Tokenomics of PRV (according to raz)

[Kelsomatic]

@raz

The DAO will be mostly about ecosystem developments, not changing the underlying protocol.

I am still soaking everything up about Incognito and learning. Happy to hear that the DAO will be focused on ecosystem developments and not the protocol. I probably could have clarified my thoughts more clearly.

[raz]

In your model, with $0.4 price and mass adoption, the network needs 50,000,000,000,000 transactions / month and its still not profitable.

100% unrealistic. With even 10 billion users, everyone needs to do 5000 transactions / month or the network collapses.

I think your hypotethical environment is not valid:

• The price of PRV will be much higher probably.
• Problem is not with this stage, but when PRV compensations are no longer exist or very low. (A 3 years period is not long-term in investments)

My point is: Node operators will stop staking once it turns unprofitable and they could destroy the network overnight. One big sell rally and all you have built for decades could be gone.

Plus: I personally make my transactions in the banking world for free or very cheap atm. This is clearly not a feature we should compete with. Decentralized systems have usually higher maintenance costs than centralized services. What we need to focus on is trust. If people could trust Incognito that it will be a thing even after 100 years, then they will use it. Otherwise it remains a speculative asset. Bitcoin has the value because people strongly believe it will exist in the space era too. Your local bank will probably go bankrupt twice until that point.

[palumboe1]

This is an amazing idea, as the fee right now of .000000005 PRV is way to low. Even if it went to .005 wouldn’t feel a difference at all

[Mike_Despo]

@raz

• Idea A, voting rights : as you may know Incognito will soon become a DAO and we will govern the network & its development together. This idea is an additional utility to nodes: What if users will be able to vote through the “My nodes” screen on different proposals & decisions. One node = one vote.
• Idea B, decreasing supply : burning mechanisms are a significant part of many tokenomics, what if we increase transaction fees in PRV by 100% and burn that in favor of long-term price stability? (a more radical version of this idea is to increase fees by 2,000,000%, that way every 5000 tranactions give 1 PRV, but keep burn at 100%, which means 500 billion transactions burn 5 million PRV) (another variation of the radical version is to increase burn to 1000% or even 10,000% but stop the burning mechanism, once all the PRV were earned)

I think these are great ideas!

@raz

I actually made more calculations and my idea is to raise fees by 20,000,000% to ~$0.001 / tx in favor of the long-term stability of the network. And lower it dinamically once the price of PRV increase.

Yes to this!

[Kelsomatic]

@raz

Idea B, decreasing supply : burning mechanisms are a significant part of many tokenomics, what if we increase transaction fees in PRV by 100% and burn that in favor of long-term price stability?

I like the idea of burning some of the supply. The amount burned per transaction could go down over time like the % of PRV of a block designated to the DAO goes down over time. Once it hits 40 years the burn rate could either disappear or be set to a sustainable rate voted on by the community DAO.

I’ve heard burning coins can define the coin as a security in certain jurisdictions–not sure if this would be an issue or not.

[raz]

Currently this discussion stucked with the lack of core team responses.

It seems like most of them don’t see the point of stronger tokenomics. They believe if they focus on the product only, everything will work out naturally.

I understand their point of view, still raising awereness of the currently weak long-term economic model of Incognito is important.

[davoice321]

@andrey said he would work on some numbers. We can remind him about it in about a week.

Would it help if you @raz put together a model for discussion?

We can also make sure this thread is discussed during next week’s prv holders meeting.

[raz]

I don’t think any complex math model would be necessary to see the extensive need for higher transaction fees.

One could easily pick a mature cryptocurrency and check how much transactions it has per month, then multiply that with current Incognito fees and you will still get nothing, which means current rate of fees are just illusions. Don’t have any real purpose.

Next you could examine how other privacy coins with high inflation loosing value over the years (zcash, monero)

And finally you could realize we have a network secured by staking. Staking provided by investors. Investors pull out if loosing or not earning money: the network will remain vulnerable without further incentives to strengthen the utility of PRV

Proof of Stake is highly experimental. No one knows if it will even work. Ethereum 2.0 is not delayed so much because Vitalik is a lazy ruler, but because the reality of sharded PoS is a gamble.

[davoice321]

Okay. @andrey hopefully will get back to us next week.

I’ll also post this thread to telegram to get them to add this topic to the prv call for next week.

[andrey]

hey @davoice321,
To be honest I hoped you would find time to join the monthly call with prv holders. It was the best place with for such a discussion, as there were devs who work on consensus model, chain layer, app layer.

I saw that you tagged me several times, saying that I am working on the model right now. To be clear and so we do not confuse anyone, I said let’s play with the numbers to find the best TX model. Quote is here:

@andrey

Yep, let’s play with the numbers. @raz do you have any math models yet or need to create some ? I could try to find some time for it also.

Sorry for any confusion. I didn’t mean to imply that I would put aside several weeks to fully research this topic, and commit to finding a model that would see increased tx fees. I have quite high target for this month in terms of growing Incognito DEX, and I would really rather not fail to deliver it. Note: this is not to say that there aren’t other people on the team who have been working on this for months already.

Anyone is welcome to conduct their own research and build their own model.

---

I also mentioned several times that, personally I do not have problems with making improvements on any aspect of Incognito. I would even say that continuous improvements is must. I think you will find that the entire core team feels similarly.

The only thing I have a strong position on is that all changes on the chain level have to be researched carefully and shouldn’t be based on individual assumptions, or a kneejerk response influenced by the loudest voices.

[davoice321]

I think the best way to manage it is to

-create a spreadsheet
-post it to the forum for community comment
-present it at a future prv meeting

@raz: it looks like this could be the best way to get the devs attention

Do you mind taking a crack at a model and posting a google sheet with it for comment?

A burn mechanism might be nice to include

Cheers

[raz]

Not at all, please take actions!

[Vala]

@raz idea

[davoice321]

Thank you! @raz

Once the spreadsheet is up I’ll comment and help spread the word.