Before I get into my idea I want to congratulate the team on making it this far! I think Ren has the potential to be come one of the most amazing projects in the crypto space!
Some background about myself. I have been in the crypto space since Jan of 2018 so I don’t have as much experience as many others in this industry. I’m also no expert in in writing up these suggestions but I will do my best anyway. I also recognize that I may have limited knowledge about this project in comparison to others, but I ask that everyone read this with a open mind. I have been successful in finding early gems ( like Ren! ) and like to patriciate in community discussions.
The idea I have is quite simple and has been used by other projects to help bootstrap platforms in their early stages. The idea is to incentivize more darknodes to sign up by offering a staking reward by creating a small amount of inflation. ( Disclaimer – I AM NOT TRYING TO PUMP MY BAGS! )
Our circulation supply is 1 billion. We can increase that by 10 - 100 million and slowly release those newly printed coins to Darknode holders that continue to stake early on in the game. These newly printed coins can have a vested period of 1 year lock up time.
Let’s look at Synthetix ( SNX ) as a good example. They were the ones that essentially pioneered this yield farming craze by offering new and early users SNX rewards for securing the network. Right now they have approximately 75-85% of all SNX in supply locked up. Just imagine if we were successful in getting 75% of our circulating supply locked up by that amount. Just image the network security and price appreciation!
In order for REN to work in the long hall we need to have our circulating supply locked up so that our “Value to locked up funds” makes sense. Offering Darknodes a new incentive to secure the network will definitely help to bring new sign ups. As it stands the project is asking a lot from Darknodes. They have to lock up their funds for close to 80 days, which may result in lost opportunity elsewhere. The fees right now are relatively small and the potential for superior gains else where, whether yield farming or just trading poses all sort of opportunity costs.
The Defi game is constantly changing. I’m sure under normal circumstances the team would have never considered inflation as a means to help bootstrap the project, but I think it’s time to come up with more creative ways to get more Darknodes signed up asap!
Lastly, I think it’s a mistake to just think that everything will “ be okay” as is. The Crypto space is so fast moving that those that stay stagnate end up losing the most. There is nothing wrong with making small adjustments to help the project succeed. That’s why were all here!
Let me know your thoughts and if you agree or disagree.
Thank you @whipper156, for your idea, I like yourself am interested in making sure we have enough node operators to secure the network, however also as a node operate am concerned about yield and cost of capital.
More DNs Less Returns For at Current Volume Levels
For us to bring even 50% of the nodes online from where we are today has a substantial reduction in yield per node at the current level of BTC through the network. Granted we are only on Epoch 4, and I am frankly impressed with the level of BTC volume through the network already, and the speed at which various projects have adopted and integrated renBTC into their DEFI platforms. However, there is a balancing act here that has two major variables for what I see as network security.
Value of REN - the value of REN is a way to help increase the bond that secures the network, if REN is worth more than in theory we might be able to meet our network security thresholds.
Number of Nodes - if there are more Nodes we might be able to also help secure the network however this reduces the yield, and in turn could have a negative effect on token price, which may negate some of the effect of having more nodes in the first place.
So, what do we do? I think the best way for us to get off the training wheels is for Nodes to create more value for Dark Node holders that are supporting the network, this requires more throughput volume, which is directly associated with increases the number of integrators, expanding the features of the RenBridge to support more crypto assets, and working with DEFI projects and DEXs to increase the volume through the network, this helps us in all fronts, it pays existing Dark Node holders which in theory should increase the demand of REN which should drive price higher securing the network, this should further incentive new future Darknode operators to join the network which helps us with security in a way that hopefully wouldn’t negatively impact yields as much since the incentive mechanism is more profit based than inflation based.
DarkNode Reward Concept
There is something to be said about early DN holders, and I am sure the team which still has some stacks of tokens outside the circulating supply that they are reserving to incentive big node players etc could find that instead it is cooler to airdrop to node holders who have been around for a long time proven to care and sustain the network, but that is more of a gift and I don’t think really helps secure network beyond knowing that the DN holders will more than likely use that to set up further nodes, which is in a way helping like your proposal.
I do not think yield farming is a good comparison to what Ren has going on.
Incentives aren’t free, someone pays for it. In your example, ren holders pay through inflation to promote token bonding.
Im not convinced Ren has an imminent problem with number of nodes. If anything it being low while greycore does all the heavy lifting is nice because: 1. Same security, 2. More rewards
It looks like we both share a concern about getting Darknodes signed up while maintaining Security and a proper yield for those who invested.
Your second idea is sort of similar to what I suggested in that in provides incentives for Darknodes to continue to secure the network while providing additional yield on investment. I like your first idea too as it expands the areas of the RENVM reach.
I had a idea where Renvm could be used as a Cross exchange and or a lending platform . I feel that REN brings all the value and hardly gets the proper compensation for it. Imagine a user wants to go from BTC to Link. Right now, the trade would look like this:
BTC to ETH ( using RENVM)
ETH to Link ( Using one of many dexes)
Total of 2 transactions and lots of gas.
Imagine he went directly from BTC to link having Renvm sitting on top of Uniswap or a different Dex. 1 Transaction and less gas. The user thinks he is simply trading BTC for link in a trustless way! The profit potential could be massive to include our own exchange or even sit on top of a dex of our choice.
I wouldn’t call it " Yield farming". I would think of it more as boot strapping the project in it’s early stages. No one really loses other then those who didn’t bond REN. It’s not real inflation if the new coins printed go towards REN holders.
What are some of your thoughts to get more nodes up and running? As more BTC value gets held in Greycore the task to bond the right REN to value locked up becomes increasingly harder to achieve.
Ok I was just using the word yield farm because you mentioned in it context of your example given about synthetix.
I wouldnt mind if nodes increase or decrease. I fully believe the only thing that matters right now is liquidity and integrations. When the time comes to fix the TLV, my take is to use the continuous fee
If you hold 100000 Ren in your wallet, and don’t bond it for a Darknode, you will slowly lose Ren.
If we set the non-bond continuous fee to 2% a year, you would have 98000 Ren after a year
This would encourage bonding and discourages speculating and holding.
But this might decrease the price of Ren, as there would be less market makers.
This is a big trade problem with the solution, as it means it is difficult to buy and sell Ren without affecting the market price. This would decrease the number of new investors in Ren.
First off, thanks for the submission! This is actually an idea that has been considered a few times, albeit always in slightly varying forms.
Before I dig into my thoughts, something has to be immediately addressed: introducing inflation/deflation to the REN token would require migrating the REN token contract; the REN token contract has no notion of inflation/deflation at the moment, and cannot be updated. Migrating the REN token is no small endeavour, requiring coordination with a massive number of parties. So, any proposal that requires such a migration needs to be very well considered, and very convincing.
Ok, now we can address the topic at hand.
I actually do like inflationary models, because they allow us to incentivise participation by punishing non-participation (your share of the network lowers due to inflation if you are not running a node).
Having said that, I believe it is better to first attempt to incentivise participation through other means.
Find the right fee. We started with 10 bps, but it was somewhat of an arbitrary choice, because there is was no data to work with when we first launched RenVM, a never-before-seen system (other than aiming to be lower than WBTC fees). But, now that we have data, and can run experiments, we should try and find the right fee to meet demand. Most people’s intuition is that the fee should be higher than it is right now. If that is the case, then rewards will increase and this will naturally increase the number of nodes.
Make bonding REN more accessible. Right now, only people with more than 100K REN can bond REN into the network. Any one with less than that, or with a non-multiple of that, cannot put all their REN to use helping secure the network. By opening up new avenues for bonding REN, we should be able to increase the bonded amount.
Increase demand for renBTC and other renTokens. This is done by introducing new chains and applications to use renBTC. This is probably the more obvious point, but also one largely out of the scope of RFCs.
Point (2) is especially interesting, because it raises concerns about inflation. Imagine trying to save for a node so that you can contribute to network safety, but you keep being inflated out (assuming that as inflation grows, so too does the bond requirement for nodes). This could have a very material impact on the decentralisation of the network in the long-term. Early node operators would become oligarchs of the network, boasting large amounts of REN that had inflated over the early months/years. An argument against this concern is that you could keep inflation low. However, that is somewhat moot, because if you keep inflation low then its use as an incentive (especially in the face of yield farming) does not actually work as intended.
To summarise, I like inflation, especially when we look into the future and want to figure out how to incentivise proper governance etc. However, if the goal is to increase node numbers and the amount of TVB (total value bonded) — which I believe is the more pressing concern — then we should consider other mechanisms first.
Thanks for you proposal which I read with interest! I share your concerns but feel that we cannot assess the problem until the team have completed many more integrations and partnerships. Only then will we be able to truly assess the actual situation properly.
I wholeheartedly agree with Loong’s response. I was going to address the same points but he already did it. Increasing adotion of the Ren project and increasing Ren bonded are obvious goals, but inflation is not the best method at this point in time within the Ren context and its present value proposition. While it works for Synthetix, Ren occupies a different niche. Thanks.
Guys, at the time of writing this 40 dark nodes are De-registering. That represents 3% of all nodes. Think about it and think about it hard. The Defi space has dramatically changed since the team thought of the tokenomics and sign up structure. I’m telling you we have to somehow bootstrap these signs up by offering some sort of inflation with a 1 - 2 year lock up. Besides, what is so bad with a small amount of inflation for Darknodes? Every other Defi platform is using this approach and seeing unbelievable growth. Keep in mind that our BTC volume is far outpacing our Bonding sign ups etc….
Please don’t give me the same old response that everything will sort it self out blah blah… Things don’t sort themselves out. The speed in which this industry is changing is shocking.
Keep in mind, again regardless of what you say, our darknodes are competing with other forms of income, whether it be yield farming or staking etc. Asking people to lock up their funds at a lower yield that’s available somewhere else is hard to do. Let’s give our darknodes more incentives and larger yields!
Currently there is a net change of 37 more nodes coming online for the next epoch, and that will likely increase leading up to the epoch change which is in 5 days:
I’m just worried that our volume and locked up funds are going to move way faster then bonding etc… I’m just looking for ways to get more signs ups etc…
We can raise our fees to increase our yield without inflation. There is plenty of yield in the field, but there is a difference between the level of risk one takes, and REN does not take on as much risk as some of the other DEFI options, therefore it would be natural to have less of yield, but I do agree we need to raise our fees, to make it more attractive. The volume will come, as people learn to trust RenVM more, there is plenty of volume in the space, wBTC is taking the majority at the moment.
There has been hundreds of net new sign ups in the last few months. Basically every month since Mainnet has been positive for darknode sign ups. The trend is pretty healthy with the existing incentives.
And even at the current Ren price, the current renBTC volume going through is making it profitable for new node signups at a healthy APY. If volume continues trending up, even better returns.
