Polkadot's Economics Parameters: Proposal 3 (8% total inflation in the first year, then gradually decreasing)

1yr ago

Executed

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AI Summary

Overview

The Wish for Change (WFC) referendum is part of a series of referendums aimed at probing token holders' sentiment regarding proposed updates to Polkadot's economic parameters. The key changes include implementing a fixed treasury inflow, removing the adjustment of staking rewards based on the discrepancy between the ideal staking rate and the actual staking rate, and potentially reducing overall inflation.

There has been extensive discussions in the community about this topic leading up to these referenda. Here is a reading list:

Rules

Only a WFC that is executed can be considered a candidate (i.e., it must be gathering enough approval).
If one or more WFCs are accepted, the one with more AYE votes (weighted with conviction) is considered the preferred candidate.
Ideally, WFCs should be run mostly in parallel.

Important

The WFC referendum cannot be binding, i.e., there is no mechanism to force the chain to update the parameters to the one specified in the WFC. Instead, it is a method to aggregate the opinion of voters through OpenGov and offers some commitment of the community to one WFC on the social layer.

Ways forward

The goal is to put forward a root referendum after the WFCs ended that implement the logic of the winning WFC. The proposed parameters in each WFC would achieve their goals but it might be that it's more efficient to implement the code otherwise. Importantly, we agree on the outcome as stated in the REMARK of the winning referendum.

This WFC

Voting AYE for this proposal expresses your approval of setting a 8% total inflation on a fixed total issuance (potentially the total issuance at the time of the execution of the root referendum), diverting a fixed 15% of that to the Treasury. This will effectively lead to a constant issuance in DOT leading to a gradually decreasing inflation over time.

The following parameters would achieve that (note that there might be better ways to do it):

MaxStakerReward: 85%
max_inflation: configured to start at 8%, then decreasing
min_inflation: equal to staker inflation

REMARK: 8% constant total inflation (on a fixed total issuance) with 15% to Treasury

Edited

Up 2

Status

Decision28d

Confirmation

Attempts

Tally

77.2%Aye

50.0%Threshold

22.8%Nay

Aye

≈63.92MDOT

Nay

≈18.89MDOT

0.0%
0.0%
Threshold
0.0%

Support

1.31%

≈19.53MDOT

Issuance

≈1.49BDOT

Votes

Nested

Flattened

Calls

Check how referenda works here.

Call

Metadata

Timeline6

Votes Bubble

Curves

Statistics

Comments

12TA...UWcD

I'm voting Aye on 1138 and 1139. Nay to 137. Reduce to 8% inflation no matter what. But 1139 (8% and decreasing) is my preferred option of the three. We all expect inflation to shrink as a protocol and ecosystem mature. It's better to go ahead and put that auto-reduction in place now (and tweak later) than require more political capital and effort to push through the next reduction in the future.

1PGi...Cznp

Voted Aye.

1v54...jjwv

I would be highly surprised if Polkadot went first. Why would we do that?

1NAF...gpY4

I don't quite understand the definition of "max_inflation: configured to start at 8%, then decreasing min_inflation: equal to staker inflation". Does this mean that inflation would start at 8% and decrease until it reaches a constant inflation minimum? What does 'equal to staker inflation' mean?

PLEASE don't screw investors. BTC has been successful because its monetary policy has been immutable. How lightly you talk about inflation percentages and treasury allocations.

I understand that something needs to be done about the current inflation of the protocol but the change must be ONE and definitive. We must absolutely provide predictability for the next 10, 30 or 100 years.

I'm not here just to complain about the 3 proposals, but I also bring my proposal for inflation and the treasury. A definitive proposal for the next 100 years.

Proposal 4 (if any holder with the power to propose referendums is encouraged to add it, it would be ideal to the plurality of proposals):

Inflation proposal:

Changing the current 10% annual DOT emission to a tail emission from the current 10%, where a fixed amount of DOT is issued per block forever.

Benefits of the proposal:

Economic predictability: Provide greater predictability to Polkadot's circular economy.
Payment stability: Ensure consistent payments to the network's validators.
Consistent supply: Ensure a consistent supply of DOT for nominators and the treasury.
Inflation flexibility: Gradual reduction in inflation if the total circulating supply increases due to issuance. Gradual increase in inflation if the total circulating supply decreases due to possible DOT burns that exceed monetary issuance.

Treasury proposal:

A fixed minimum percentage of the issuance will always go to the treasury.

Benefits of the proposal:

Economic Prediction: Provide greater predictability over the years on what the budget should be spent.
Budget Constraint: Remove incentives for referendum proponents to make ridiculously expensive proposals when there is not abundant money in the treasury.

Conclusion:

The goal of the proposal promotes long-term stability and predictability, providing a reliable environment for investors, validators, and the Polkadot treasury.

Please, I hope my words are heard.