Threshold
Hi John,
Increasing inflation isn't a typo and I know how shocking it may sound. In my opinion, decreasing inflation and increasing validator commissions would have negative effects on nominators and without their backing security drops.
I am suggesting that we increase inflation but reduce transferable supply by locking some of the rewards long term. There's a lot to cover on the topic but the proposed idea can be a win/win/win for validators, nominators and the network. It is however a profound change which requires coding.
Kusama is the realm for such experiments, an opportunity to try something that might not necessarily work.
Comrade,
Will
Thank you for your reply, Will.
Since you write in your proposal that your goal is to strengthen the validators, I can assure you that this proposal (and the future proposal to increase the inflation rate) will have the opposite effect.
Why? Kusama's inflation rate is currently about 10% per year. This is extremely high and has a negative impact on the trading price. The larger the number of coins, the longer the individual coin becomes worthless.
However, the trading price of a single coin is relevant for the validators' income, as you yourself have shown in your calculation. So if your calculation is correct, there are two very effective methods to achieve your goal without having to increase the minimum commission rate from 10 to 15%.
Which ones? Firstly, Kusama's inflation rate should be drastically reduced. This would result in a single coin becoming more valuable as there are fewer of them on offer. Another method would be to increase the minimum commission rate.
However, if you increase the minimum commission rate and increase the inflation rate at the same time, then the individual coin will still depreciate over time because there are more and more coins on offer, which in turn means that validators earn less because the individual Kusama coin is worth less.
To cut a long story short: If you want to make validators more profitable, inflation must be reduced, not increased! With this proposal, all you will achieve is that the validators will profit in the short term on the backs of the holders before everyone loses out again.
I hope that you are aware of the consequences of your proposal. A compromise would be, for example, to combine the increase in the minimum commission rate with a reduction in the inflation rate from 10% to 5%.
But even increasing the minimum commission rate is unnecessary, because reducing the inflation rate would already be the solution to your problem according to conventional economic logic.
Sincerely,
John
Hi again John,
I believe we are getting a little side tracked by my radical statement (increasing inflation). If we look at this proposal on its own, it seeks to adjust the distribution of existing issuance in favour of validators who play a vital role in the security of the network.
Looking ahead, I ask you to be a little patient and allow me to present the idea in detail as a separate referenda. I'm familiar with the position you're presented, we took this approach on Polkadot and reduced Polkadot's inflation with almost nil effect to token price. The market is not easily gamed, I'm suggesting an out of the box alternative.
There's an aspect of my argument increasing inflation that you're not factoring in with your response. I am suggesting that we lock some of the funds which overall reduces the transferable supply.
Regards,
Will
Hi Will,
I agree with you that validators play a vital role, but that does not justify a one-sided increase in the minimum commission rate.
I would remind you that in the last referendum (https://kusama.subsquare.io/referenda/507) there was talk of lowering inflation rate in exchange for an increase in the minimum commission rate.
Your proposal is therefore not only one-sided, but also extremely destructive. Don't take offense, but I don't buy your reference to 'big plans later'.
In order to become more profitabel, the inflation rate must be drastically reduced. And since the validators do not want to do this without an increase in the minimum commission rate, because they obviously have no one with sound economic knowledge, it is very stupid to agree to an increase in the minimum commission rate alone without lowering the inflation rate at the same time.
Sincerely,
John
You're still thinking in one dimension John; "big plans" is why we even have this extrinsic to vote on. I invite your comments when the next referendum is opened on the Wish-for-Change track.
Edited
This possibility does indeed exist. So please explain your ulterior motives and economic reasons?
As I understand it, only the validators will initially benefit from the increase in the minimum commission rate. This is of no use to the average holder, whom it is intended to attract; on the contrary, staking will actually earn them less in future.
By increasing the inflation rate by X, everything loses 10% + X in value every year. Even if a large part of this annual inflation is now locked, there are still two problems, namely where, how and for how long this share is locked, and secondly, that the token quantity still increases.
Even if you were to burn this portion, it makes no sense to take the additional step of expanding the volume, unless of course you want to favor the validators.
By the way, I don't try to play the market, but simply apply the most proven strategies, keeping the big picture in mind.
I'll release my proposal for Kusama's inflation before this referenda ends. Please keep an open mind, it's not just increasing inflation, it ultimately reduces supply.
Dear Proposer,
Thank you for your proposal. Our first vote on this proposal is AYE.
The Staking Admin track requires 60% quorum according to our voting policy v0.2, and any referendum in which the majority of members vote abstain receives an abstain vote. This proposal has received six aye and zero nay votes from ten available members, with two members abstaining. Below is a summary of our members' comments:
Some voters cast their votes in favor, highlighting the need to assist individual validators and suggesting adjustments to improve their financial sustainability. Others chose to abstain, citing potential conflicts of interest and concerns over the depreciating value of the KSM token. Overall, there was a consensus that the proposed changes could benefit smaller validators, with several voters open to reevaluating the decision based on future market conditions.
The full discussion can be found in our internal voting.
Please feel free to contact us through the links below for further discussion.
Kind regards,
Permanence DAO
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Edited
Dear Paradox,
In the last referendum which wanted to decrease inflation, there were many validators who said that they would approve of decreasing the inflation rate, if the minimum commission rate were higher.
In this proposal you wish to increase the minimum commission rate while saying that in another proposal you wish to increase the inflation rate. Are you sure you meant "increase inflation" or was this a typo and you actually meant "decrease inflation"?
Secondly, and if you meant "decrease inflation", why didn't you make a proposal with both of these matters (increase minimum commission rate from 10-15% and decrease inflation rate from 10 to 5%)?
Sincerely,
John