Over the past few weeks we have discussed at length internally and with the community around the staked-based voting and rewards proposal that was put forward by Block One based on research conducted by Prysm. Please see below our thoughts, suggestions and overall conclusion.
The proposal looks to place inflation on a sliding scale from 1.2-3.8% annually up from its current 1%; with the inflation scale being based on missed blocks from Block Producers. There has been a strong pushback from the community around the increase of inflation on the network. The core arguments were; Inflation is what we are trying to escape from in Fiat and there is no value added by giving away ‘free’ inflation to stakers. In some regards, we echoed these concerns and explored the topic further. After digesting and understanding the research conducted by Prysm, it is clear that PoS platforms in the market are offering staking rewards and it is a key attribute that is looked at by adopters in the space. The paper looked at a range of top-performing PoS chains and concludes that there is mean annual inflation of 4.6%, with a mean staking reward of 6.9%. We strongly believe that our target market is the PoS market and we should be competitive in this space. However, it is critical that the inflation increase provides enough value to offset the inflation generated. Prysm addresses this with their ‘economic activity growth estimates’ of 2.4-5% with a token velocity of 1.1, and we believe these are quite conservative estimates and have no issue with the values selected. We explored other ways to add value to the network through the added inflation such as tying the sliding scale of inflation to network utilization in the same way that the PowerUp model works. Network utilization takes into account more parameters from BPs, not just their ability to produce blocks. The proposal suggests using missed blocks as the sliding mechanism for inflation and although we do not think this is the best method we feel it is a good start and are happy to move forward with it.
100 EOS vpay threshold for Block Producers
To earn vpay rewards as a Block Producer on the EOS mainnet you need to reach the 100 EOS vpay threshold which currently sits at around 47million votes. EOS has been criticised in the wider crypto space for being more centralized than its PoW competitors due to the barrier of entry to become a BP. Although this is still a live debate, and we certainly are of the opinion that it is still far more decentralized than any other chain on the market, we believe there is value to be gained by lowering the barrier to entry, giving more nodes the chance to participate and rally their own votes and drive more value in the space. We explored the possibility that the threshold should be removed entirely or reduced significantly and all 1.2-3.8% of inflation be driven directly to vpay. In theory, this felt like a good strategy, but it was pointed out that there is a double claim threat with the current system due to the nature that vpay is claimed by BPs, meaning that a BP that has a large number of tokens could claim vpay then swap votes to another BP and claim again. Therefore, in order for this to be achieved the system contract would need to be upgraded to alter the method in which vpay is claimed. We feel that this should be explored and we have started discussions around this with the community, however due to its complexity this aspect should be addressed separately at a later date and is premature to be included in this proposal.
EOS Nation have suggested and implemented a modified version of the original proposal from Block One. The reasoning behind this is that the implentation by Block One would potentially require massive changes to existing tooling and applications and could lead to major disruptions to the EOS community. In summary, EOS Nation’s proposal is to keep BP inflation at 1% and add 2.8% inflation to REX for stakers to receive. As there are no further changes required to the way REX currently works, this is a straightforward change which would result in a similar outcome as proposed by Block One.
To summarise, although we would like to see a way that more nodes can be incentivized to enter the network, we believe that the current proposal by Block One is a great step forward and one that we support. However, given the potential impact of the system contract changes on existing tooling and applications we believe that changes are required to reduce this disruption. As such we would like to state our support for the alternative approach proposed by EOS Nation. We have completed a code audit on the proposed changes from Block One and EOS Nation and have made some suggestions but see no roadblocks at this stage for testing and deployment.
GenerEOS is a social enterprise Block Producer with a mission of promoting and supporting scalable and highly reliable block production whilst giving back to social causes and the wider community. Based out of Sydney, Australia, GenerEOS is founded by a team of like-minded blockchain enthusiasts with diverse backgrounds and a passion to make a difference in the world and fostering the spirit of generosity by giving back.
GenerEOS: The Future of Giving!