Just a note on the constant – it was originally envisioned to fulfill three purposes:
(1) Provide an insurance against disorderly exoduses, by rapidly increasing effective APY if the staking rate dropped below a pre-specified, DAO-chosen ‘dangerous’ percentage.
(2) Focus the stable yield mechanism on addressing staking rate scenarios that harm small stakers in the short-term – i.e. elevated staking rates → depressed yields → larger segment of the staker population falling below the break-even stake size. As you detail, this remains an issue due to fixed USD infra costs >> T subsidies converted to USD.
(3) Make the switch from the prevailing ‘dependent variable’ yield model to stable yields psychologically less jarring/unnerving.
I decided to ditch the constant for the first minting proposal, because sticking to a constant 15% yield from genesis avoided over-rewarding early adopters (read: insiders) and unnecessarily ladening sell/depreciation pressure onto the T token (bear market thinking). Moreover, none of the three above arguments were compelling enough; (1) an exodus seemed very unlikely given the foundation of community/client-team commitment to servicing the network, (2) small stakers are still harmed if the protocol over-mints, and (3) the general approval of the stable yield concept meant that this compromise wasn’t necessary to get it over the line.
I not fundamentally against reintroducing variable yields, moderated by a constant, thereby increasing rewards – up until staking rates increase to an ‘acceptable’ level. However, I would question whether this will actually increase the number of genuinely independent stakers, or just be gobbled up by existing large stakers. The staking rate may simply increase because incumbents increase their capacity. Hence I would suggest any changes to reward rates be complemented by:
(i) A concerted marketing & education campaign to convince prospective stakers that the long-term cost-benefit makes sense. Making it easier to spin up a node is one major cost reduction, and the capital efficiency of being exposed to DeFi and Web3 with the same collateral is a unique, huge, underemphasized diversification benefit over longer investment horizons.
(ii) Unearth and detail overhead-reducing (even temporary corner-cutting) strategies for the currently shallow-pocketed.
(iii) Reiterate the business case for betting on medium-term fee-based income – e.g. taking market share from centralized/declining alternatives.