PS2: “Staking Rewards are how the network pays trusted node operators for security. Given the current downturn in the economy it is not desirable to reduce the rewards rate. As such the rewards rate of 5% should remain in effect.”
I don’t know who wrote this sentence and as much as I love to use Hanlon’s razor when it comes to stuff like this, you really left me out of options here.
Maintaining a 5% staking rewards ratio has to come at the same time with a proposal/implementation for additional use cases for Flow utility. Otherwise the generated inflation will just make the Flow token situation worse, and therefore will not attract additional developers to the ecosystem.
As Layne said during the last Office hours, we just have at this point a Flow tokenomics MVP, and it is really the time to revisit this piece.
I’m new here so apologies if my questions have been answered elsewhere.
What is the strategic priority at this point: operating margin for node operators or inflation rate of $FLOW? Which is a bigger risk, both short term and long term?
What is the current cost to maintain a node? At 5% reward rate, what is the margin node operators are making? What is the target margin, and how competitive is it vs. other chains? What about the return relative to the required stake?
Does the reward margin need to be competitive to attract new operators (when will that be opened up?), or just enough to retain existing operators, or are existing actors going to maintain their nodes even at a deficit (ex: if they are vested in the success of Flow blockchain beyond their node operation rewards, or if they are not concerned with short term USD/FLOW prices because they plan to HODL the $FLOW anyway)?
What are we hearing from node operators, are they raising concerns?
What is the target inflation rate for $FLOW? Is the desire to make it 0 or even deflationary at some point, and if so, what’s the target timeframe for that? Will that be strictly achieved with higher demand for $FLOW or do we expect to reduce the reward rate (now or in the future) to reduce minting new supply? If we decide not to change the reward rate now, what would need to be different in the future to justify changing it?
I see @bluesign linked to some related threads but as they point out those threads don’t have clear conclusions yet.
@C-3PFLO I don’t have the answers to all your questions, but what I can say is that the answers to questions 1 to 4 are all related to a same topic which the Flow team don’t like to discuss about publicly, which is the Flow token price (node operators are rewarded with Flow tokens hence their margin)
At some point this need to be included in the overall approach… a weak Flow token pricing is making the situation more challenging for node operators. The inflation rewards and even broader, the Flow tokenomics need to be built having in mind a sustainable/ healty Flow token pricing
If there’s a policy that certain entities or community members can’t comment on the price of $FLOW for ethical or legal reasons (is that confirmed?), so be it. But then who is going to lead this discussion (and discussions like this), where the price of $FLOW is central (since node operation costs are priced in $USD)?
I have a ton of thoughts on this topic and I’m working on a longer post laying out the various topic areas that I think warrant discussion.
However, relating just to this proposal to not change rewards rates. To me, this proposal means that we aren’t going to change the reward rate today because we don’t yet have a well-reasoned proposal for how to change it given all of the inputs to the tokenomics framework.
Now isn’t a great time to just willy-nilly decrease this value from 5% to 3% just because the original documentation from 18 months ago stated that as an idea.
I’ll try to follow up in the next 2-3 days with a longer post that highlights various discussions that need to happen in order to put together a proposal for a larger plan.
I apologize for my slowness with posting here – this isn’t malicious I’m just a bit behind on writing!
@pgpg The discussion here is popping-up because the decrease of the Flow rewards is not just coming out from the fact that the original documentation from 18 months ago stated that as an idea, but because there is no sustainable reason to keep the rewards at this level and increasing Flow inflation without having enough utility to spend the Flow token in the ecosystem. The integration of Flow in the Dapper wallet in the coming days might change the picture, but for now what’s the point for keeping an inflation rate @ 5% ?
Dapper Labs is actively recruiting a Senior Product Manager for Flow Tokenomics. At least this shows that the matter is taken seriously by the Dapper team.
Seeing this, I understand why there is no rush to change the rewards ratio now.
Looking forward to that, and I would be keen to kick-off the discussion by now with the community and not wait till the new person is onboarded. This might take months and not happen before the end of the year