Updating Mina’s planned inflation and block reward schedule from the original tokenomics

[EmreNOP]

Not totally Agree, I’m ok with some parts like fee burning. This is the new trend in crypto and helping pressure on supply. But just cutting down supply is not helping to more price up. At the same time, we should see use cases on the mainnet. Except the current community needs reasons to buy and spend mina and we cannot create a new tokenomic scenario based on the current community. The community is already believing Mina. That’s why more than 90% of staking and supercharge rewards are boosting their thoughts. If we remove supercharge, I believe, we’ll see a lower delegation rate and that will be a reason for the increasing circulation supply and the price will be under sell pressure. We should not remove supercharge rewards till we see real-world use-cases on the mainnet. But I’m ok with reducing Supercharge rewards a little bit more and the most important one, what will happen when we reduce block rewards? People will buy more mina? will it create new cashflow ?

Also, I’m not believing in a periodic check of 82.5% and fine-tunning on tokenomic. This is not looking sustainable and manageable. What we’ll do if we see under the threshold? are we gonna change tokenomic again? We should not periodically change tokenomic. not looking professional.

By the way, These are my thoughts. But the Turkish community has different opinions. They are always complaining about like supply is too high. People are just checking current supply, speed of increase, similar projects supply. They are missing the use case factor which we saw in the other projects that are currently created ecosystem.

in a nutshell,

• Apply fee burning ASAP
• keep current BR as is
• Reduce a little bit more SCR but not totally remove till real-world use cases

[ChrisCrisKris]

I don’t know if it is feasible, but what about the solution to have a second token on the Mina blockchain ? For example $MINA tokenomic could be modify to have a deflationist token, and the new token could be use to remunerate the block producer and staker for example ? Or maybe a stablecoin could be used ?

[onur]

I am a long-term investor in mina, the first reason is that I believe in the project, the second reason is the promised rewards. I think that every mina that comes when I spread it over a long period of time will be very valuable after 3 or 4 years, and I do not want my rewards to be reduced by embarking on an adventure whose outcome will not be known. Those who don’t want inflation can stop staking and sell them sorry for my limited english. thnx.

[o1brad]

Awesome to see this conversation and very thoughtful contributions throughout!

On whether Mina’s staking rewards being competitive in the market, it looks like we’re roughly in the middle of the pack both in pct of the protocol supply and dollar cash flow. I pulled a few comps from StakingRewards.com.

I think we’re in a reasonable place there and wouldn’t consider that a strong reason to change the tokenomics independently.

One good reason might be that every time staking rewards are paid, they lead to some downward pressure on the price, since some of that reward must be liquidated to pay for taxes. If you assume taxes are 25% and the price is stable, that would be about $100M of forced selling pressure each year. So if we, say, half the rewards, then it could save maybe $50M of forced sales each year. Not sure that’s a ton, it’s about 2/3 of the daily average volume.

Just throwing around some ideas and data, once again it’s awesome to see such a lively discussion.

Thanks to @evan for the proposal.

[erknfe]

I doubt whether mina’s economic policy really needs an update. people are currently buying it just hoping the price will go up. but when that doesn’t happen, they think it’s because of current supply rates. As a result, such complaints arise. people need to use and spend mina. snapps yes, but smart contracts are urgently needed. people will forget these complaints when they start using defi tools. mina’s primary goal may not be to produce decentralized financial solutions, but it has to do it somehow.

[Pipcol]

I dont like either the fact that you start changing things. Many invest believing on the original vision and economics. I invested planning to accumulate x amount of minas on x time. Is not fair now to be forced to see that reduce or to hold even more time.

If you create the use cases there shouldn’t be the need to reduce the initial economics so work harder on creating the ecosystem instead of reducing your promises

[Pipcol]

I like the original vision… Part of the investment was made based on the original tokenomics, simple as that. Certain amount of time for certain amount of return… the efforts shouldn’t be on modifying tokenomics to suit mina foundation interest and start playing with that when mina has nothing on it build and 0 use cases is playing with fire. Is not the same to say oh ethereum make changes, they are but after 10 or 9 years? Mina has nothing and its already playing based on imaginary numbers

The original plans are not excessive thats why it was planned as that at the beginning. But good things takes time, 8 years for initial supply to be released is more than enough. Mina is like 9 months old with nothing valuable on it yet. Making this changes just based on assumptions is a huge risk. Efforts should be on creating real demand and use cases then real increase of price based on value will be seen

[Pipcol]

I like the original vision… Part of the investment was made based on the original tokenomics, simple as that. Certain amount of time for certain amount of return… the efforts shouldn’t be on modifying tokenomics to suit mina foundation interest and start playing with that when mina has nothing on it build and 0 use cases is playing with fire. Is not the same to say oh ethereum make changes, they are but after 10 or 9 years? Mina has nothing and its already playing based on imaginary numbers

The initial plans and inflation is not excessive thats why it was planned as that at the beginning. But good things takes time, 8 years for initial supply to be released is more than enough. Mina is like 9 months old with nothing valuable on it yet, changing things is easier instead of having patience for the ecosystem to be build. Making this changes just based on assumptions is a huge risk.

[Pete]

Thanks for bringing your comments to the forum Pipcol, it is easy to see you are passionate about the project, that is great to know.

My personal view is that if someone like Evan who has co-created Mina Protocol and spends so many his hours of his life considering what is absolutely in the best interests of its future puts forward a proposal for discussion it should be taken seriously.

There are a huge amount of new projects launching virtually daily (a lot using zksnark tech too) they are all fighting for the same space / developers & community, most of them won’t survive. I am old enough to remember VHS V Betamax and the best tech doesn’t always win.

The cryptos that get stale are often the ones who haven’t been adaptive to situations as they appear. If you look at Polygon for example they have changed direction far more dramatically than this proposal and have thrived from it.

[Pipcol]

I understand but what about early believers? I was planning to hold 8 years, now waiting 10? And if the rewards are reduced then the ones that invested based on the original plans will not get the intended amount they calculated

May be the burning mechanism… but eliminating supercharged rewards? And extending the time for initial supply to be released is really messy…. And all of this based on imaginary numbers its a huge risk

[lamps]

Supercharged rewards were only planned for 15 months anyway, and this proposal did not change anything about that. In fact, we are having higher SC rewards than originally planned as we speak, check https://minaprotocol.com/blog/mina-token-distribution-and-supply

[kudretthunder]

I think we should wait a bit. It’s kind of weird to talk about this when there aren’t even Snapps yet. We have to see how the market will react to the product. But I am more positive that inflation should fall.

[cryptozen]

I am in favor of inflation rate modification as articulated

[oldman]

Most people buy MINA and hold/stake because they want to make money, not because of the project or its technology. Like it or not, cryptos need these people and for that they need to show appreciation potential. One of the ways of valuing is through scarcity, this should have been thought of at the beginning of the project and found a way to create scarcity without affecting decentralization. I know that a change of direction now will be difficult but waiting longer will be even worse.

[aaamil13]

BR = 5 and SCR = 20 %, → decentralisation, same inflation, new stakers interest.

[TenPay]

A financial model that can be borrowed is an ecology developed on a sero chain. If you can develop such an ecology if the Mina chain helps Mina consensus, enhance MINA internal exchange, helps Mina financial time leverage, help Community team is strong,However, 2-20 rewards have excessive foam, it is recommended to reduce 1% reward
Solve inflation intelligent contract

GitHub - ubsgame/ubs

UBS Bank Contract Rules

I. Use recommendation code as link relation

Ii. Scope of participation: ≥10 SERO

Iii. Personal finance income (Static Income)

1. Upon participation, all SERO flow into the same UBS bank contract pool, and the account immediately shows a static return quota of three times the investment amount, which can be increased indefinitely.
2. Static income is released in accordance with 1.5% of the bank contract pool every day, weighted by the amount of static income of each account, until the static income is three times of the investment, and the contract stops
3. Daily settlement of static returns (UTC 00:00), which can be withdrawn or reinvested by “triggering returns” and then flowing into “collection”

Iv. Performance reward income (sharing income)

1. Permanently enjoy 100% of the static income of a layer shared
2. If the direct share performance reaches 20,000 SERO, you can enjoy 10% of the static revenue of the second layer shared
3. For each additional 10,000 SERO of direct sharing performance, 10% of the static revenue of the additional layer will be enjoyed by the shared person, up to a maximum of 20 layers
4. Income sharing burns, that is, when calculating the income sharing, the smaller of the principal of the sharing person and the shared person shall be calculated. If the actual investment amount reaches 100,000 and above SERO, the bonus will not be burned
5. Daily settlement of income sharing, automatic implementation of “collection and collection”, withdrawal and reinvestment

V. Additional mining income UCON

1. Based on UBS 2.0 technology, UBS series ecological rights management token UCON will be officially issued on 9/9/2021 00:00 UTC. 60% of UCON’s daily circulation will be automatically issued to UBS bank users as a reward for investment and mining
2. Mining authorization: After the first “investment” is made in UBS bank and successful, the account is deemed to be authorized to invest in mining, and the account will automatically trigger the function of issuing UCON tokens. PS: You must click “Invest” for the first time to activate authorization, and “reinvest” for the first time cannot be authorized. After authorization, “Reinvest” can be used normally
3. How to obtain mining reward UCON: After successfully authorized mining in THE new UBS interface, all future investment/re-investment (including the first investment for obtaining authorization) in the new UBS interface can receive corresponding UCON
4. How to calculate and collect UCON revenue

• Each account can collect UCON once every 24 hours. The amount of UCON can be collected will also change in real time with the increase of other users’ new investment. The statistical interval is calculated according to the 24h interval for each account to be collected.
• UCON per collection = UCON daily circulation * Account mining weight ratio [Account mining does not collect SERO/ all account mining does not collect SERO]
• Since the account is authorized to activate the mining function, all SERO invested/reinvested are counted as the SERO that the account has participated in mining, minus the SERO released by the account to the collection every day, and the difference is the SERO that the account has not collected in mining. All investment volume will continue to accumulate until the account mining is not collected SERO, not eliminated according to the natural day.

Vi. Allocation scheme: 94% of each investment amount will be allocated to the address of UBS Bank contract pool, 4% to the address of development team as technical service fee, and 2% to the address of UBS Foundation bonus pool as platform governance fund. Smart contract will be automatically allocated

Vii. Open source system, data on the chain, code written, decentralized accounting, no back door, can not be tampered with, automatic operation, automatic distribution.

Viii. The system discloses contract rules and default recommendation codes, and players can actively participate without referees.

Developer philosophy:
Make wealth more free
Make finance simpler
Make life better

[Serdar]

Imho, getting a game theorist’s and a macro economy expert’s opinion on this matter could prove to be crucial later on.

Creating sound money is no easy task.

[o1brad]

I wanted to update my earlier post in light of recent legal developments in the US. Earlier, I said:

every time staking rewards are paid, they lead to some downward pressure on the price, since some of that reward must be liquidated to pay for taxes

There was an outstanding case in the US to clarify whether block rewards are capital gains or investment income. It’s been recently reported that the IRS told an individual (who sued them) that they can count it as capital gains. If this ruling holds for all US taxpayers, that would negate what I said earlier.

In my view, that weakens the position to get rid of or lower block rewards.

[Darko]

I’d like to offer an alternative view on tokenomics in the web 3.0 era, with a focus on the role of tokenomics in the application layer, rather than viewing tokens as block subsidies of a bearer asset or a commodity.
In other words, proposed Mina tokenomics changes as viewed through the lens of an app designer.

An exercise in unintended consequences of tokenomics might become observable with an app which utilizes low cost transactions (micro transactions), where a strong bearer asset which is not easily dilluted and is scarce, inherently dsscourages frequent interactions with a blockchain, especially if this strongly secured bearer asset (like BTC, ETH) also has fees which may not be high, but are prohibitive to social economies of micro transactions as a truth and value mechanism.

I don’t mean to get partisan but, BTC has kinda matured to become a prime bearer asset, that one does not spend lightly or at all. The problem of sound money is kinda solved (ok, Monero for Agoric purists of Austrian economics).

And not to knock on Ethereum, but it’s unclear whether it wants to be an investment asset category or a gas platform for vast social economies. Not because it can’t be a platform for web 3.0, but simply because of a market force of Valuable = don’t sell. Don’t interact. Don’t distribute.

We have other usecases to ‘fry’ in web 3.0 land, assuming the problem of sound money has been solved. Kinda.

That is how an application designer might think about blockchains in the next 5 years. How to utilize a protocol like Mina to bring about a myriad of social innovation that can be of true benefit to society?

Certain protocols, perhaps Mina, might be better served by a dilluted supply which consistently loses value over time, or optimally, holds constant value due to increase in utility. A fairly distributed inflation (as is in Ouroboros type protocols) better encourages actual liquidity of assets, from one hands to another, in a social fabric of value exchange, than stronger assets which have a baked disincentive to spend because they are scarce.

Ok, what do I propose, rather selfishly as an app designer who wants to build on Mina? I vote for the tokenomics as is, because I think it better suits a potential use case of a social fabric economy. (which happens to also be the core maxim of mina; a ‘network’ powered by participants)

I did some long term thought about what parameters a protocol should have for my usecase, and found that;

Around a 0.01$ minimum transaction (or smart contract interaction) fee is optimal. In Mina terms today that is 0.0036M. This is an acceptable and nice looking (easy to imagine) fee for a basic web 3.0 experience, which I describe roughly as a payable internet (Like Jaron Lanier elegantly described as a reasonable ‘fix’ for the internet )

The particular usecase I am targeting would benefit greatly from as stable a price per Mina, and as close to 1$ as possible. It would not benefit some usecases for Mina price to rise consistently over time. This could disincentivize social participation.

Unpopular opinion. I think it would be healthy for Mina speculators to slowly abandon hoarding Mina before or without a clear usecase, and to dillute the price of Mina down to 1$ ($0.75 -$1.5 range). This would enable app builders a great fresh start for mass adoption. That is, in more futuresqe, social use cases, not merely FOS (financial operating system) which every chain today apparently wants to be. Finance is boring. Aren’t we annoyed to see a new ‘anyswap’ on a new sidechain of a new fork of something. Social usecases are interesting and just beginning to be explored since about 2015.

A dillution of price before a strong usecase would enable a lot of people to buy and hold a lot of Mina before a strong social usecase really takes off with mass adoption. If the price of Mina rises steadily I fear that many users (think Africa and South Asia) would be priced out of participating.

I suggest as a thought, then, that a dillution down to $1 per Mina this year might be a good thing for market adoption of Mina powered Snapps. For one, for marketing purposes, it would be really awesome if app builders and services could work around a price of 1Mina per object, or item. One Mina being ‘roughly around one dollar’ has a good aura of mass adoption about it.

Secondly, it makes protocol costs (smart contracts) easier and sensible to build 5 years into the future, or more. What we don’t want is to bake transaction and deploy costs into a contract that will end up costing users more (or less) in the future than it cost them at the time when they signed up for a service.

Slow and predictable, and unchanging inflation, or dillution, however we wanna call it, would be useful to build things like subscription models, where a user can know that one interaction with the world costs around 1 cent (0.01$), or 0.01Mina, or that one subscription costs 1 Mina, which you don’t have to think about because you know it is roughly $1, without much volatility. I guess I am calling for the dillution of most token economies. Let true believers operate nodes and receive rewards for security and protocol consensus, and let everyone else have a reasonably stable token to build social consensus around. We have no need for every particular token to constantly just rise in price. I may be mistaken though, and price appreciation builds rich networks of use. ETH certainly proves that today with unberable gas costs.

In conclusion, for me the tokenomics ‘as is’ look appealing for some types of social applications, a slow decrease in subsidy from 12% to 6% looks reasonable and incentive systems can be built around it, fees are just right as is and a large rise in fees will make building apps potentially more prohibitive.

With a predictable and high inflation cycle, Mina token would appreciate or hold value, much more like a ‘fiat’ money that wants to be spent, but without all the dirty fiat connotations. If the Mina community votes to un-dillute the Mina supply in order to increase the relative dollar value of everyone hodling, that would surely benefit every holder in the short to mid term, but potentially put a roadblock for mass adoption and rich utility networks in the long term.

[lamps]

Thank you for the excellent contribution to the discussion! My two cents on a few points:

1. As a POS layer 1, $MINA price is fundamental to the security of the whole chain, it’s not just for utility any more;
2. whether we like it a lot, any successful L1 probably needs a price appeciation process to increase its security, and attract more devs and more users, in the bootstrapping phase. Economy is the driving force for human society, and web 3 won’t be an exception;
3. I do not think txn fees will be a problem. With appreciation of the price, the fees will most likely drop when denominated with $MINA, same as BTC and ETH. Many problems that cause high gas fees for ETH do not exist on Mina due to the off-chain computation (so that users do not need to bid for gas) and rollups being extremely easy to deploy. I’d imagine that most, if not all, snapps will utilise the rollup feature in one form or another.
4. Rising prices do not mean developing regions will be priced out of participating. An obvious example is the >1m Filipino Axie players - they did not get priced away when $AXS went from $2 to $150 last year, in fact, they were amongst the largest beneficiries. Similar for future Mina snapps, as long as those people can benefit (eg earn fiat) by participating, the development will have a positive social impact.