
• Treasury: 25m DOT per year

Comparison

upsides:

• simpler to understand, better memeability
• with linear inflation the inflation rate diminishes over time (100m @ 1b supply is 10%, 100m @ 2b supply is 5%)

downsides:

• diminishing relative security budget over time (but it’s totally manageable to react in time)
• essentially none

Direct some coretime revenue to the Treasury

Currently, the Treasury has ~2 sources of income:

• inflation
• tx fees
• (slashes, randos sending tokens to the Treasury, etc…)

TX fees are a concept of monolithic L1s where everything happens on the L1. Since Polkadot is more of a rollup host, coretime revenue is an analogue of tx fees in our system.

I think in the long run it would be ideal to reduce the dependence on inflation and instead incentivize the treasury to optimize for coretime revenue. Building a parameter that allows splitting coretime revenue between burn and Treasury inflow would be a great starting point.

[filippoweb3]

I propose an even more aggressive scenario to force more healthy spending of treasury funds while making DOT less inflationary (6% total inflation):

max_inflation = 0.06
maxStakerReward = 0.9

Below is the adjusted plot:

Staker inflation 5.4%, staker APY at 59% staking rate is 9.1% (3.1% after inflation).

Every spending period, 580k DOT is added to the treasury. This should incentivize people to do more due diligence, prioritize projects, value retroactive funding, and avoid continuous overspending. However, I think 1.15 M DOT is way too much.

This should also incentivize people to look around for higher APY if they want to.

I agree with @alice_und_bob that spending period should be lifted and replaced with a more agile system.

We do not need a lot of inflation to the treasury as long as the influx is fixed and predictable and not dynamic as the current (soon old) scenario. The 80% of tx fees go to the treasury, and we are far from broad Polkadot adoption where fees can actually become an important treasury inflow. Also, coretime revenues can be used as well for treasury influx.

[ThomasR]

You forgot Defi users/protocols in your list of actors.

• Long-term investors/stakers want high staking rewards and probably wish to reduce excessive spending by the treasury.
  → This population brings no activity to the network. It’s a passive behavior which is just here for the PoS security and hedging the inflation risk for bag holders.

Moreover, Polkadot has one of the highest staking yield compared to other chains. So there is room to keep a high yield (remember ETH staking is 5%) but a lower one.

Defi users/protocols want a good balance between high yields and low yields.
High yields kills any Defi activity.
Low yields brings more Defi activity because people will tend to look for better yields in Defi.

For the Traders population, we collectively don’t have to take care of them. Trading is trading, it’s a bet on future. We owe nothing to traders.

What is proposed by Jonas is definitely fine:

• Keep a steady flow of inflation towards the Treasury which is super important
• Reduce inflation (and yields to a close double digit range 9-11%)

[coco]

That’s not necessarily true. I quadrupled my DOT holdings through Defi (Acala, Parallel.fi) within 1.5 years. However, with a model of 6% inflation, I would ultimately withdraw the parked values ​​from the ecosystem and park them in stablecoins (6%) and/or fiat (3.75%). Especially when a disproportionate treasury regularly throws assets onto the market that work against me. High inflation ensures that users will restake the rewards or part of them, whether this is technically necessary or not. Good luck with this strategy to strengthen DOT.

[Why]

Long-term investors are bankrolling the system by parking their capital here. Treasury beneficiaries are taking money out of the system and traders who are buying and selling are net neutral at best. Long-term investors and stakers are the only party here sending money in.

Love it or hate it, Coco has a point that must be considered. Polkadot is competing with other cryptocurrencies for the capital of investors. If the benefits offered to investors are not competitive with other assets, investors will simply move their money elsewhere.