Skip to content

Latest commit

 

History

History
26 lines (14 loc) · 2.6 KB

models_inflation_funding.md

File metadata and controls

26 lines (14 loc) · 2.6 KB
Raw

Inflation Funding approach (still in development)

**https://medium.com/@petkanics/inflation-and-participation-in-stake-based-token-protocols-1593688612bf
**https://forum.livepeer.org/t/an-overview-of-bonding/97

This is a variation of the “Continuous Token Model" mentioned above.

“An algorithmically adjusting token issuance model for stake based protocols, where high quality participation is vital to the quality and security of the network. The case for such a model in this type of network is as follows:

  1. Participants contribute value to the network.

  2. Greater participation rate yields greater security.

  3. Incentives must exist for participation.

  4. Targeting a participation rate, rather than a token issuance rate, aligns better with ensuring a high quality network.

  5. Participation targets may be easier to move via decentralized governance than token issuance rates.

The result of working through these assumptions is that a protocol can set a participation target, say 50% of all tokens staked and participating, and that inflation rate can adjust automatically to incentivize this target. If less than the target % of token are bonded, then the inflation rate can creep up and the protocol will issue more tokens each round. If the participation rate is above the target, the inflation rate can reduce itself and fewer tokens will be issued each round”.

https://medium.com/@FEhrsam/funding-the-evolution-of-blockchains-87d160988481

“Inflation funding is where things get interesting. It allows economic rewards that are otherwise unthinkable. Remember, if Ether holders believed an upgrade (ex: sharding) would make the price go up by >10%, they’d be happy to pay close to 10% of their tokens for it. That means Ethereum could crowdfund a $3bn feature bounty by inflating the number of ETH by 10% and pay the newly created tokens to the creator(s) of the upgrade. This is somewhat analogous to taxes:everyone in the community chips in to fund common infrastructure (ex: roads) which no one would build alone.

A protocol which provides strong incentives for people to improve it is likely to evolve faster than one that does not. So blockchains which fund innovation through token inflation would seem to have a superior evolutionary algorithm. And over the long run, rate of change is often more important than starting point”.