Sunsetting Incognito   

The Incognito Network: Ponzi or Economically Sustainable Blockchain?

#41

Fees and block rewards are extremely important and have a strong relationship to usage/price

I’d like to share a talk my colleague David gave at Ethereal which presents the idea of settlement assurances

The sole focus of a decentralized blockchain is to provide settlement assurances for its tx. Currently, since the team runs a large portion of the validator nodes and the beacon chain, the only settlement assurance we have comes from the team. At some point in the future, the team will ceede control and users will run all nodes.

At this point the only thing that matters is the settlement assurances of the incognito chain.

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#42

Thanks. @duy. Can pnodes set this parameter as well? This function (tx fee setting) looks like a vnode-only capability?

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#43

Sorry for reviving old posts, but are there plans for increasing the transaction fees collectively (e.g. on the app instead of just some vnode operators). To be honest I wouldn’t even mind if transaction fees were 1 cent or 0.1 cent, and I’m sure newcomers would not be discouraged as it is still better than ETH gas fees.

#44

Yes, the question is still open. Feel free to share your math or economic models on how do you see it.

Keep in mind the Ethereum issues, when the price of coins goes up, possible TPS scale, possible number of daily transactions in 5, 10, 20, 40 years, expected number for validators at those timelines, etc.

I am more than happy to dive in.

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#45

Has anyone checked out ethereumgold.io? It’s the first fair and economically sustainable “pseudo-Ponzi”. It doesn’t quite fit the bill of a Ponzi. Here’s how it works:

All buyers pay 10% fee to buy in
All sellers pay 10% fee to sell out
Those 10% fees are divided out to all currently still holding as dividends and paid in ETH
No fees (other than gas) are charged for withdrawal of ETH dividends

So if early adopters dump, newcomers reap rewards for holding via ETH dividends. And as price of coin falls it becomes more attractive to new money and the cycle continues. I don’t see why people wouldn’t continue to speculate on this. I just bought in on Monday and have already made 10% of my original investment via dividends. That’s not including the appreciation of the coins value. It’s completely scam proof as it has been through 8 audits and 2 hackathons.

What do you guys think? I’ve spent all week trying to poke holes in this one but I can’t think of any downside to this other than it becoming a dead contract that nobody continues to buy or sell which I don’t think human behavior will allow for :joy:

#46

Was any decision taken on this subject?

This is my understanding :
With the increase of validators the reward per month in PRV will decrease. And to maintain the earnings of validators we hope the increase of validators will increase the demand for PRV and so increase the price of PRV and so lead to an even amount in USD for validators.
Those past few months the increase in price (mainly due to general crypto price increase from my point of view) maintain the total reward in USD but the reward in PRV is already dropping. So can we really believe in a strict relation between number of validators (more staked PRV) and the PRV price?

But there is an other aspect to take into account. For a node staked with 1750 PRV the ROI will decrease because the PRV price is increasing. So same reward for a higher USD amount staked.

#47

The average reward will statistically decrease as validators increase, but it’s mitigated (or even reversed) by two factors:

  1. More slots for validators to earn (look into releasing fixed validator slots). There are only so many open slots, and that will grow over time. As sharding increases, the number of available slots will increase to over 16,000.

  2. More transactions to validate. As the Privacy network is used by more and more people, there will be more work for validators to do and therefore more opportunities to earn, as well as more fees paid.

The increase in validators is not meant to increase the demand for PRV and raise the price. That may happen, it may not. The point of increasing the number of validators is for greater security and stability in the network.

As for the decreased ROI due to staking 1750 PRV, that is somewhat of a misunderstanding. That 1750 PRV is always yours, even though it’s locked. If you bought 1750 PRV to stake today at $1.70, and in time PRV becomes $2.50, that’s better for you. Not only does the USD value of your PRV reward as a validator increase, but you can unstake and sell the 1750 PRV for positive (but definitive) ROI. If you don’t sell, your ROI hasn’t decreased because you’ve already staked, you don’t need to buy more at a higher price.

This is one of many reasons it’s better to get in early as a validator, because the cost of the 1750 PRV has consistently gone up over time. That said, this is all speculative, and we can’t predict the price of PRV, nor do we want to. It helps to disassociate the USD value, because that’s not really what Incognito and PRV are about.

The bottom line is, you stake but always retain ownership of 1750 PRV. You earn PRV rewards, the pool of which decreases by 9% each year. As transactions and slots for validators increase, you’ll earn those rewards more frequently, which means that even though the block reward pool shrinks and there’s more competition, you may actually be earning more consistently and more in fees.

Hope that helps!

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Validator pool
#48

Hi @aaron, thanks for your answer.

My heart inclines to both helping the network and make some ROI. Sure the more validators the better to help the security and stability of the network. But the ROI and its evolution also needs to be clear for the people who invests in the Incognito network by buying a pre staked node or create some vNode.

  1. More slots for validators to earn

Yes but. There will be 176 new slots which is less than the november’s validators increase only. Sharding increase, yes so it will only spread out the rewards. So you will earn more often but less. Am I right?

  1. More transactions to validate.

Yes but. The fees are so small that it is almost impossible to really consider those. It will need to increase the number of transactions by 10^7 at least

As for the decreased ROI due to staking 1750 PRV, that is somewhat of a misunderstanding. That 1750 PRV is always yours, even though it’s locked. If you bought 1750 PRV to stake today at $1.70, and in time PRV becomes $2.50, that’s better for you. Not only does the USD value of your PRV reward as a validator increase, but you can unstake and sell the 1750 PRV for positive (but definitive) ROI. If you don’t sell, your ROI hasn’t decreased because you’ve already staked, you don’t need to buy more at a higher price.

I don’t really agree here. Yes of course it is better if the price goes up. But it also mean the APY for your actual value in USD is decreasing.
If you have 1750PRV valued at 1750USD and you make 875PRV per year so 875USD.
If you have 1750PRV valued at 3500USD and you make 437,5PRV per year so still 875USD. It is good but you might change for an other project if the ROI is better. Because the return is now half of what is use to be if you consider the USD value of your assets.

But at the end you are right if the ROI is less the number of validator should balanced itself.

I am not trying to be annoying or anything. I am also promoting the network and a big supporter of Incognito as a whole.

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#49

Just realized I never responded to this, I apologize!

There will be far more than 176 new slots, as validators will need to fill all shards. As for spreading out rewards, I’m not sure what you mean. Block rewards decrease over time, which is one reason it’s good to be an early validator, and yet conversely, if the price of PRV goes up and it’s harder to buy 1750 PRV, the USD value of your earnings increases too. Which is another reason it’s better to get in early, with the opposite effect.

I don’t see where you’re getting the 437,5 PRV? The number of PRV you earn won’t be cut in half just because the price of PRV goes up.

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