Dear Persistence community,
On January 24th, Governance Proposal #16 was posted on the Persistence Chain, proposing parameter changes to improve XPRT inflation distribution among the ecosystem stakeholders.
Really appreciate community members taking the initiative to advance the Persistence ecosystem. Most of the proposed changes are in line with the ongoing efforts by the Persistence core team.
I wanted to add more color to some of the points and open a discussion for the entire community to add their feedback before the voting period ends.
- Proposed changes:
- Inflation Rate Change= 1 [Reference: Cosmos Hub Proposal #48]
- Set Block Proposer Rewards to 0 [Reference: Osmosis Proposal #31]
- Increase Community Pool Tax to 10%
- Points 2, 5, and 6 in the proposal are suggestive and not actionable. Hence, voting YES on the proposal only changes the parameters highlighted above and has no impact on suggestive pointers.
- The proposal quoted concerns regarding community pool usage for Proposal #2 and Proposal #13. I have added more details on the community pool spending below.
- By voting YES to the proposal, the users vote their intent to change the chain’s parameters as suggested. Despite not agreeing to all points (detailed thoughts below), I support voting YES on this proposal to change the proposed chain parameters.
Feedback and Action Points
Pain Point 1: Community pool usage and community pool tax
CP spend for Proposal #2 (530,000 XPRT) and Proposal #13 (450,000 XPRT):
- 100% of the allocated XPRT for Proposal #2 was used to incentivize XPRT/UST pool LPs. Hence, allocated XPRT directly flowed back to the community.
- Proposal #13, submitted by the Dexter team (a collaboration between AstroTech Labs and Yeti Labs, working closely with Persistence Labs), also committed the majority of allocated XPRT as LP incentives.
- While I agree that there might be an overlap between the objectives of the community pool and the ‘ecosystem development & growth’ allocation, both proposals were put on-chain and voted on by the community.
Regardless, the more important takeaway is that we need to rework the tokenomics and more clearly define the purpose of each allocation.
Action Item 1 [Ongoing]
The core team is working on the XPRT 2.0 proposition and will share revised tokenomics with the community for feedback before the upcoming inflation halving (tentatively early August).
Increasing Community Pool Tax to 10%:
I agree that the current 2% community tax is low and are happy to support the change to 10%.
However, as the pool increases in value, we’d need better governance processes to avoid abuse.
Action Item 2 [Ongoing]
The Core-1 Chain team has consolidated effective governance practices and will share the proposition on best options for feedback. The idea is to have open and constructive discussions BEFORE any proposal is posted on-chain.
Pain Point 2: Relation between upcoming halving and Foundation Delegation Program
The intent behind the FDP is to decentralize the network further, improve Core-1 chain resources (documentation and tooling), increase testnet participation, and support the most active validators.
Action Item 3 [Ongoing]
Provide an in-depth walkthrough of the FDP allocations and gather feedback from the validator community. Toward the same goal, a thread was published through the Persistence handle, and over the next two weeks, along with the Core-1 team, I plan to have multiple activities engaging the community to improve future FDP rounds.
Important Note: While halving would reduce the effectiveness of the FDP, the goals and the intent will remain the same. The FDP will be adjusted wherever needed to ensure it remains effective.
Rather than pressing on inflation halving, exploring avenues for funding staking rewards from protocol revenue instead of inflation is more important.
Pain Point 3: Validator commission based on FDP requirement of max commission of 5%
- This initial working value for Round 1 ensures that all applicants have equal FDP support.
- In Round 1, every validator who met the baseline criteria received a delegation of 785,714 XPRT, which (at 5% commission) generates 14,080XPRT/year or 1173 XPRT/month. This revenue alone should allow validators to break even at current prices based on our estimated infrastructure costs.
Action item 4 [Planned]
Open feedback form for FDP Round 1 to gather all inputs and make Round 2 even better. It’s an iterative process, and we require constant feedback to make FDP more effective.
Pain Point 4: Contributions to the broader Cosmos tech stack and ecosystem
- Find contributions of the Persistence Core-1 team to the Cosmos tech stack and the ecosystem here.
- Additionally, all Persistence Github repos are public and can be leveraged by the existing or new teams building within the Cosmos ecosystem. An ongoing open-source contribution is regarding the automated upgrades of the graph firehose nodes, which should enable all Cosmos-based chains running the graph indexers to do the same.
Action Item 5 [To start]
Align the efforts between the Core-1 team and the teams building within the Persistence ecosystem and identify public goods that need improvement and funding. Targeted funding will help both Persistence and the broader ecosystem.
Pain Point 5: Decentralization of the voting power
- While I agree that voting power should be more decentralized, this is a long process and can only be solved over time.
- The parameter changes for block proposer rewards could be a first step towards resolving this pain point, but further steps will be required.
Action item 6 [To start]
Launch an extensive research campaign to find ways to improve current chain mechanisms to promote decentralization further.
Response for each proposed item
Proposal 1: Increase community pool allocation to 10%
- Agree (comments above under Pain Point 1)
Proposal 2: Enforce min commission at 5% via code
- Disagree - there needs to be a clear indication that doing so will improve the network overall. It also puts smaller validators at a disadvantage if they want to use a lower commission rate to attract new delegators temporarily.
Proposal 3: Remove block proposal rewards
- Agree - While we don’t think this will magically solve all problems related to skewed voting power, it is an experiment we support.
- Bootstrapping validators with community pools - TBC, the FDP should be able to do this too.
Proposal 4: Inflation rate change to 1
- Agree - this will make the inflation more reactive to changes in the staking ratio.
Action Point 7 [Started]
- As a liquid staking hub, the Persistence community must collectively emphasize the ideal bonding ratio we want to achieve once liquid staking XPRT becomes the default over XPRT.
- With Liquid Staking becoming more prominent, inflation adjustments based on the staking ratio might not be relevant.
Proposal 5: Better Community Pool Usage
Action Item 8 [Planned]
in line with Action Items 1 & 2: Clarify community pool objectives and usage
Proposal 6: Manually fund the community pool with 1M XPRT or drop it amongst long-term holders and supporters
- Disagree - this part of the proposal needs to be better researched and taking into account our feedback on the background and Pain Point 1, I believe the objective of this suggestion has been addressed.
I can confidently say that the Persistence team is committed to working relentlessly to ensure long-term holders and supporters benefit in the long run through initiatives such as XPRT2.0.
I am delighted to see this proposal and welcome all initiatives to improve the Persistence network health and decentralization. Like most Persistence core team members, I am aware that many things have a lot of room for improvement, and aim to take into account all feedback to drive the ecosystem forward in the best possible way.
Open to exploring various routes (working groups, DAOs, community calls, etc.) to find the best way to do this in a collaborative, sustainable, and decentralized manner.