I was reading this post from @evan and it mentions that the consensus protocol requires 75% staking participation for maximal security of the network. I haven’t been able to find the analysis that reached this conclusion, so it would be cool if someone could share it.
Security and stability are obviously top priorities and I would like to know why 75%, and what “maximal security” means in this context. For reference, the current staking participation on Ethereum is 28%, which translates on a lot of ETH being free to be used for economic activity. Not to mention that a lot of the staked ETH is being also used for economic activity in the form of liquid staked ETH. It is also a matter of time before a lot of the staked MINA is similarly used as liquid staked MINA, which begs the question of how will this impact the security assumptions.
In the same post it was also proposed to slowly decrease MINA block rewards and stop if participation approached the 75% threshold. I think this is a great idea to deal with the issue of avoiding falling under a dangerous participation threshold. Although I think this should be baked into the protocol as a dynamic block reward, which would automatically adjust according to how much participation there is at any moment. To target low inflation, block rewards could be decreased by default and stop decreasing when reaching 1% inflation target, and increase when approaching the dangerous participation threshold.
Of course those are only balancing mechanisms and it should be noted that there’s not inflation rate that guarantees that we would never go below the dangerous participation threshold, which leaves me wonder what happens to the protocol if that happens.
Another question I have is that in the same post an “Original Block Rewards Schedule” is referenced, and a new “Proposed Target Block Rewards Schedule” is presented, but none of these schedules seem to reflect the actual mainnet block rewards. It looks like mainnet has given a fixed block reward of 720 MINA (excluding the old supercharged rewards) since inception until this day. So I wonder how the monetary policy has been managed all these years and what is the official stance today.
Finally, the post also proposed a fee burning mechanism as a way to reduce inflation, but as I mentioned in the initial post, Mina should avoid focusing on fee burning / chain revenue mechanisms too much. Chain revenue is not a reliable component of monetary policy; deviates attention from the more valuable aspects of Mina (from decentralization, censorship-resistance, and liveness; to transaction fees); and introduces perverse incentives like enshrining MEV or making block space artificially more expensive than it has to be.