As Nimiq prepares for its upgrade to Proof-of-Stake (PoS), attention is once again drawn to a pivotal element: the supply curve.
Let’s keep discussion in this thread to make it easier to find for all Nimiq community.
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Let’s go… Red? whatever curve gives the initial highest staking rewards 
or
whatever curve takes the edge off the high supply selling pressure to help prop up the price?
Richy, would be nice to see a spreadsheet or interactive chart to play around with some of these scenarios 
Which curve will increase adoption? - that is my main concern.
- Would the highest possible staking reward increase adoption by showing a competing return against fiat inflation? I suppose that would be curve “B” in red.
- Would the lowest possible annual emission rate lower the downward pressure on the price and make the coin more attractive to more people as an investment? Maybe it would release it to have a better growth potential? I suppose that would be curve “A” in green.
So, short term is my main focus, because adoption now is key. I don’t see the staking reward effectively competing with Fiat interest rates because of the delay in the POS release and the current and forecasted market trends. So, the highest possible staking reward doesn’t make sense to me anymore - thumbs down on curve “B”. I give my thumbs up for curve “A”, to limit the emission rate as much as possible and create scarcity.
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What do you think about a new “blue curve” which exists in the middle of these two boundaries? This is similar to how the original blue curve came to be–the best & worst of both of the other curves. Increased adoption in the near-term is important, but long-term continued adoption and usage is also key. Higher staking rewards now means lower staking rewards later, and vice versa.
In my opinion, the most important thing is that the 21,000,000,000th NIM is still created at the 100-year mark, regardless of the emission curve, as this gives the currency an anchor through time. If there is a way to entrench this date/supply at the protocol level, where it cannot be changed by anyone (including Team Nimiq), I would be in support of adding such a hard anchor. It would also go a long way to stop the same criticism ETH faces about an ever-changing emission rate/supply and the inability to predict how many ETH will exist in the future. Since NIM is designed to be a form of money/currency, there needs to be an anchor so that people can build financial models on top of it. For example, if someone borrowed against their NIM, or if someone wanted to create a model that compares NIM to something like U.S. treasuries or gold, there would need to be a hard anchor, otherwise the models would be meaningless.
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Supply of 21,000,000,000 NIM at end of year 100 is not up for debate. The question is how we get there - fast or slow.
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Fast: larger staking reward, downward pressure on price from stakers/validators selling off profits. But, could entice folks to get Nimiq and hold onto it if the staking rewards are generous and more competitive than Fiat inflation
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Slow: smaller staking reward, create scarcity and prop up the price of NIM
I would love to see an option that’s literally a straight line from the day of POS transition to end of year 100 - straight line, not a curve. Can we get this as line option “C” in NIMIQ gold/yellow?
I’ve been through the wringer with a few crypto projects by now, and higher rewards will increase selling pressure. I’m personally on board with something more reasonable intially that fluctuates / decreases more slowly. Higher rewards initially does reward early adopters (yay) but can set the chain up for events down the road where a select few early adopters are putting massive amounts of selling pressure on the price of the coin. Sustainability in my eyes is something more stable right out of the gate. My .02 of course!
Blue curve is best i think
I vote for red curve (option B). One of the main selling points of 2.0 is the easy staking. If staking rewards are too low nobody will bother to stake.
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The blue curve is no longer an option because the supply has now gone far above the start point for that curve. So you need to choose between other options which begin from the current supply level. Does that make sense?
I think that option B. Maintain Initial annual supply growth is the best way forward. We need to grow and attract more people with initial higher rewards to get adoption going.
The tricky part is that is if emission starts with a high reward %, then it MUST decrease really fast for it to reach the total supply in the expected amount of time. Doing some math, and using 5% as an example then it would look like this:
1st Year: 5%
2nd Year: 4,4%
3rd Year 3,9%
4th Year 3,5%
5th Year 3,1%
6th Year 2,8%
Just as an example of the side-effect of having a high reward at the beginning.
True, but you could also view it as a means to incentivize early user growth: join early and gain an extra-high reward %.
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Check out the supply curve chart we can explore now - experiment with the emission rate to get the annual returns you think are ideal - scroll to the bottom of the blog post.
Given that the average US long term inflation ration rate since 1913 is approx. 3.10% (source US Inflation Long Term Average) should Nimiq aim for high emission off the bat to entice new comers? Since long term or short term it won’t be able to compete with inflation and interest rates. At least not beyond 5 years or so. Or should it aim for long term viability and provide a somewhat steady emission rate of maybe 1%? Would that entice more long term investors / HODLers?
So does that mean you are voting for a lower initial reward %? And maybe it would be good if more of the team came on here and got off the fence? Just a thought!
I guess there are topics to differenciate:
Emission curve - market capitalization - price action - inflation - investors - consumers
As an investor of the sum x, I am interested in an higher price. A higher price comes with demand. It doesn’t matter, if the demand comes from investors, consumers or both.
Theoretically, if the market capitalization remains equal over time, the emission will decrease the price. If the emission rate is high, price will go down fast. If the emission rate is low, price will go down slow. As an investor/staker, possibly nothing really happens, as the emisson payout compensate the price decrease. But as an investor I don’t have the interest that the market capitalization remains equal… it should go up! (Thats means, a stable price [the emission pushs the marketcap up] or a higher price is needed.)
Sure, if the price would be stable, a higher emission rate would attract new investors. But I guess a higher price comes with promisingly inovations and/or adoption, not because 1,000 new stakers decide to stake the coin for one or two years…
So, independently of our choice which emission rate will be selected, adoption inititives like cryptocity are important.
The idea of inflation is that people spend their money, as money revenue leads to economic growth, not saving. Do we need inflation now, as the user basis is really low? (No.)
In my opinion there is only one worst case: A too high emission rate. Why? Because price decline would unsettle both, new investors and customers (holders for a short period of time). If I buy NIM for $10 and tomorrow it worth $9, well…
In the end, as a consumer I would prefer a stable price, while price actions means volatility.
As a staker, sure, I wish a staking compensation, that means I am okay with a stable price, but better increasing price.
I guess, the network needs stakers. If the emission rate is too low, nobody stakes. Especially in the beginning, I would set the emission rate to 4 %.
I think it is helpful to reframe these ideas.
Instead of comparing [NIM + emission] to the [dollar + interest] where one hopes interest earned will be higher than CPI inflation, try comparing NIM to a store of value like gold, which emits nothing and has a quantity that grows at a very slow rate.
Hypothetically, if the amount of gold magically doubled every year, it would quickly drop in value and people would not want to hold it for very long. In other words, if you had a magical gold coin that grew in size at a percentage rate higher than CPI inflation, the value of your coin would go down, not up. Its scarcity is what gives it value. The same is with NIM. The higher the emission rate, the less it functions as a store of value and accordingly the price will fall relative to things like gold or bitcoin.
For this reason I would prefer to see an emission rate in the 2-3% range.
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I vote for a low emission rate, I think this will make the price increase by creating shortages, and with a high price we attract more users and adoption. In any case, the price is going to rise a lot, remember that after Pos we will reach many exchanges, causing the price to rise more and more, we also have NinPay! This will make our beloved Nim useful for something really useful, such as Crypto payments. Personally, I am very excited to be able to pay for everything I need with my Nim. Also I guess that would be curve “A” in green.
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Also, at the end of the 100 year period (year 2117) can Nimiq transition to a transaction fee-based rewards system, ensuring the longevity of the coin since the total supply will be reached at that point?
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Wow, that is mind-blowing to think that far into the future! It is great to think that we can envisage a roadmap for Nimiq to go on forever.
I am also convinced that we need high rewards for the launch of POS. A stronger drop-off is allowed, so that we reward those who have been invested for a very long time and can get started right away!
My suggestion, let’s have a vote on 3 variants…
As a third variant, I would now like to see the curve from POW retained. In the end, the community votes for the right way.
You have to bear in mind that miners have to sell most of their coins to cover their overheads. I think that all real HODLers will not do this and that this will also reduce the pressure to sell… but that’s my personal opinion!
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