Dear community,
BTC halving is just around the corner and that’s a great time to talk about another inflation reduction/halving for XPRT.
The current XPRT inflation reached the miminum parameter set at 12,5%.
What results in total monthly xprt emmision on Dexter pools about 150K and 2,1 mln coming from inflation.
The Team has done a lot to improve XPRT tokenomics and address community feedback so far. Since the parameter reached the minimum rate set that’s great opportunity to discuss about next steps.
It looks logical and beneficial to continue the path decided couple of mounths ago towards further tokenomics improvement and change the minimum inflation parameter to 6,25%.
There are a couple of rationale and open topics behind it.
Leading Cosmos chains Inflation reduciton
It would rezonate well with other leading cosmos chains tendency to cut inflation rates significantly.I believe the inflation reduction would benefit all parties, usually high inflation leads to undesired economical outcomes.
BTC Security
Considering new security solutions like BTC security via Babilon Persistence needs very minimal inflation to pay for security. Integration with Babylon will cause the split of staking rewards with XPRT stakers and BTC stakers.
Validators economy
The inflation change impact validators economic situation where the cost vs payment ratio will be different. It could cause the situation where the business model would be no longer viable for all the validators (especially the ones in the lower half) but the impact of having lower set of validators can be balanced by additional BTC security.
Let’s discuss and confirm if there is any room for another inflation reduction proposal (halving?, - 33% or more?).
The idea of adjusting the inflation parameter in line with other leading Cosmos chains & considering all the changes on the horizon like BTC security integrations is good.
Let’s just explore a bit more if 2nd halving so soon is needed yet & how these changes could affect everyone, from validators to token holders. Keen to hear more thoughts on this,
Cool to see that the minimum inflation is hit, by having such a high percentage of XPRT bonded. I was not around in the period of the previous halving, so I don’t have any experience with the times before it.
From a delegator point of view I think it would be better if the change would be combined with other means of value accrual for XPRT. I don’t think that holders will be against it, but it can be more easily digested if the value accrual for holding and staking XPRT is upgraded at the same time the emission is going down. Then it becomes more like a balance.
From a validator point of view I think it would be good if the combination is sought with some more spreading of the VP over the chain. Right now the top validator has now nearly 10% of the Voting Power but it is questionable how much this validator contributes. If the VP would be a bit more evenly distributed it becomes already less of a worry for a validator if the inflation is cut.
From an investor point of view it would be good if there would be a plan / roadmap behind inflation corrections. Is there a set timeframe for assessing the inflation? Or is it just because the inflation has now reached the minimum inflation parameter which triggers this? Predictability is a good thing to have.
We should wait for the integration with Babylon Chain (BTC security) to occur before we discuss cutting XPRT emissions.
I’ve seen chains cutting emissions in half (and even to 0%, look at Kava) while not having much if any impact on the token’s value.
XPRT halving will occur in one year either way.
As LeonoorsCryptoman mentioned, if we minimize XPRT’s inflation we should explore additional ways of covering for the decreased staking APR (before we cut it).
In conclusion, Cosmonaut Stakes believes a reduction in XPRT’s inflation currently provokes more harm than good and must be well thought out before implementing the parameter change.
Inflation has changed - everyone is starting to receive 1/2 of the earnings of tokens. The price is not growing at the same rate.
Halving occurs - everyone starts earning 1/2 tokens. The price is rising slowly.
Before these changes, the price of XPRT lived in its own way.
After the changes, it started repeating the Atom graph.
Our maximum price was on January 2, 2024 - $ 0.593. Do you think that this happened because of inflation and halving? I do not think so. It was a small bull run at the end of the 23rd and the beginning of the 24th year for everyone.
What I am sure of is that the minting will decrease, but the price will not compensate for this. At least until something positive happens to Atom.
Therefore, this discussion is not really a discussion, but the question “Are you ready to lose income? Because Persistence requires minimal inflation to pay for security.”
Of course, we all don’t want to lose income. But we have been cooperating for a long time and always support the initiatives of the team.
So, let’s discuss what can be done to ensure that validators do not lose revenue by supporting this initiative. I don’t have many ideas about this, just change the amount of FDP. Does anyone else have any ideas?
Let’s reduce the staking rewards from 12.5% to 6.25% because it will:
“resonate well with other leading cosmos chains”
“we need minimal inflation to pay for security” and “Integration with Babylon will cause the split of staking rewards with XPRT stakers and BTC stakers.”
“it could cause the situation where the business model would no longer be viable for all the validators”
So, said another way, let’s drop the staking rewards from 12.5% to 6.25% and then split the 6.25% in half to 3.125% because we will need to reward BTC stakers when the Babylon integration occurs.
Effectively, it is asking for the reduction in staking rewards to approximately 3.125% without any proper analysis on why this will help the token achieve value.
From a token owner’s perspective, I see the following problems:
Existing long-term XPRT stakers are being penalized without any reasonable evidence that a reduction in rewards will lead to an increase in value. The current staking rewards at the current rate is the main value stakers receive today. Reducing that amount reduces current value for all existing stakers.
XPRT becomes less attractive for new owners to want to buy and stake at ~3.125% rewards as that is pretty low in the industry. By reducing rewards, you force yourself to have to increase XPRTs value in other ways, otherwise owners will evidentially abandoned a token that doesn’t have any meaningful value.
Potentially letting go of half of the validators may generate some ill-will in the community and doesn’t say much about loyalty to those who helped XPRT along the way.
If you look at paranormal’s analysis we see no clear correlation with a reduction in staking rewards and any increase in value of XRPT.
My honest opinion is that this proposal shows that XPRT doesn’t have a well-researched set of reason for making a change to the existing staking rewards. Proper research needs to be performed, value increasing options identified and implemented. Until these changes are in place and existing token holders see the new value accrual in action, I don’t think any changes should be made.
I agree with LeonoorsCryptoman that we need a much more researched and proven plan of attack. Why not apply a first principles analysis where we look at similar blockchains providing similar functionality and see what has happened to them when those tokens reduced inflation? Let’s also look at what similar chains have done to increase value. Let’s also look at any chain that increased value significantly and if that technique would apply to the XPRT business model.
Here are some random ideas…
If we reduce staking rewards, take that exact same amount and additionally incentivize the soon to be released XPRT/stkXPRT pool on Dexter. This keeps those rewards going to those staking XPRT that decide to support the PStake/XPRT liquid staking functionality.
If we think XPRT inflation is a problem (after performing the proper research), let’s also support the reduction of XPRT tokens through a token burn. Let’s figure out a schedule and burn X tokens on a regular basis (ex: every 6 months) until value increases to some determined target amount.
XPRT has very low transaction fees. I don’t remember how they are used, so please excuse me if I am stating things that already exist. Maybe we could increase the transaction fees and use the income generated from them to invest on a monthly basis into an XPRT liquidity pool. Then at regular intervals or under certain conditions in order to make sure staking and validation are being properly incentivized, we could make allocations to those areas if/when they are needed.
Here are two value generating mechanisms from April 2023 where I don’t believe the XPRT folks have given us an update in over a year:
(1) MEV-capture with Skip Protocol - Instead of an MEV bot extracting this value, Skip’s Proto-Rev module on the Persistence Core-1 chain can extract this value to be distributed to XPRT stakers finally. On-chain MEV will increase with the increase in on-chain activity (thanks to pSTAKE, Dexter, Bamboo, & other dApps in the future), resulting in a new source of yield for XPRT stakers.
(2) Bamboo - Earlier in Q1 2023, the Bamboo team came out of stealth with their vision of creating a borrowing/lending protocol for LSTs. Bamboo is still under development & is expected to go live in the coming months. What is the status of this?
In summary, until a complete and proper analysis in performed on how and when new value can be brought to the Persistence One chain, I don’t think we are ready to make an unsubstantiated change to staking rewards.
It couldn’t have been better said.
I absolutely agree that this proposal is situational in nature, and is not the result of some kind of research. And, what scares me the most, solves the problem with Babylon, but worsens the situation with Persistence supporters.
It seems necessary to consider the purpose of XPRT and then apply Burn to reduce inflation.
CAKE seems to be the most similar, but even though Burn has inflation reduction, its purpose is unclear, so it is difficult to reflect it in the price.
Noted, in case of INJ, they have lifted the limit on incineration bidding for each Dapp and this has been greatly reflected in the price.
