The Incognito Network: Ponzi or Economically Sustainable Blockchain?

[davoice321]

Thanks @raz

I decided to be pretty blunt on this thread because otherwise (among people with various levels of English proficiency) the message gets lost.

And I’ve been promoting this project to others and some of the issues they have raised are listed here.

Tough love is better than no love.

This is a high potential project with a lot of benefit for the community, that I would like to see do very well.

So better to address and fix the issues in the beginning, and clear, tough language is what I think will do it.

If people are offended by clear language … they’re in the wrong business, especially when it comes to privacy projects

[Mike_Despo]

@Jamie

In short I am not describing a cycle, I am describing a straight line where balance between block production earnings and fee earnings will shift.

We can put a million nodes online, but if we have no transactions to process, there is no use for them. We need both nodes and users, a new balance will need to be found on a more or less regular basis.

True. Balance is really key in this whole growth process. There’s no way to grow one side of a project without needing to grow another. So I think it makes sense that we’re seeing these various ‘issues’ spring up as things grow, because growth isn’t necessarily happening in a uniform way, which could make it seem ‘Ponzi-esque’, something which is most definitely is not.

Now that nodes and liquidity is growing, of course PRV price is going up. It’s a bit of a “bubble,” unless organic adoption and network users follows suit. If the team wasn’t working on making that next growth aspect occur, I’d be concerned - but they are definitely working on it hard so I’m not concerned at all. Once adoption starts to take off, it will have a synergistic effect with the groundwork already laid down with Nodes and liquidity. It was necessary to have this here first.

I feel like a helpful key for any newbie reading this post to know is the intention behind the project and the people and Dev team behind it. There is an exchangeable product to give to the world of crypto and the intention is good to put it there and have it be a service to help protect people’s money and privacy.

[Jamie]

I am not at all offended by anything just wondering how it relates to the Ponzi scheme.

I am not sure what you are (trying to) say here

I am personally worried about what will happen 40 years later or just a few decades when people realize what will happen 40 years later.

When the fee price is raised, in the future, you won’t need trillions of transactions.

I am also not clear on how you tell Mike that blockchains don’t usually change, I don’t think there is any blockchain that hasn’t gone through a number of hard forks. Data doesn’t change, structure, procedures can. And so can fees.

What I am afraid of happening is, like I mentioned before somewhere, ending up with a bus company (Incognito) with 3 million (nodes) busses and no passengers (transactions) to take from A to B (process).

[davoice321]

The level of fee increase we’re talking about won’t be a big barrier to entry vs. the benefits of privacy.

[Mike_Despo]

Also agree with this. ’

I think the fee could be set to scale/increase over time, or based on the number of transaction volume over time.

[doc]

@davoice321

I don’t want to rely on the price of PRV rising as a reason to encourage people to become node operators. Because that’s just pure speculation rather than an argument on the fundamentals: as Incognito is used more often, your earnings will rise. That provides a foundation to the PRV price and makes it worth it to those who are more ROI oriented.

This is the exact point I was trying to raise in the other tokenomics post @andrey, but was not able to state the case as eloquently as @davoice321.

One thing to consider is that adoption goes both ways, users performing transactions and users hosting nodes. I personally was trying to understand how PRV could be sustainable as a node validator and couldn’t see a path forward in the current structure. I believe having a strong tokenomic plan is essential, even now, so people (such as myself, who are not as versed and experienced as others), can understand the utility of PRV and see it has a staying power and value that someone hosting a node can comprehend. I hope PRV growth continues, but there has to be something else outside of this to help show the need for PRV which keeps its demand high and not just for speculation.

[doc]

@davoice321

The level of fee increase we’re talking about won’t be a big barrier to entry vs. the benefits of privacy.

I also think this is important… The argument is about Orders of Magnitude… I believe an increase (or structure for increase) is the right path forward. Even if it is tiered where it starts at 0 and scales up in steps as transaction/validators online/SomeOtherMetricHere increase over time.

I do understand, and even saw posted in Telegram this last week, a new user who couldn’t get a transaction completed because he didn’t have any PRV. So I also see the desire to make it no transactions fees to help new users get familiar with platform. But I also agree that the networks down times are probably bigger detractors from adoption than those small fees.

Is it possible to have the DAO cover fees directly while the network is looking for adoption? In the similar fashion how liquidity and staking rewards are being done to encourage growth (which is the reason PRV price is going up)? could this be a good compromise for the time, a dedicated fee structure is set in place and has a roadmap that shows a long term success and ROI for node validators, but also makes them currently free to help adoption and growth.

[raz]

Now these are empty words. How much they increase, when will they increase?

Basic economics like fee structure & block rewards or total market cap (including burning) usually cannot change later, if you don’t see why you don’t understand the fundamentals of cryptocurrencies.

Hard forks are the worst things could happen to a blockchain.

I only said @davoice321 has an offensive tone and he described several times how it relates to the ponzi scheme.

[taind]

Totally agree with @raz, as time to come, it would be harder to make critical changes to the structure, especially trading fees.
Just look at BTC.

[andrey]

Hey @davoice321 @raz found interesting website with earnings of different coins. I think it will be very useful for the fee structure research. Please take a look https://bitinfocharts.com/monero/

After I found this website and read a thread again I instantly got a question in my mind, guess what

Monero: Ponzi or Economically Sustainable Blockchain?

Despite this I have to say that ETH and BTC have quite high % of transaction fee 7 & 4 accordingly.

Just link it to Monero reddit)

[raz]

I saw the default network fee of pDEX trading increased! I am satisfied with this direction, currently 0.004 PRV network fee / trade.

[raz]

Damn, a recent update just dumped it back to dust…

I feel like the development starts to become a bit chaotic. A few weeks ago the app developer tram started to change the design of the mobile app. Now it is still half-complete, but meanwhile the full brand went legacy. We have a mobile app now with inconsistent design decisions and rushed updates.

I really like how hard-working the core team is, but please keep focus & synergy with the community.

[davoice321]

Thanks. That’s the average fee, so actual per transaction fees may be higher, which appears to be the case.

This chart shows recent monero vs bitcoin fees.

The median fee in usd is about .0022$.

The usd amount of the fee is higher for both because these assets are much more expensive compared to prv

One model that might work is to adjust the transaction fee amount (in prv) depending on the usd price, so that perhaps it matches monero’s median fees (within a range) taking into account users’ ability to adjust the fees. Prv fee goes down as prv’s price goes up, so that fees in usd are always stable.

[andrey]

I think we are talking about different numbers. I talk about % of the total reward earned from TX fee. You talk about absolute numbers of TX fee.

[davoice321]

Yes. It’s the average tx fee per individual transaction that interests me the most.

[Jamie]

That was some quick bugfixing. The devs pushed an update within 20 minutes after being notified. Pretty impressive.

[duy]

@davoice321 i’m catching up on this long thread. but i wanted to point out that by design min_tx_fee is set by validators, not by the core dev team.

line 48 in run.sh, you can modify the parameter LIMIT_FEE=1 with the min_tx_fee you want to accept. 1 here is 1 nano or 10^(-9) prv.

say there are 4 validators: alice, bob, charlie, and ducky who set their min_tx_fee as 1, 6, 3, and 4 respectively. alice won’t accept any tx with min_tx_fee < 1, bob won’t accept any tx with min_tx_fee < 6, etc. so the network will eventually reach the consensus that the min_tx_fee must be 3.

i think min_tx_fee should be set by the open/free market. this is definitely something we don’t want to be decided by a few people’s opinions in a forum discussion.

[raz]

@duy Very interesting detail, I believe most of us didn’t know about this.

So basically if I raise min_tx_fee on all my validators It could effect the consensus & increase tx earnings globally?

Great news!

[duy]

@raz… yes.

i was just reading your reply a few days ago (above) that we can’t change a cryptonetwork after it’s launched.

true… there are things we don’t want to change. but there are things that we can change if that’s better for the network.

in fact, i would argue that the more we can change / re-configure the network the better. this will make the network more adaptable over time. who knows what the world will look like in 50 years? 6 months ago, i didn’t expect 2020 to be the 2020 we’re in now.

by design the incognito network has a bunch of parameters that can we modify on-chain – whether that is the number of validators (see @dung’s self-configure dynamic committee size), simply trading fees on DEX (as we discussed in another thread), or network tx fees (in this thread).

the key question now is who gets to decide when to change these parameters and change to what values? i’m not entirely sure yet, but there are a couple of ways to do this for now.

• free market. let the users of the network reach consensus on these parameters autonomously. min_tx_fee is a good example for this.

• on-chain voting. i think dex trading fees would be a good example for this. the pool holders can vote on the trading fee. or the prv holders can vote on dao split rewards from block rewards. i guess one close example from another network would be something like the mkr holders from makerdao votes on the dai stability fees, which is an on-chain parameter.

as we’re refactoring our codebase to be ready for a bunch of v2 stuff like consensus v2 and privacy v2, we’re thinking through what else we should “parameterize” so that we aren’t locked into bad decisions forever but rather given the opportunity to update these decisions later. this enables us to move fast, make decisions fast, ship products fast, and iterate on the products fast. at the same time, if we make a bad decision… oh well, let’s see what we can learn from it, and make a new decision that overrides it based on the lessons learned.

[Jerry_Watson]

Dumbing down this thread here a bit for myself.
I thought that the transaction fees would increase subtly to the point it would hardly be noticed per the amount of nodes that were coming online. That the PRV, regardless of price, unless it went down to $0.01 was supposed to “hold the line” as node purchases increase to allow a passive type of income over time.

Remove the nodes for now, the incognito platform as just a trading area, that allows staking rewards and liquidity rewards with PRIVACY being the forefront will bring new investors. People are perfectly happy earning 57% APY or 62%/8%, etc. in liquidity. These additions by themselves will draw people, hopefully privacy will help them stay.

Put the nodes back into the conversation-After so many transactions are hit on a monthly basis or nodes are online, then the subtle fee increase is added. Then the node earners are happier on top of their liquidity and staking earnings, which then help drive node sales, when then drives the slots to open up and repeat. This does not constitute a ponzi scheme, but a profitable business. This does not constitute a “gamble”, because every single investment is considered a gamble just varying degrees of security on that “gambled investment”.

With all of that being said, you all can go over the tokeneconomics and everything, I love the back and forth.

The focus: Privacy; Consistent returns on Staking and Liquidity. These are the focus to pull people in, to get people to check out the project.
Nodes are a big piece but should be broached as a secondary-“hey if you love what you’ve seen already check out the node for passive earnings that may make “x” a YEAR, but keep in mind it is random. Say, 10% bite and purchase, this is sustainable growth, the point——pick an amount of monthly transactions, that when hit signal a certain level of interest and to help keep the node earners happy quietly raise the fee a discernible amount AND/OR when a certain amount of nodes are online quietly raise the fee.

Last point—Post that number, let people know the timeline. After “X” of monthly avg transactions over say 3 months, AND/OR number of online nodes.

That was my foolish way of contributing, hopefully my thoughts help in 0.0000001% of a way, if not it is all good. But there needs to be a concrete goal in terms of raising the transaction fees, abstractions help this conversation nil