Proposal to Optimize Baking Rewards

Title: Proposal to Optimize Baking Rewards Distribution for Active Tezos Community Members
This proposal aims to address the issue of baking rewards being distributed to inactive wallets that have been dormant for over a year. The proposal suggests optimizing the distribution of rewards by reallocating them to active community members, thereby fostering a more dynamic and engaged Tezos ecosystem.
Bakers play a crucial role as validators in the Tezos network, and part of their responsibility should include ensuring that the wallets delegated to them remain active. Currently, rewards going to inactive wallets do not contribute to the growth or vitality of the community. By redirecting these rewards towards active users, we can better incentivize and reward those who actively participate in the network.
Proposed Changes:

  •   Implement a mechanism to identify and flag wallets that have been inactive for over a year.
  •   Devise a redistribution strategy for the rewards allocated to inactive wallets.
  •   Allocate redistributed rewards to actively participating community members based on their contribution and engagement within the Tezos network.

Expected Outcomes:

  •   Encourage bakers to actively monitor and encourage wallet activity among their delegators.
  •   Foster a more engaged and vibrant Tezos community by rewarding active participants.
  •   Optimize the distribution of rewards to align with the principles of fairness and community involvement.

Implementation Plan:

  •   Collaborate with the Tezos development community to devise a protocol for identifying inactive wallets.
  •   Develop and test the redistribution mechanism to ensure accuracy and fairness.
  •   Communicate the changes to the Tezos community through official channels and documentation.

By addressing the issue of baking rewards going to inactive wallets, this proposal aims to enhance the overall health and engagement of the Tezos community. It encourages active participation and ensures that rewards are allocated to those who contribute to the growth and success of the network.

Baking rewards are distributed to bakers that are active enough to maintain their node and baking software up to date, and they have no specific transactions to do but paying delegators should they be public. Optionally they may maintain their stake. So none of them is inactive for over a year as long as they still run the current version of the protocol.

Public bakers pay delegators off-chain, either directly or via a payout account. So delegators rewards are not controlled by the protocol, which makes this proposal unapplicable to delegators. But even if it was, delegating a dormant amount of XTZ to a baker help this baker to gain more securing power by increasing its baking rights.

1 Like

I can totally understand your view but I would still be looking at the long term health of the network with the current system for Rewards. Also the votes/voting power I feel would be more useful in the hands of community members who are actually in touch with the community. By giving additional voting power to a dead wallet we are not only offering inactive community members the price action that we help to create for the $XTZ token but also reward them with additional tokens. Within a Proof of Stake system in the long term I believe this will create a hidden inflation issue and actually have a negative impact on the network as a whole. Baking rewards similar to mining rewards should be the incentive for active community members and to pay bakers for their time spent doing the behind the scenes work, including voting on the behalf of other community members. Furthermore with Tezos moving into 2024 and working to secure more developers, validators (bakers), and community members from defi and the art space we have to keep a forward thinking approach and this is a proposal no other proof of stake protocols are currently looking at. My question I will end with for all community members is, why should “BOB” who’s wallet has been inactive for over 2 years be gaining voting power against active community members who spend Tez into the ecosystem? Now 7 years down the line “BOB” remembers his seed phrase and decides he wants to vote himself in governance with his new found voting power we assisted him in securing and “BOB” also gets the benefit of the appreciation of $XTZ which is created from “ACTIVE” community members. With this proposal the biggest arguments I feel should be being discussed is what is considered enough activity to remain delegated, and how long without activity until a wallet is de-delegated. Or do we let “BOB” continue to strengthen his voting power?

Thanks for your post and your thoughts - I appreciate that you’re thinking about the economic health of the ecosystem.

But… if what you propose happened to me, I’d be really annoyed. I’m a long-term advocate and I have a few “HODL” wallets just sitting there collecting rewards. Their activity isn’t an indication I don’t support Tezos, it’s just the opposite - they’re inactive because I have no intention to sell. If I learned I was being punished for my HODLer mentality I’d be pretty upset.

As a counter-proposal, what do you think about letting users make long-term commitments (e.g. lock their tez for a year) and then reward them more the longer they lock? Then you could pay the true-believers more than the “traders”, which I think is what you really want, right?

I can totally understand your point of view from the aspect of a HODLR. I will say my goal would not be to punish anyone, but an issue that we saw arise in WEB2 over the past few years is bots>humans. So this would stand additionally as a verification method and let’s say every 3 years or every 4 years instead of 1. In that time frame one could lose their seed phrase or other mishaps. Tezos is an ecosystem built on people actually using the technology. These rewards that may be sent out to compromised, dead, or lost wallets would be better served amongst the active participants on the chain. As for increasing the rewards with different lock times I think to do that onchain would go against Tezos liquid proof of stake model. But just an idea overall staying ahead of the curve in this market is key.