There is nothing inherently special about the 5% PGF inflation rate or the 40% target staked ratio. It is easy and straightforward to change these values in a future governance proposal to be lower or higher.
I think 5% is a good number now for PGF inflation to get some tokens into the PGF address for community spending. If we felt like the tokens werenāt being adequately or properly spent further down the road at any time, the community can easily vote to reduce this inflation. Also remember that these tokens are not considered by the protocol to be ācirculatingā until they are directed to other accounts.
I think 40% is some general realistic target for now. If the protocol gets there too quickly and the inflation rate doesnāt rise as much as desired (and plateaus at some value well below the max inflation rate of 5%), then Iād personally be in favor of raising the target ratio after that to stimulate more inflation. Remember that the staking rewards rate is the inflation rate divided by the staked token ratio (total staked tokens / total native supply).
Iād like to see the proposal on-chain in pretty soon, in the next day, and I also have seen general agreement with the initially proposed values, so this seems like a good starting point in the name of efficiency.
Please speak up if you have strong feelings against something here.
Aside from the temporary nature and the fact we can always adjust inflation rates, added up together it may seem like there will be a sizeable amount of inflation. I was initially somewhat apprehensive, but I have been weighing pros and cons.
Staking Inflation is approximately zero sum within the Namada economy: yes, the monetary supply goes up and devalues the token price, but if you are staking you get more tokens, usually more than making up for the lower price. In other words, holders are nudged to secure the network or lose money.
On the other hand, PGF Inflation spent on external expenses like donations and real life events leaves the Namada economy, but the loss is expected to be more than made up in other ways, such as goodwill, integration and a larger userbase.
I am like Rigorous concerned if inflation is too high. I think these parameters can work for a start, but I also think 5% PGF inflation is high when all the different types of inflation are summed up. A more general discussion on overall inflation might be beneficial at some point. 11.5-16% inflation total (ballpark figure) is a very high rate of depreciation of currently held assets.
one minor point in addition to my comments below in the general: Iām not sure it makes much difference that the minted tokens are considered not in circulation. they are still minted, part of the total supply, and in pgf treasury to be spent via governance. (I am not sure such tokens would be considered out of supply by most reckoning standards).
Itās been over a week that the Namada mainnet has been running smoothly, and as of Dec 11, 16.7% NAM has been staked. We (Luminara) think that Namada is ready for Phase 2: activate inflation for staking rewards and PGF.
I am unsure if we should not soon settle on a steward inflation rate. there was some good progress and tentative (limited participation) consensus on amounts in the discord hot topic, and I think it would not be too difficult to land on an agreement with respect to those numbers. (based on that discussion, I would say a good number could be 0.05% per steward per year, thatās 500k nam per year. could be a bit more but consensus seemed to tend around this level in said discussion)
An additional aspect to be considered with inflation is that if too high, it may (and will, other things being equal) also dilute stake percentage of supply.
Yeah and because of this, the displayed data hash is incorrect on such instances. I see the same on Sproutstake, but Emberstake has it correctly, for example.
From the CLI:
> namadac query-proposal --proposal-id 1 --node $DO_RPC
Last committed epoch: 34
Proposal Id: 1
Type: Default with Wasm
Author: tnam1qztdx4y7a3wn0qmgcgtrty237vcnp9f9hs3rt3k7
Content: {"authors": "Luminara", "details": "Namada mainnet has been running smoothly since Dec 3. As of Dec 11, 16.7% NAM has been staked. We (Luminara) think that Namada is ready for Phase 2: activate inflation for staking rewards and PGF. 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%. PGF Steward inflation will be off for now. Our understanding is that this proposal was successfully tested on the Housefire fork (which is now in Phase 2) using this code: https://github.com/anoma/namada-governance-upgrades/blob/f1d19a5d4d28595ee73fe8fd15a9b4319bb171ff/phase2/src/lib.rs", "discussions-to": "https://forum.namada.net/t/phase-2-proposal-discussion/1297", "motivation": "We want to advance to Mainnet Phase 2 by activating inflation to reward stakers and to enable Public Goods Funding (PGF).", "title": "Phase 2: activate inflation for staking rewards and PGF"}
Start Epoch: 34
End Epoch: 48
Activation Epoch: 49
Status: on-going
Data: Hash: C4C00DF8AD4C5EFB76611555401236B696A5F4E367429B293B09A438679F8176
I download the wasm from the build artifacts of the CI here and then:
We, EmberStake, have reviewed the code of the Phase 2 Proposal at GitHub. Based on our understanding, it performs as described in the proposal and does not exhibit any malicious behavior.
We also verified that the checksum of the compiled code matches the on-chain hash.
Considering these fact checks, we voted Yes on Proposal ID 1.
(Note: For proposals involving WASM code, we believe all validators should attest that they fully understand what the code does and have verified its integrity before voting. Public attestations may add a level of responsibility and discourage blind voting merely to appear active in governance participation.)
I agree with this suggestion. However, I feel that if we start with 0% and gradually increase it, it will feel better than setting it high from the beginning and then gradually decreasing it.
5% may be reasonable but we do not foresee how inflation will play out along with the staking rate. Macroeconomics are always unpredictable. So it seems more reasonable to be cautious at this stage. I think it should be divided into several stages depending on the staking rate and gradually increase it from 0% to 3% 5%.