Adaptive inflation

Research and Development
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You should look at rewards in real terms, that is the nominal rewards minus the issuance. It’s difficult to say whether any individual baker (or delegator)'s real returns from adaptive issuance as proposed here would increase or decrease, since it depends on the amount of Tez baked, and this is not knowable in advance. What is clear is that rewards from bakers would increase relatively to those of delegators, as compared to the situation today (point 1 of the proposal as per Arthur’s original post in this thread). Therefore, all users currently delegating will have a stronger incentive to start baking instead. You do raise two good points in my view:

  1. any entity running a private bakery can stake enough to decrease inflation, forcing other bakeries to shut. In the ETH research around adaptive issuance, this is called “griefing” or discouragement attacks and I’ve linked to a paper discussing it in one of my previous posts in this thread (#32). Basically, I believe we should have some solid foundations supporting the specific issuance curve, and if we don’t we should perhaps just copy the ETH model (or at least have clear justifications for deviating from it).

  2. Delegators also play a role in governance. I agree there is a governance aspect to this proposal and I’ve also raised that point previously, however it does not seem to get much traction. Perhaps this proposal should be accompanied by some change in voting behaviour; perhaps it should e.g. be more easily possible for delegators (or simply holders of Tez) to vote directly on proposals, bypassing bakers.

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Not only griefing, but that entity can act as just like a central bank to increase and decrease the inflation without a governance vote. We should also consider that an entity which holds a large amount of Tez can also have a huge long/short positions with 2 to 3x leverage on exchanges or OTC markets. So the entity can act both in beneficial or detrimental way to Tezos price.

Also the adaptive inflation needs to be adopted only after a change to on- chain governance where all holders of tezos can have say without having to run the node. This option will discourage any attacker having a malicious intent.

Also on the broader question on inflation, in current market where one can stake cosmos for a 20% APR just from wallet and Cronos for a 10% staking rewards. (similar 10%,+ staking rewards with other crypto which rank higher than Tezos), how would you attract new users towards Tezos.

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Can we listen to a recording somewhere?

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Yes! here: https://twitter.com/BlockchnEvolved/status/1618731238369685506

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69

This is a very serious change, such changes transform the existing protocol into a completely new blockchain with a different consensus and a completely different economic model. To be honest, I am not at all sure that the change in inflation will bring any benefit to the holders and those who support the network all this time. In simple words, we can go back to the very beginning. Or is that what you want?

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The recording of Thursdays #BlockchainEvolved show where Arthur and I discussed adaptive inflation is live on Odysee and Youtube.

Please give it a listen, like and subscribe! Thank you!

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I agree with a comment made long ago by tezoswakenbake.
He was describing how these economic changes resemble the monetary policy of the FED. It seems a group of people are trying to control the economics of this protocol one way or another.

I am not a developer or a mathematician, so I can’t go deep in technical issues, but I try to see the big picture. And the picture I see now is that Tezos is slowly turning into a Rube Goldberg Machine, which means, overcomplicating issues and at the same time creating new issues derived from supossed solutions to other issues (like for example, I am not so sure SCORU’s are THE solution to scaling).

I jumped into Tezos because of it’s supposed adaptability into whatever it needs. I thought that was a great system. So, why aren’t developers looking at other platforms that solve problems in very creative ways, like DERO does with it’s mixture of blockchain and DAG, using proof of work but way more efficiently and securely than Bitcoin.

Food for thought. How much can Tezos really adapt? Maybe a smarter proof of work would beat the current proof of stake? Could it evolve into something like a DAG, even if a hard fork would be needed?

I am not saying in any way how things should be done, but just to take a step back, observe, and try to simplify as much as possible. Nothing simpler than to copy a good system, if possible…

Cheers!

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What group of people? If there ever will be a proposal that includes adaptive inflation, bakers must accept it via voting. There is no group of people or an entity that controls the chain. :man_shrugging:

Please elaborare why you think its not the solution to scaling? Or not sure at all and just throwing around assumptions?

Again please elaborate why/how is it more efficient and secure than Bitcoin? (I know Dero and as always this sounds like a bunch of hot air buzzwords)

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It seems like a very poorly disguised spam post shilling Dero. Adaptive issuance is too complicated but we should switch to a blockchain/DAG PoW hybrid? The person you are replying to is not posting in good faith, I would not engage further.

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Agree, its the first post from a new account.

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Ironically you half understood me. “Adaptive issuance is too complicated” you say. I don’t know, but it looks like to me also. Good that people have their doubts. My view is one step further back. Is modifying the algorithm to “adaptive issuance vs leave it like it is” really the only option we have? That would be dissappointing considering Tezos is so flexible.

I did not say we should change to DAG PoW hybrid. I am saying, “hey, look at those guys. Can we improve our own code using part of their techniques instead of what we are trying?” . Probably there are other unknown chains that use even more unkonwn techniques. Do we definitely need to abandon the idea of L1 scaling? Has it been thoroughly researched and is the conclusion that it is technically impossible to drastically improve L1 to achieve hundreds of thousands of TPS?

About posting in good faith, I have no clue what you mean. But I hope this post and my previous one clarifies things a little!

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Hello again,

I see my post did not really show the point I meant. Like I said, I am not a developer son I can’t go deep into technicals and therefore I keep it superficial. But I am technical enough to have an overview of things.

Okay, let me rephrase. It seems like “we” are trying to control the economics of the protocol artificially. The similarity with the FED is that when they do that, because it has s many implications, unforeseen problems arise afterwards. Since Tezos can adapt, but I don’t know how much technically, maybe there are other solutions where we don’t need to control the economics in this more direct way (I know in the end every protocol has some economic directives, but some are simpler than others)

I was mentioning that it seems “we” are trying to solve problems via complicated ways. When 1 million TPS is the standard, are we going for triple SCORUS on 4 paralell chains? I repeat, my point is not that I know better and it should NOT be done. Smart people developed those things. My point is, again, not to get too paranoid about Tezos not having enough adoption and price action and therefore run just to make a big bang (1 million TPS!!). So, what I suggest is…is L2 scaling the only option? Did we REALLY explore a bunch of other blockchains that scale maybe more efficiently without complicated high tech solutions? I still firmly believe, if it’s built right, they will come. Maybe Tezos is still too early for the masses. Sometimes, you see a good way to do things and you focus extremely hard on it and create the best possible option within that way. But maybe another better way was just around the corner.

Okay, then forget DERO. It seems that if somebody posts about any other chain, you are trying to sell that chain (coin). I don’t care which one you want to put as an example. It just happens that the only blockchains I have studied more, for different reasons, are BTC, Ethereum, IOTA, Monero, DERO and obviously Tezos. The point I was trying to make is the same as on the whole post. There are other people taking completely differente routes to do things. And the magic of Tezos is adapt to whatever there is. If a competitor does something better, how much can we take from him?

In general, we should never stop questioning the way we do things. And I have the feeling there is a need to go FAST now because Tezos is unfortunately not as popular as we would like yet. Maybe we are already on the best path (great then!), or maybe one developer takes a break, and suddenly comes back with a way better idea. I have no clue, but I needed to just post this because being silent never does anything.

Now this is my second post. How many posts do I need to make so I am a respected grandmaster? :slight_smile:

Relax people, I am not attacking anyone!

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Not all tech solve the same problem; L2 scaling has very little to do with adaptive inflation so I don’t understand the point you are trying to make. That’s also a bad example to argue that we are developing tech in a bubble; rollups are considered by many as the industry standard for scaling a blockchain.

To come back to adaptive inflation, what technical solutions do other blockchain ecosystems implement to solve the problems adaptive inflation solves? In what aspects are they better than this proposed solution?

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If we don’t control the economics of the protocol, who should? In what sense is it “artificial”? What would a natural control of the economy be?

I really have a hard time understanding the point you try to make. On one side you pray the adaptivity of the economic protocol and suggest that we should look for inspiration in the rest of the industry to pick what works best there and on the other side you complain about this proposal to change the economic protocol because touching at the economy can have unanticipated consequences.

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I will answer to both your replies, and I will try to make it short, as to not to make this endless.

I put those examples (inflation and SCORU’s) not to try to solve them or go into details about them. I put them only as examples of possible proposed solutions to a few problems that MIGHT overcomplicate things knowingly or unknowingly later on (the Rube Goldberg Machine case).

I follow tezos since the beginning and I always liked the calm step by step approach. Now, how I perceive it (itś a perception, not necessarily true), is that a race has begun to, for example, be the one with most TPS, or be the one which grows quicker in price. And therefore, the easiest way is to look at the most known solutions (the “industry standard”) and tweak those. But, it COULD happen that in a few years, this now “industry standard” is completely obsolete due to a better system that was actually around for years and nobody noticed…

Well, this are EXACTLY the questions I was trying everyone to make to themselves! In particular, to developers.

I think not many people would disagree that blockchain is still relatively in it’s infancy, that there are thousands of different ones, and that there are probably a few unknown ones that take completely different approaches. Tech goes FAST.

I know it is impossible to look at every other blockchain out there, but how many developers REALLY dedicated at least a few days to dig through non mainstream chains to solve whatever issue they are trying to solve?

If they did, wonderful! I just hope that if we argue about if A is better than B, it is because we calmly triple checked that there is almost no chance for C or D.

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Kraken to Discontinue Unregistered Offer and Sale of Crypto Asset Staking-As-A-Service Program and Pay $30 Million to Settle SEC Charges

Kraken settles SEC charges over its staking program

Kraken to end on-chain staking services for U.S. clients

So this means that other exchanges that provide a staking service like Coinbase or Binance will stop for the US too sooner or later. With that the staking balances of Kraken, Binance and Coinbase will get smaller and this leads to less voting power?

Does this effect Adaptive Inflation in some way?

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It doesn’t affect inflation but it does improve decentralisation and it stops rewards dumping that exchanges might have been doing.

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My eys is blurred???

Set the global inflation rate to be (2/(100x))2(2/(100 x))^2(2/(100x))2 where xxx is the global fraction of tez staked (at risk). So if bakers altogether place 20% of the whole supply at stake, the global inflation rate would be 0.5% per year. If they only place 10%, it would be 2% per year to incentivize more stake to be placed, if it’s 30% it would be 0.22% because that’s plenty of economic security and there’s no need to inflate all that much to attract stake.

So for the current 75% network delegating, the inflation rate would be (2/(100*0.75))^2 = 0.00071111=0.07% ???

If a baker has N XTZ at risk, then total stake at max is 10N. the reward for commission 10% would be (N2+(10-1)N10%)0.07%=2.9N0.07%=0.203%N.

APR for staking is 0.203% at most!!!
What’s the point of staking for such a APR ???

It can’t even cover server cost, I will definitely shutdown my baker.
and also quit XTZ immediately, cuz it’s demonstrate how brain damage it is.

Staking is actually a tax on none-staking holders, to increase your own share in the total market cap.
But if the APR is toooooo small, the tax is nothing.

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XTZ always demonstrate brain damage all the time,
Car racing, Football…
That’s why no market share after 5 years even though xtz is one of the project collected most money.

My friend recently stays at France told me that even in France, no devlopers of XTZ at all.
No one mention it.

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Looks like we’ve just identified the cause of all this dumping. Adaptive inflation can’t come soon enough after reading a comment like that.

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