Phase 2 Proposal Discussion

Governance Ops Proposal 🗳️
1

I would like to start the discussion for the governance proposal to transition to Phase 2 of mainnet.

This proposal primarily deals with turning on inflation for proof-of-stake (PoS) and public goods funding (PGF). This marks the beginning of staking rewards. In the Namada dry-run, the governance proposal use to activate Phase 2 was in this Rust code file.

Following some discussion in this discord thread, I notice some sentiment around keeping the PGF steward inflation rate at 0.00% and punting this decision further down the road.

Thus, I’d like to start the discussion by proposing the following values to be set (similar to the dry-run):

  • PoS max annual inflation rate = 5%
  • PoS target staked ratio = 40%
  • Kp gain parameter = 0.5
  • Kd gain parameter = 0.5
  • PGF annual inflation rate = 5%

To understand in detail how the Namada inflation mechanism works, please see this resource.

I am proposing to use larger gain values than in the dry-run, which in mainnet will help the network to reach a larger inflation in a quicker (and in my opinion more appropriate) time period.

I used this branch that contains a test called test_pos_inflation_playground in order to get a sense of what the inflation dynamics might look like with a configuration similar to the current mainnet conditions (initial staked ratio of 16%). Please feel free to run the code and change values if you are interested. I can also explain what is happening there in more depth if requested, but for now I think this is enough to at least get the conversation started before we put a proposal on-chain.

PGF inflation is not dynamic and is set to be constant at the chosen value. This mechanism mints tokens into the PGF address on-chain. However, as these tokens are not really liquid until governance spends them and directs them toward other addresses on-chain, these tokens are not considered to be part of the circulating supply while they sit in the PGF address. Once they leave the PGF address, they are considered part of the circulating supply.

On another note, it is also my opinion that this proposal be executed on a Namada testnet that is running alongside mainnet. This will give an extra degree of confidence that the proposal we choose to execute will do what we intend. One such testnet has started running, and the process for onboarding participants into it has begun. Stay tuned for further communications regarding this.

Looking forward to the community discussion!

24 Likes
2

I would like to note that I, as a community member, personally believe that the decision of the PGF steward’s inflation rate should be evaluated at a different time and left to be 0 right now. These views are my own and not representative of Heliax as an organization.

7 Likes
3

I agree, we should increase the target staked ratio and test these changes on a Housefire instance.

2 Likes
4

I don’t have extensive knowledge of this, but I agree on these values and parameters. Because we can change those via governance if community wants to?

1 Like
5

We fully Support these numbers and the governance proposal to transition to Phase 2 of mainnet.

1 Like
6

We support this proposal, but regarding the timelines, when will the proposal be executed on the Namada testnet and when is it expected to be put on-chain on Mainnet for voting?

1 Like
7

This proposal sets a solid foundation for Namada’s growth. We support it.
PGF inflation at 0% is a sensible choice to prioritize key incentives, though a compromise, such as starting with a lower rate (e.g., 2-3%), could also help avoid premature over-allocation.
We’re not entirely sure which path is best here, but we’re excited to see the community shape this together!

1 Like
8

Fully support and ready to go to the next phase. Also agree with setting PGF steward’s inflation rate to 0% with step-by-step increase in future, as 5ElementsNodes suggested

4 Likes
9

Thank you for sharing these proposed values.
These figures strike a good balance and align with what I believe are equitable parameters for the system.

10

Overall, I agree with the parameters described above by Brentstone

11

I agree with that too

12

Originally I suggested to set both PGF inflation and Steward inflation at 0% to fast track staking.

After ruminating I now suggest a 1 month experimental PGF Lite program to fund short term projects and test the PGF process. Its goal is to limit risk and discourse while still allowing for educational experimentation, so we can initiate Phase 2 ideally before the end of this week.

The only change is a lower PGF inflation rate for 1 month:

  • PGF annual inflation rate = 1.2%

which means allocating a maximum of 1 million NAM to PGF Lite projects. PGF Lite projects must result in usable products by the end of the program. Further development and maintenance of successful projects can be considered for the full PGF program.

Perhaps a PGF Lite Steward to fund and oversee the PGF Lite projects can be acceptable too, for example at an annual rate of 0.012% for the duration of 1 month (10,000 NAM).

13

Yeah, agreed with all these numbers & support the governance proposal for transition to Phase 2 of mainnet.

14

thanks Brent

so PGF Steward rate 0% now, but set it soon!

support :white_check_mark:

2 Likes
15

Sounds good to me! For PGF agree about setting pgf stewards inflation to 0%. For PGF inflation, anything between 1% to 5% works. Lets first test this on the testnet!

1 Like
16

I support the idea of setting 0% PGF steward inflation for now; it sounds reasonable to me. Everything else looks good to me!

17

Agree on the general consensus of the discussion.

We also strongly support the creation of a formal testnet process and would be glad to participate in it.

18

Supporting figures discussed here. PGF rate of 5% seems very high to me for long term. Concerned this could result in community pool looting as we call it in other networks :slight_smile:

It’s very hard to oversee projects funded through use of community pool funding. Hopefully with the stewards we have an effective strategy for oversight.

1 Like
19

I agree, but I prefer to have higher PGF rate at launch, then decrease them as needed instead of setting it too low and having needed to increase them in the future.

On target staked ratio, is there any reason why this number specifically? Also, what is the downside of having it lower or higher than 40%? I believe both Cosmos and Osmosis have more than 45% tokens bonded.

1 Like
20

Correct, see here Mintscan

Research performed by Blockworks Research shows that the Cosmos Hub is overpaying for security and that high issuance is not a pre-requisite for >60% supply staked to the network, with most PoS networks issuing <7% of supply annually while maintaining over 60% supply staked.

A higher target staked ratio does mean a higher inflation rate if the staked amount is well below it. That is because of the PD Controller. If we expect reaching a 60% ratio takes a lot of time regardless of the inflation rate, we will be paying more in terms of inflation than setting it to 40%.

2 Likes