Reducing inflation and setting a realistic target for coretime sales
Reducing Inflation
Some time has passed since our wild cousin Polkadot successfully reduced its annual inflation to 8%(with gradual reduction), as a KSM token holder I believe our loved bird is due an adjustment of its inflation parameters as well. Instead of copy-pasting Polkadot's model, Kusama can try something different, some DOT holders were left wondering if inflation could be lower, I propose we reduce it to 5%. The high initial inflation was good for early bootstrapping and incentivizing participation, the ecosystem has matured enough to aim for long-term sustainability.
Changed parameters
- Setting
MaxInflation
: From10%
to5%
UseAuctionSlots
: Fromtrue
tofalse
.
From the docs:With the move to agile-coretime, this parameter does not make much sense and should generally be set to false.
NOTE: As IdealStake
is "75%", UseAuctionSlots = true
had the effect of making the real target around 45%, this is intentional as it would increase the treasury income to around 10% with current staking levels.
Reducing ideal bulk coretime sales
The reduction of inflation should be balanced with an increased demand for the KSM, the main utility of KSM is to pay for coretime(which gets burned) but current prices are virtually 0 making it hard for the system to benefit from its main product offering. Elastic scaling will help grow demand for coretime and thus KSM, there might also be new sources of KSM demand like Kreivo's memberships but we need to adjust the core business model.
A while back I proposed setting a minimum price but it was pointed out by @seadanda that a better approach is to change the parameter that controls the ideal target for sales to a value that better reflects the expected demand of the Kusama cores to stop the price from further being driven to 0 and quite the opposite drive its price up to a more realistic value.
Note that this number is not set in stone, it's a starting point that can help us better discover coretime's true value.
Changed parameters
- Setting
ideal_builk_proportion
: From100%
to40%
The proportion of cores available for sale which should be sold.
If more cores are sold than this, then further sales will no longer be considered in determining the sellout price. In other words the sellout price will be the last price paid, without going over this limit.
As self-proclaimed Kusama enthusiast#1, not only as KSM-only holder but as full-time exclusive builder on this network for several years, I hope this proposal well received and not seen as malicious as I only have the best intentions for this ecosystem :)
Comments (14)
Proposal Failed
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Aye (18)0.0 DOT
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Nay (46)0.0 DOT
I would really like to hear from validators before voting on this. This would reduce validator rewards substantially.
As a validator operator for both Polkadot and Kusama, I do not believe this proposal will be any good for the decentralisation of the Kusama network. Currently Kusama validator rewards are already pretty much non-profitable.
We currently run two Kusama validators, and the average rewards per month are about ~16 KSM or $280 per validator when the validator is permanently active. The hardware requirements have recently increased (https://wiki.polkadot.network/docs/maintain-guides-how-to-validate-polkadot#reference-hardware) to:
8 physical cores @ 3.4GHz
32 GB ram
1TB NVME
Considering these specs, the baremetal cost is anywhere between $100 — $200 per month. Like most validator operators, we also have to pay taxes on our income (50% in The Netherlands). This means that we are just breaking even. Reducing inflation by half would mean that most validators will start actively losing money. This will result in validators either quitting running validators for Kusama all together, or decrease the quality of their hardware in order to break even again. The only solution to this would be to increase the minimum commission rate again, but this would cut further into the staking rewards and reduce the incentive to stake on Kusama even further.