[PROP #6][APPROVED] Reduce Goal Bonded ratio to 50% and narrow inflation to 8% max and 2% min

Status

Voting Period

ADJUSTED PROPOSAL:

  1. Narrow the inflation bandwidth to a maximum of 8% and a minimum of 2%, compared to the current inflation parameters (10% maximum and a 1% minimum).
  2. Adjust the Goal Bonded ratio to 50%, instead of 66% (originally proposed a change to 45%).

Reasoning:

Demand-based inflation isn’t achieving the goal it set ought to achieve. (Pay DYM according to staking demand should act: more stakers = reduction in yield, less stakers = increase yield)

I.e currently staking demand is at 92% of the total stakable tokens, both vesting and circulating, yet inflation is still “paying” the maximum it can.

This proposal aims to recalibrate the distortion caused by the following:

  1. Inability of onchain modules to engage in staking.
  2. Rapid increase of inflation rates due to reasonable operation time the network needed to acquire stake.

The adjusted proposal takes into account the importance of long term monetary stability.

Below is the original proposal (Reduce bond to 45%) following the response which led to this new adjusted proposal:


After careful consideration and discussions with advisors, core team members and community members, I would like to propose two improvements to the original proposal that are expected to have a broad long-term impact, as well as immediate effect.

Proposed Adjustments:

  1. Introduce an additional change to the original proposal: Narrowing the inflation bandwidth to a maximum of 8% and a minimum of 2%, compared to the current inflation parameters (10% maximum and a 1% minimum).
  2. Adjust the Goal Bonded ratio to 50%, instead of the originally proposed 45%.

Reasoning:

In addition to the reasons described in the original proposal, we must carefully consider Dymension’s long term stability aspirations together with our justified argument for fixing distortions. A tighter range between the minimum and maximum inflation rates creates more certainty and mitigates the odds of extreme edge cases from appearing in the monetary policy. In addition, this change will recalibrate the current distortion.

i.e currently staking demand is at 92% of the total stakable tokens, both vesting and circulating, yet inflation is still “paying” the maximum it can.

Given the current phase (’singularity point’) of the Dymension protocol, the timing for this adaption imposes minimal risk compared to future changes which might effect countless RollApps. Adaptations at later stages will be less likely due to the broad effect that they can impose in a 2D, 3D permissionless environment with various bonded RollApps. Therefore the opportunity to safely align the parameters into a more conservative range between min 2% and max 8% is sufficiently adequate with respect to timing.

On a longer time horizon, a 50% bonding goal (instead of 45%) is a more conservative approach as currently, 50% would be closer to the actual bonded ratio of 57% (and the standard 66% original goal bonded ratio) thus having less effect on the rate of inflation change. This tweak would greatly improve the odds for these parameters to stay relevant and serve the protocol vision and goals of both stability and accurate demand based inflation for the longest foreseeable timeframe.

TL;DR

  1. Immediate effect to narrow the range of inflation between 2% and 8% (instead of 1% and 10%).
  2. Set bonded target for 50%, rather than the 45% proposed (or the current 66%) to reduce risk and pursue our goals for moderate demand based inflation.
87 Likes

VNBnode will vote YES.
The more delegation, the less inflation. This is a good design.

19 Likes

thanks for this. just one query for my clarification

if community pool and incentive streamer cant be staked and given we have 300k right now burned every month, will this pool eventually drain out in few years. Do we have any other means of replenishing the pool.

14 Likes

Correct observation @simplysimplebrightly, we are not replenishing those pools, although that is possible by having a parameter gov vote on community tax from block issuance. Many cosmos chains choose to go that route, Dymension did not.

The CP and IM pools are a long term growth budget necessary for Dymension to manifest the vision and reach economic equilibrium. I believe that long term the Dymension ecosystem should not rely on diluting public budgets and treat the pools in hand only as a bootstrapping tool for the first years.

13 Likes

Samanvay will be voting “YES” as it’s a no brainer to decrease the inflation to optimal levels. If our community would like to earn additional rewards then we can research introducing non-inflationary rewards which could be paid in addition to staking rewards OR introduce aggresive flywheel effect to DYM token as a part of circular economy wherein there are very few tokens emitted but the total rewards provided are on par with a chain with moderate / high inflation. Maybe we can get some inspiration from Kujira to find a non-inflationary yield mechanism, after we’ve gained traction from onchain revenue that will be generated after quite some RollApps are live !

14 Likes

After careful consideration and discussions with advisors, core team members and community members, I would like to propose two improvements to the original proposal that are expected to have a broad long-term impact, as well as immediate effect.

Proposed Adjustments:

  1. Introduce an additional change to the original proposal: Narrowing the inflation bandwidth to a maximum of 8% and a minimum of 2%, compared to the current inflation parameters (10% maximum and a 1% minimum).
  2. Adjust the Goal Bonded ratio to 50%, instead of the originally proposed 45%.

Reasoning:

In addition to the reasons described in the original proposal, we must carefully consider Dymension’s long term stability aspirations together with our justified argument for fixing distortions. A tighter range between the minimum and maximum inflation rates creates more certainty and mitigates the odds of extreme edge cases from appearing in the monetary policy. In addition, this change will recalibrate the current distortion.

i.e currently staking demand is at 92% of the total stakable tokens, both vesting and circulating, yet inflation is still “paying” the maximum it can.

Given the current phase (’singularity point’) of the Dymension protocol, the timing for this adaption imposes minimal risk compared to future changes which might effect countless RollApps. Adaptations at later stages will be less likely due to the broad effect that they can impose in a 2D, 3D permissionless environment with various bonded RollApps. Therefore the opportunity to safely align the parameters into a more conservative range between min 2% and max 8% is sufficiently adequate with respect to timing.

On a longer time horizon, a 50% bonding goal (instead of 45%) is a more conservative approach as currently, 50% would be closer to the actual bonded ratio of 57% (and the standard 66% original goal bonded ratio) thus having less effect on the rate of inflation change. This tweak would greatly improve the odds for these parameters to stay relevant and serve the protocol vision and goals of both stability and accurate demand based inflation for the longest foreseeable timeframe.

TL;DR

  1. Immediate effect to narrow the range of inflation between 2% and 8% (instead of 1% and 10%).
  2. Set bonded target for 50%, rather than the 45% proposed (or the current 66%) to reduce risk and pursue our goals for moderate demand based inflation.
26 Likes

the proposed adjustments include several cons:

  1. Stability increasing: Narrowing the inflation bandwidth to a maximum of 8% and a minimum of 2% provides more certainty and stability to the monetary policy. This adjustment would help to mitigate extreme edge cases and reduces the potential for volatile fluctuations in inflation rates.
  2. By implementing the inflation bandwidth, the protocol can better align inflation rates with actual staking demand, promoting a more balanced ecosystem.
  3. Enhanced Protocol Resilience: By adopting a more conservative approach and aligning parameters with actual demand and stability goals, the proposed adjustments enhance the resilience of the Dymension ecosystem. This can lead to greater confidence among stakeholders and users, fostering trust and further adoption of the platform.

Overall, these adjustments aim to improve the effectiveness and longevity of the protocol while ensuring stability, alignment with demand, and a conservative approach to parameter settings.

10 Likes

These marks sound reasonable to me

5 Likes

We are ok with 1
Regarding 2nd point

  • We are still making decisions based on projections right, since we have rollapps launching soon we might as well wait to see how the behaviour is and make changes? will that be an option. I dont understand the full impact of 45% and 50% so a detailed explaination would certain help educate myself.

Cheers.

4 Likes

Inflation numbers look fine to us. We consider a good practice limiting inflation with time, to avoid token price dilution at all costs (seen in other projects).

Will vote yes for the proposal coz looks the right direction to us.

1 Like

I think the updated proposed numbers are quite fair and follows cautious approach compared to the previous ones. It’s a YES from us.

2 Likes

This adjustment is suitable and brings long-term benefits to the entire Dymension ecosystem in the future. Lucky Research vote Yes.

I agree with the proposed changes, including adjusted values. The narrower inflation bandwith and adjusted target bond ratio are intended to help create a more balanced and resilient ecosystem.

The larger the gap between the goal bonded ratio and the actual bonded ratio, the greater the impact on the rate of inflation change and, consequently, on stability. The rationale for choosing a 50% goal bonded ratio instead of 45% is to enhance the long-term stability of the system.

Immediate effect: With the current bonded ratio at 57%, setting the goal bonded ratio at 50% would result in a slower rate of inflation change compared to a 45% goal.

Long-term effect: Given that tokens from the unstakable On-chain Governance module will continue to be released in the coming years, it’s likely that the bonded ratio will increase (as more stakable tokens will be available see the graph in the main proposal). This will, in turn, widen the gap between the current bonded ratio (57%) and the goal bonded ratio. Opting for a 50% goal bonded ratio represents a more conservative approach regarding the rate of inflation change, as it is expected to be closer to the actual bonded ratio than 45%.

7 Likes

thanks for the explanation bud

1 Like

It is hopeful that this proposal will pass. Congratulations.

2 Likes

The reasoning is excellent, no counter questions arise. I’ve been waiting for the voting to start, I’ll be happy to support this proposal!

2 Likes

In this ideal context.
What is the proposal that includes that bettors will obtain good performance?

Understanding that this could also generate an escape from DYM bettors as they see a reduction in their performance.

This would generate more performance for those who keep DYM staked, but at the same time it generates an imbalance with greater circulation of DYM in the market.

5 Likes