It doesn’t matter where the 65% go. Because if they really need so much PRV to run the project we do not have a sustainable economical token system.
If they need more FIAT for financing the project what they would need is a higher PRV price then. But if we continue like this there will be no demand at all for PRV right now, because no one is going to buy it for staking anymore.
I am not complaining about earnings in general.
Even if we earn 20 or 30 per node there will be more demand for funded nodes instead of self funded nodes. This will only shift once the price for PRV goes further down.
So we get a non decentralized network on the long-term or a really low price like .65 USD / PRV (only if the price is lower than 65 cent it is more profitable to set up a self funded node) which will make the system not sustainable long-term as well.
Let’s circle back around to the original concern. Decentralization.
The 65% doesn’t go into the pockets of the dev team. The 65% of the funded pNodes rewards goes to the pStake users. The 37% reward we get for adding our money to the pStake has to come from somewhere and it’s the 65% of pNodes that are funded.
Thats the point, the decentralisation! Primarily it doesn’t matter where the 65% go.
If we all go for pNodes and nobody is interested anymore in vNodes, as the price is too high to get a vNode and returns of pNodes higher anyway; Where does the demand of prv come from? Where is the decentralisation then as its still a PoS and not a PoW concept? @andrey
I dont care about what they did or doing or will do with node rewards.What i care is in future with pnodes they can controll majority of network that makes it decenteralized.Cuz pnodes are more profitable to go than full node.We need a solution.
@sato, @Nubex: The point you’re making is clear. Why buy 1750 PRV stake for $2275 when you can buy pnodes for $399 and have Incognito fund the stake? So the fear is that the network will be flooded with funded pnodes, and Incognito will control 65% of all PRV. I think you both have stated that case well. I think there are a lot of faulty assumptions at the base of this argument, though.
Assumption 1: Incognito keeps the entire 65% they earn.
Initially you said that 65% matters greatly, as it determines who controls the most tokens, but the argument should factor in where that 65% actually goes. Jared mentioned that some of that money helps fund the Provide liquidity program. Another small example of how the 65% is used, I believe some of those earnings fund the builder program. That’s a good chunk of PRV going back to the community. I recommend more research into how Incognito’s 65% is used.
Assumption 2: Eventually everyone will be running a funded pnode.
This assumption overlooks the fact that we currently have many 100% owner-staked vnodes and pnodes already in place. Stats on the exact numbers definitely would be welcome, but in order for a completely Incog-funded network to exist, all current (and future) 100% node owners would need to unstake their nodes.
Assumption 3: The expense of 1750 PRV for full ownership is a greater loss than the $399 expense of a funded pnode.
This assumption isn’t true, because you get to keep the 1750; you don’t get to keep the $399. The 1750 is only a loss if the price of PRV goes down (in your scenario, it goes up to $10). It’s still your 1750 PRV, and you can unstake it and sell it if you need to. Conversely, you cannot get back the $399 you spent on a funded pnode. The $399 is a true loss. Add to this the fact that PRV can increase in value: you might actually be able to sell that 1750 PRV for more than you paid for it. You can’t do this with the $399. Of course, the price of PRV could go down as well, and you are especially affected by this when you buy at high prices. This is a valid point, but you don’t necessarily have to buy the PRV. You can mine it.
Assumption 4: You either have a funded pnode, or you buy enough stake to own a full node.
These aren’t the only options. You can save up your rewards from your funded pnode and use them to eventually turn that same pnode into a 100% owner-staked node. You’re not buying these rewards, you’re earning them, so you’re not shelling out any money to buy PRV. And you’re using the same pnode you bought; you’re just changing how it’s funded. You use your accumulated rewards to switch your pnode from funded staking to owner staking at no additional cost. You would more than double your earnings on that pnode by doing this (going from 35% to 100%), and the 1750 you put into it is not considered a loss unless PRV loses value; the PRV is still yours and it’s still redeemable.
Assumption 5: PRV reaches $10, even though there is no incentive to stake.
The only way PRV will increase is through staking and increased liquidity. So if the argument is that there is no more incentive to stake, then we don’t have to worry about PRV reaching $10.
Assumption 6: Funded pnodes are more profitable than fully funded vnodes.
It might be true that the ROI is higher for funded pnodes when the price of PRV is high, but I don’t think the amount of earnings is actually higher. Here are some statistics comparing one funded pnode and one 100% owner-staked vnode. I realize we need more statistics to get closer to the truth–comparing one pnode to one vnode isn’t necessarily fair. I also understand node earnings have decreased across the board since August, but no one really has good stats on the new average earnings, so this is the data I have. Earnings are represented in PRV.
Okay, we can subtract my hosting fee from the vnode earnings. For four months, that’s roughly 42 PRV, putting my vnode earnings to around 480 PRV. But we also need to subtract the $399 I spent on my pnode from the pnode’s earnings; say that’s equivalent to 303 PRV; I’m in the hole 220 PRV for the funded pnode.
Now say I had 6 funded pnodes earning the same amount as the pnode in my stats, for the same period of time. They would earn roughly 500 PRV total, which is a little more than what the vnode earned after fees. But then subtract the $2394 it cost me to buy those 6 pnodes, and compare what’s left to the earnings of the vnode. Additionally, factor any price changes into the value of my owner-staked node: if PRV price continues to go up, for example, then the value of my 1750 will go up, and that needs to factor into our overall ROI.
Again, I’m not counting the cost of the initial stake for the vnode as a loss, because it isn’t. It’s only a loss if the price of PRV goes down.
Now I do get what you’re saying that as PRV price goes up, it becomes more difficult to fund your own node at one hundred percent, so more people might opt for a funded pnode. But know that if price is going up, then earning rates are likely going down, and that affects everyone, including pnode owners, so this might slow the growth of the network naturally. At some point, earnings will decrease. That’s just the nature of saturation.
Assumption 7: If validators sell off all their earnings instead of staking it, the price of PRV will go to zero.
If there are nodes in the network, then someone is staking that PRV, even if those nodes are funded by Incog. Incog funding doesn’t help with the decentralization of token control, I agree, but funded staking will not be the end of PRV value. Every time someone spins up any type of Incognito node, PRV is being staked, and that staked PRV will help regulate the price, even if validators sell off all their earnings.
(One last thing: this entire conversation will likely change once the Incog team implements dynamic committee size and increased shards in 2021, as earnings should improve for everyone at that point, at least for a while.)
Unfortunately, this would not change anything for me. Well, we will have more earnings in this case but the big thread of lacking decentralization as 65% of all tokens going somewhere is still not solved in this scenario.
Maybe we can get some information from @andrey to get a better overview of what is happening at this stage with the PRVs. As many things seem not to be clear to anyone right now.
Sorry for all these questions but I guess this could help at least for the moment to understand the economics better.
By the way, @inccry it might be a cool feature if we could check in incscan.io how the under provide tab from the community provided PRVs are distributed. Means we could see how much PRV is “locked” under the provide tab and how it is used like for example 30% virtual nodes, 20% developer rewards. Or even if we could see under validators instead of just active validators information like self-funded node, funded node, node operated by incognito might be possible if we “tag” them somehow.
This is one of the most well thought out and helpful replies I’ve seen on this entire forum! Thank you @Gold I was trying to think, “Where do I begin?” because so many assumptions are being made. I didn’t want to sound mean. Your response encapsulated everything I wanted to say and MORE. Thank you for spending the time writing this! 
These are good thoughts, and @Gold has a great response . But a few more things to remember:
The funded staking option may not always be available. Nor will the percentage necessarily remain static. I don’t know of any plans to change it at the moment but it’s an option should it become necessary.
Additionally, the 65% isn’t just going to line someone’s wallet. It’s a tool for the DAO to further remain autonomous. It requires funds, and this is one way of generating them. There is room for discussion and change, but it’s not an apocalyptic scenario. The price of prv fluctuating has been a certainty from the start, and the staking mechanism was designed to account for it. That’s why it’s good to be a validator now, it will get harder in the future. Yet if it gets harder since prv increases in price, the rewards are balanced. There’s much more to address but someone from the team will be more able than I, so I’ll leave it to them! But all in all, these are important questions, so good eye @sato.
Hey nice post, good conversation to have.
Maybe there’s something I don’t understand about this point above. pnodes run off of a person’s wifi in their house. The fact of the stake being provided by Incog shouldn’t have any effect on decentralization. Or do you mean it would throw off the balance PRV because ppl arent buying into their own PRV.
Hey Sato, yep, there are quite a lot of assumptions here, and i’m not sure if the proposed model will work better - but let’s take a look.
Regarding control of the network, the goal is to release it to the community. It’s the way we go.
Regarding economics, could you kindly share your math so we can play with numbers and find out the weaknesses of our model, and benefits of yours?
That would definitely make the discussion more constructive.
@andrey Sure it contains some assumptions, which we have to make because the community does not have all information about the way the funds are used. Thus would be great, if you could give us here the numbers I requested. Afterward, it would be simple to give you the exact math to explain the scenario with real numbers. This would help to clear all up I guess. Thanks.
Woah, what a conversation! I’ll need some time to read through each response but overall, I agree that there are quite a few assumptions made in here, and not all of them may be accurate. For starters, while it is true that the average vnode earnings per week may appear to have gone down in the last couple of weeks, that doesn’t constitute to a conclusion that it will stay around that number forever. For the part of decentralization, I’ll review the entire thread and respond. Great to see so many people jumping on this topic, though! 
This is what the whole discussion is about - No one was complaining about low earnings. Excited to see your opinion according real* decentralization.
*with real I mean a proof of stake blockchain network is not really decentralized just because a lot of nodes running around the world. In a proof of stake system the entity who has control over a critical stake of tokens finally can or will control the whole chain as tokens are needed in order to get permission to validate with your node.
Andrey said he could properly give answers to this closer to the weekend.
Might be a stupid question. Where does the PRC come from that helps fund the pnodes? And who controls that?
To the best of my understanding, it seems the devteam A) runs their own staked nodes and B) controls the “randomness” of the selection of the nodes to ensure one of their nodes gets selected a majority (65%?) of the time. This ensures the team has sufficient PRV to fund pnodes, pay pool rewards via PROVIDE, and other development activities.
This is true since the team already said this.
This is probably not true. I have to examine the source code but I do not think they will do it. If this is noticed by someone, the reputation will be ruined.
Ok, there is one more possibility: if they have a bad-intent, they may publish a code different from the code that they use in the selection and staking process. This requires much more time to be found out. However, I do not believe that they will do it.
The randomness is defined in the code. There is no control other than that the devs set the algorithm that performs the selection.
The team does hold 2/3 of the shard spots, for stability and security of the chain. The Roadmap post shows an ETA for releasing these spots.
Earnings from those nodes are used for staking pNodes, builder rewards, badge rewards, paying bills and so on.
I may be off base here, but isn’t “provide” funded by the team and the community? In that case the “team” isnt the only one taking a chunk of that 65%…if I understood correctly you can partially fund your own node with earnings correct? That would change the percentage I’m sure. Although I am guessing it will take me awhile (years maybe) that is the route I will be going. Decentralization will happen when more of the shard spots are random selection among everyone and Andrey has said openly that it is planned to happen.