Supply Curve Update Discussion

Discussion
#13

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?

#14

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!

#15

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 %.

#16

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.

2 Likes
#17

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.

2 Likes
#18

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?

2 Likes
#19

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.

#20

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!

3 Likes
#21

I mostly agree with the points raised above. That said, I still believe that Blue Curve 1 is best. One point that’s missing from the discussion above is how the current PoW inflation rate is vastly higher than all proposed PoS reward rates. If all you care about is price, you would expect to see its increase regardless of staking rate.

I approach the supply curve problem from a psychological perspective. Simply put, higher staking rewards are far more attractive; anything less than 2% and users may simply ignore staking as it is perceived as pointless.

Looking 10 years into the future, the % rate for curve #1 is 1,87 whereas curve #2 is 1,48%. From a purely psychological standpoint this difference of 0,39% is mostly irrelevant: I do not believe it will change anyone’s decision wrt staking. Both curves reach parity in 2040 at a rate of 1.15%. At this point curve #1 will output less than #2, sure, but the difference (in absolute terms) remains meagre 0.24% in 2050.

It is of course important to think of the future. However if Nimiq is still relevant in the year 2050, let alone 2100, there must have been huge societal and cultural shifts that are
more or less impossible to predict. What ‘staking’ means in 2050 will be vastly different to our own understanding. As such we should focus on the here and now as it is, at the very least, understandable.

The shift to Nimiq 2.0 is an event in and of itself. It should be celebrated. This is when we want all eyes in the world to turn on ourselves. An initial reward rate of around 4% will help with that.

2 Likes
#22

Another point I forgot to mention wrt supply/demand:

We shouldn’t worry about supply increasing by single-digit percentages as we should expect demand to grow much faster. Even within the crypto space Nimiq is a fairly small project. There’s so much untapped demand it’s silly to focus mostly on supply-side dynamics.

#23

This is a great post. Would you be able to explain whether blue curve 1 is the same as either the A. or B. options, which are shown as green and red respectively on this blog post? Nimiq – Nimiq Proof-of-Stake Supply Curve Update

#24

One thing I am wondering is what happens after the 100 year period? Or what happens after 20 or 40 years if the reward is no longer enough?

The total supply is obviously fixed at 21 billion NIM. But would it be possible to start charging a small transaction fee to fund an increased reward? @Richy are you able to answer this question, as what I am asking about gives the possibility of higher initial reward but also the possibility to increase the reward later.

#25

I vote for the lowest emission rate. We promised the “super halving” so let’s stay with it. This will also create a mad rush to get $NIM to stake and thus create a sort of scarcity and keep the sell pressure down. This is a good thing.

1 Like
#26

I like the idea of creating enthusiasm to stake NIM. However, I feel increasing the staking reward to create a bigger incentive for staking is the best way to do that. What do you think, does that make sense?

#27

where did we promise super halvening, please? Times are changing - we are no longer in 2021😉
We are in the Bullrun and need to generate attention!

#28

I’m saying we already voted on a low emission so we stick to it. That’s what I meant by promise.

#29

But the vote back then was about lowering the rewards and still getting 5- 7% APY and not go down to 2% APY all of a sudden like now, simply because there are 4 billion more coins on the market in the last 3 years…

The last vote was 3 Years ago - plz remember!

#30

I am entitled to my opinion and last I checked this is why we’re discussing here in this forum. You have your reasoning - fine, thank you for that. Hear me out on this: approx ~49% (or 10 billion) are in circulation now. Only those that stake NIM get a piece of the emission pie. ALL 10+ billion are NOT going to be staked on day 1 of the new PoS. I don’t even think half of the 10B will get staked the first year (there needs to be liquidity on exchanges, some people might not care to stake, and of course plenty of lost coins/wallets).

#31

If coins/wallets are lost, and some people might not care to stake, and with a 2% APY there is less incentive to stake, will there be enough NIM staked to secure the network? How much NIM needs to be staked to secure the network? Is it the case that the less NIM staked, the easier it is to mount a 33% or 66% attack or whatever the threshold is? Specifics aside, my point is that there are altruistic reasons to increase the APY, it is not necessarily all about selfish whales awarding themselves a higher yield.

#32

For anyone who didn’t get the Memo - or didn’t see the Nimiq tweet - discussion is over and it’s time to get out the Vote!

If you voted and feel you need to adjust your vote you can do so by voting again before the deadline. Voting ends April 5.