[PROPOSAL][ABANDONED] New governance proposal for Max Supply and Burn Rate

I would like to create a governance proposal, but I’m not technically advanced enough to know what I’m doing, so I will require assistance. If this proposal is interesting to anybody here and you want to pursue it further, please DM me. The proposal would create two key changes to ATOM that will both reduce FUD, increase ATOM price, and have zero negative impact on ATOM: 1. Create a maximum supply of 500 million ATOM. Given the current rate of ~7% inflation, it would take ~10 years to reach this number of ATOM in circulation. • Risks - The risks are two fold, but both de minimis. The key risk is that ATOM isn’t able to carry out its vision and start receiving significant transaction fees within 10 years. IF that is the case, then we can always create a new governance to change it; it seems highly unlikely that this would occur unless ATOM is a total failure. The other key risk is that inflation increases significantly and we actually reach this level in ~4 years (fastest possible rate). This would only happen if staking dropped dramatically, which, again, would be incredibly unlikely. Also, 4 years isn’t a short period of time. • Benefits - a common FUD against ATOM is…

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I would be more in favor of a inflation reduction (not tied to fiat prices and have no supply cap) after we see enough activity on IBC that will acrure value for Atom holders .

Declaring a supply cap simply to attract more new people to the ecosystem does not seem ideal to me.

+1. I think it is important to incentivize staking first. Inflation “halvenings” could in practice achieve a soft cap, while being flexible enough to incentivize staking. There is potential for burning, but that should be addressed as a second topic when it is understood more fully what IBC fees will look like, because taking from IBC fees to burn while also reducing inflation will seriously hurt stake rate

Just keep in mind - the proposal isn’t to use fees to burn AND also reduce inflation… the burn is what reduces the inflation.

If there are only enough fees to burn 1% per year, then essentially the inflation rate would just drop from 7% to 6%. However, since only 10% of fees are used to burn, that means that the rest of the fees would be 9% per year, so staking reward would increase from ~10% (7% inflation divided by 70% stake rate) to ~22% (6% inflation divided by 70% stake rate + 9% IBC rewards divided by 70% stake rate).

My main concern is reduced then. Still think it is not yet the time for this proposal until IBC expectations are firmer. Your proposal sounds good on paper

I’ll vote no.

I think I’d prefer to continue with lower value $atom to ensure that network fees are low so that we can grow the network effect of the Cosmos hub through IBC. Low fees lead to more connections and transactions which generates more revenue for stakers through an active hub liquidity pool. Hub with low fees and high liquidity > hub with high fees.

$atom can be valued through dividends from the hub. It doesn’t also need a deflationary mechanism.

Also I worry that burns created by slashing could incentivize bad behavior - such as for validators to choose to intentionally see their delegated funds slashed to increase the value of their separate wallet.

I appreciate the reply. However, I don’t follow the logic. Higher priced ATOM won’t necessarily result in higher fees (chains can be cloned to limit congestion). Furthermore, as staking dividends increase, the price of ATOM will naturally follow as more people want to buy ATOM for staking, so you’d have the same issue either way.

As ATOM holders, we should all want ATOM to go up in price, not only for our own wallets, but, perhaps more importantly, because it generates excitement and more developer activity.

As for the slashing - it doesn’t make any sense for a validator to intentionally slash as this hurts their own holdings as well as their reputation.

There is a lot active development work to able new fee mechanisms in the Cosmos SDK. These change will accommodate the burn mechanism. github.com/cosmos/cosmos-sdk Solid transaction fee mechanism opened 07:38PM - 17 Mar 21 UTC robert-zaremba Type: Security gas meta-issue ## Summary We identified problems with current fee mechanism. More specifical … ly, it's susceptible for spam attack, state bloating or even DOS attacks. This is a meta issue to list verticals related to solve the main concerns. General discussion about protocol fees: #8224 ## Gas prices and zero fee problem - [ ] Decide about short coming solution for zero fee problem. This has to be enforced by a state logic or consensus. - Discussions in https://github.com/cosmos/cosmos-sdk/discussions/8224 - [ ] Implement a short coming solution for zero fee problem - [ ] Decide about long term strategy and dynamic fee mechanims - [ ] ADR for the fee mechanism - [ ] Implement dynamic fee mechanism Related: - [ ] Ante Handler Min Fee Unit Tests #3100 - [ ] Add gas and fees concepts doc #3115 - [ ] Add provision to support free transactions #3193…

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I would vote yes for max cap.

I think we should submit the proposal and let the community decide.
Pls point me to proposal page if it’s already submitted.

There are many Atom max cap/inflation related subs on Reddit.

Personally I can’t find metrics to gauge activity on IBC.

I strongly disagree especially with opinion 1, because dilution plays important roles.
It incentivizes players staked atoms and punishes inactivated players.
If there are any of backup plan for this, it will be harmful.