is it problematic if we never reach this level? I don’t think so. In fact I think that’s better (which is why I call for better distinction in comms between a (model-controlling) “target” in a technical math model, and a general “target” such as one would use in a budgeting excersize. My understanding is the target we are discussing here has a nature closer to the former) On this basis I could support a 55% target, loosely speaking.
And we propose not to include (change) the PD mechanism until the society will be more or less formed and there will be interest in Namada, from outside companies, players, users, and not only those who participate now through the distribution of tokens.
This mechanism is designed to control the volume of tokens, stimulating the price growth when the token becomes popular, everyone starts to steak trying to earn additional % to their tokens.
And vice versa, when the Bear market, everyone sells, and the stalwart hold everything to the last, especially validators - this mechanism gives an incentive not to sell, but to earn a larger share in the future.
Therefore, without reaching phase 5, without entering the market, without understanding the interest of users and the company in the protocol, it cannot be turned on or off.
So maybe it would be right to keep 40%, reach phase 5, enter the market and then decide when to implement the PD mechanism and at what rate of 40%, 50% or 60%.
By setting the rate at 60% now, the first three validators will own even more tokens and therefore the network because of their rate.
We support raising the target to 0.5, but we believe there should be more focus on the PID Controller to address the target situation in a long term manner. Utilizing the Community Public Goods Fund is a good idea to help fund validators and avoids the issue of validators heavily relying on the issuance rate of the protocol. This is a problem many projects in Cosmos currently have. It also can potentially prevent the protocol from losing value because less variables will affect the issuance rate and the community can shift away from using token prices to support validators for as long as possible until the actual economic value gets so diluted.
1 Like
Feedback summary of the key criticisms that I’m seeing
-
It’s too soon to make changes to the target without observations.
→ My answer: I agree that it’s too soon to make changes, but imo changes to Namada’s staking rewards (ie. going toward 0) would be much bigger change and too early. -
There’s a desire to pick an ultimate target rate and stick to it: use the PID the way it’s designed to be used to get capital-efficient security while setting long-term expectations for participants and stakeholders.
→ My answer: how we use the PID is a bit nuanced, so I’m hoping to wait (ie. past Phase 5) until we get some observations (eg. security needed for the MASP; NAM liquidity) and have some discussions. In the meantime, a target increase would help to hold us over. I suspect that as is, the PID won’t deliver the network security capital efficiency that it’s designed to achieve without causing validators to leave long before a sufficent amount of stake unbonds.
Key take-aways for a proposal (and beyond)
-
There is a bit of opposition here, but there will likely be substantially more support for increasing the target than opposition.
-
There appears to be strong consensus here that:
a) Phase 5 will likely affect staking behaviours and dynamics enough that it’s hard to make lasting decisions now. Even if we increase the target, the matter isn’t settled and it will be important to revisit the topic of how the PID is used after gathering observations/data.
b) We should hone in on a set of long-term parameter values as soon as possible. -
We should be mindful that more staking will also decrease the staking reward rate.
-
There’s additional nuance that we’ll need to consider when we discuss this next, such as how staking competes with trading liquidity and NAM MASP deposits.
Thanks for feedback and discussion! 
We (Knowable) are ready to move this to a draft proposal: [Proposal] - Increase target_staked_ratio from 40% to 55%
1 Like
Thanks for the summary! I’m in support of your draft proposal.
I also appreciate the critique of the PD-controller model articulated by you and @preto - this helped at least me personally understand some more of the real-world concerns and complexities. In particular, the point about validators and stakers having different incentive structures – and about validators really needing predictable floor rates – makes sense, and I think it might be interesting in the future to consider some cryptoeconomic changes (e.g. a floor rate or even amount specifically for validators) to perhaps provide guarantees more in line with what network participants need.
1 Like