TIP-003: Threshold Network Reward Mechanisms Proposal I – Stable Yield for Non-Institutional Staker Welfare

Proposals
2

I think this mechanism is novel and brilliant. I’m completely onboard with the design.

A part of the conversation seems to be missing from the proposal, however. As a community, before implementing an inflation mechanism, we have to address and justify this value:

If I understand the proposal correctly:

  • the stable yield rate is constant (that can be modified)
  • the nominal inflation rate is a dependent variable
  • the participation rate is an independent variable

So, where do we set the stable yield rate? (keeping in mind that we can change this in the future, but it will likely be a difficult/sticky conversation once the ball is in motion)

Here are my thoughts on the matter:

The mechanism detailed in the post above will help sustain independent nodes by establishing a floor, but it won’t directly put them in business. The inflation model accounts for operational expenses, but needs to also address startup costs (which in this industry are considerable and worth subsidizing IMO).

So instead of setting a static stable yield rate, I propose that we set a decaying rate with a set perpetual inflation. This would be similar to the Synthetix model (SIP-24) here:

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However, I think our rate should be much less aggressive in regards to the:

  1. Initial Rate
  2. Decay Rate

The reason for (1) is obvious: we don’t want to dilute the DAO or people that cannot run a node too much. The reason for (2) is that a slower decay will allow more time for independent operators to learn and boot up.

In combination with the stable base yield mechanism that @arj proposed above, I believe this plan can help us maximize independent nodes in a deliberate manner.

As to the exact numbers, I’ve created a spreadsheet to play around with what that might look like:

Feel free to adjust any of the values in blue.
These are my initial thoughts on those parameters:

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Perhaps we could drill down a little further into whether these values would be more/less effective than other values at incubating operators.

In the spreadsheet and image above, these two parameters are designed to grow the number of independent operators:

  • Annual Yield Decay Rate
  • Initial Target Yield

While these two parameters are designed to sustain network growth and independent operators:

  • Constant
  • Terminal Target Yield
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