my take would be go ahead with the inflation as normal. i think requiring burns in terms of tokens would require the companies to start hedging and buying futures makes it too complicated. however with the inflation now i would implement a hope that deflation can someday surpase the inflation, like afaik eth does now, by adding a simple 1% of all tx fees get burned, or even lower, whatever is fine. i see ren usage going up dramatically with 1. the new tech (h2h), and 2. hopefully someday lower fees inviting bot usage, so dno will have logical expectation/hope that in some time the rates flip, and even it deflates below 1b
2 Likes
So the idea is not to force people to burn Ren, it is to incentivise projects like RenEVM which would deflate eventually but would need resources to be built. There is a clear pathway to deflation there, by introducing 50-75% of the tx fees to be burnt and cause deflation.
Again this does not have to be a pre-requisite for funding, just something that would get more people excited to build core protocol level tech that actively deflates Ren.
3 Likes
Interesting approach, I definitely like the immediate step towards decentralization and look forward to see the details around security assumptions (especially around growing TVL).
As to the proposed approach in this RFC Iām curious around a few things, will give suggestion to 2 scenarios:
- What about the gastoken being renDAI /renUSDC/renUSDT? I cant think of any protocol having a fixed fee like that which would be quite unique in crypto. Would be amazing for UX as devs/users would always have something stable to work around. DNOs will be happy to receive stables as well I would imagine.
In regards to the RenFoundation/RenDAO I would suggest a one time supply injection (eg. 500m REN) which goes directly to the treasury and has certain limitations as to how much that can be spent per month/quarter/year.
To counter this sudden supply boost any actions taken on the subnet (where gastoken is paid in stables) Ren automatically takes a certain % of that gas (or all of it) and buys up REN and burns it (similar to BNB). This is done until supply is back to 1B and burn mechanism is no longer needed. After that all stable fees go to nodes.
- In this scenario I will go with what was suggested in the RFC regarding the three components and using REN as gastoken. I am personally in favour of this change as I think the tokenomics of Ren needs a boost for long term sustainability.
The foundation; should be elected by DNOs and anywhere between 50-80% of the decided inflation rate goes to the foundation. The current 7% tax on darknodes can be removed in this case imo. I am also not against a sudden supply injection directly to the foundation (eg 100-500m REN) with vesting schedule.
Inflation; I would suggest remaining 20-50% emission to go to stakers. Running a node will automatically count as staking so DNO will receive their share but on top of that anyone with less than 100k REN can stake and partake in those rewards as well, this way the small holders will also be incentivized. For staking they can participate in governance (where voting power increases with time) and receive rewards from the emission.
The token utility; should imo burn all REN that is used as gas and if it becomes deflationary too fast the protocol can automatically increase the inflation (in case usage booms and too much is burned). This way there is no concerns about anyone dumping the REN in the market and usage of the protocol is directly correlated with the success of REN token.
(I also like Susruths suggestion around proposals for funding presenting a plan as to how their usage will burn X amount of REN to counter the inflationary emission. That is imo another argument to introducing a sudden supply injection of 100-500m REN immediatly into RenDAO/Foundation treasury)
6 Likes
Will the proposal, if approved, change anything about h2h and ren 1.0 and the token function?
Or will everything stay the same and only ren 2.0 will use ren as a gas token?
@Susruth
Bad idea and bad for incentives, look whatās on n3 (even like nothing)
very interesting suggestion I would agree.
Interesting if not overwhelming proposal.
Like the focus on decentralization from day one.
Just to clarify the āREN gasā would be only for smart contract uses and mint/burns would still be gasless and use native assets right?
renEVM is an ambitious project but I do not see what are the new use cases it enables for the trouble (considering we already have VarenX and Catalog was discussed to launch on an existing EVM chain first), can you clarify what unique strengths do you see for renEVM here and why they are worth the effort/risk?
How will renEVM tackle scalability issues if chain is successful ? Wouldnāt running renEVM (computations) on an ethereum L2 sidestep lots of complexity while improving decentralization (DNOs can stay light) and security (anchoring renVM smart contracts on ethereum L1) ?
2 Likes
someone mentioned rebasing meaning only up like ohm, i wanted to add it here as i agree it would be a great way to make inflation work for holders and those who want some extra value by selling rewards. in this case the idea susruth mentioned about dn bonds going up with inflation would make more sense to me.
only question would be where the foundation gets a boost in liquidity with this concept, i am overall against a large initial print, for example
I agree with the proposed three points only if DNs maintain their masternode status and get 100% of inflation rewards.
It modified so much. I think it donāt like a RFC, a new whitepaper is better.
3 Likes
I think it premature to discuss tokenomics when we have no details on the ānew Ren network.ā Howeverā¦
Just one obvious point here. Inflation is simply a tax on existing token holders. This is offset by distributing REN tokens to existing darknode operators. So who pays this proposed tax? The tax is completely paid by REN token holders who do not operate Darknodes. In other words, small REN retail investors.
As written, this is a proposal that benefits fat cat darknode operators over small token holders. I can see the advantages of this politically, because itās darknode operators that vote. And pay attention. To his credit, Max was very clear about this:
Itās true darknode operators will one day, at least in theory, power the network, and they currently take on higher risk by locking REN. But that is why they are paid income each month! There is a direct benefit, paid in BTC, each and every epoch! Small REN token holders currently receive no income each epoch, as their REN is not locked into a node. Therefore, today, the tax paid each epoch for the community fund falls totally on darknode operators. But at least that is taken from monthly income! So they still see a benefit from locking their REN, just slightly less because of the existing tax for the Community Fund.
What Max is proposing is simply switching the tax burden from darknode operators to small REN token holders. Nothing new is happening here, nothing new is being created. This is just penalizing small REN token holders at the expense of darknode operators. Who should finance Renās growth? This RFC says it should be small token holders, not darknode operators.
So to summarize this RFC, if you operate a darknode, you earn income every epoch. In addition, you avoid having to finance the growth of the network. This is a great deal for you! If you cannot afford to run a darknode, and since there are no other options available to you to bond your REN, you will be financing the growth of the network while having zero income, zero options to lock your tokens to show long term commitment. You basically get to watch your REN get diluted, and you canāt do anything about it. You have no options!
Inflation can be effective when it aligns long term holders with the success of the project. Curve is a good example of this, where anyone can participate: small or large CRV token holder, everyone has options to lock their tokens at Curve. This RFC is simply a giveaway to darknode operators at the expense of small REN token holders. It simply switches the burden on who has to finance Renās growth.
I think this should not be done without options for small REN token holders to bond tokens or participate in some other action that shows longer term commitment to Ren, with corresponding benefits paid in inflated REN tokens. Without that option, you are unfairly penalizing smaller REN token holders. Itās a fat cat giveaway as currently written, nothing more.
6 Likes
Would agree with this , one way to mitigate this would be to have a pooling service to run darknodes for smaller holders
1 Like
I agree with this view. No value is being created by simply printing new tokens. Small Ren holders are probably not going to stick around while their holdings get devalued and will just sell. I donāt think creating a staking program for Ren holders to protect them from inflation would help since, at best, it just shift the inflation tax to non-staking token holders. At the end of the day, someone has to pay that inflation tax.
As darknode operators we will be funding this DAO one way or another. Either through protocol fees or a lower token price.
Iām opposed to any voting on this matter is too dependent on the new Ren chain as a community to vote we need concrete details on what ren chain is a decent medium article and white paper is needed Imo
8 Likes
I mean, @Sabobi, fren, what do you want from me? You want my serious take on your post? To be honest, I did get suckered in for a bit and started to give you a serious answer, but I donāt think it makes any sense now. Yes, you bring up some interesting ideas, but what are we debating? Seriously, what is the point of this RFC? We are discussing a new tokenomics model with major implications for what, exactly? What are we building now, as of Thursday, June 9th? Please enlighten me as I have no idea.
Last month we were on the bumpy Road to Decentralization. Then a couple of weeks ago I hear about AVAX style subnets. Wut? Weāre going to build a Ren L1 with subnets? Seriously? Why? How? Who is going to do this? Details to follow! Now itās just a community discussion. Umm, ok, interesting, I guess. Wasnāt expecting that! In parallel I hear Catalog is not launching on Ren. Wut? So thatās two major shocks right there. But thatās just the appetizer.
This week I learn that Greycore is finished, caput, dead. Like that Norwegian Blue Parrot, itās gone to the great beyond, deceased. Wow, ok. And just as Iām starting to process that, Iām hit with a major bombshell:
Wut??? I mean, talk about a plot twist. Old Ren is out, new Ren isā¦ well, youāll definitely love it. Itās gonna be a blast, no doubt! Wow, okā¦
And with all of that circulating around in my foggy brain, with me trying to process all of this, we have an RFC on the new tokenomics of ā¦ what, exactly? Of that new and improved Ren chain that we have ZERO details about, the one that is fully decentralized from the beginning?!? Is that what weāre discussing? Iām supposed to evaluate your suggestions on how we should manage that chain I know absolutely nothing about, that just appeared out of airy nothingness in this RFC above. Now Iām supposed to comment on how to manage REN on this invisible chain that doesnāt even exist? Come onā¦ Youāre not serious, right?
You see, I almost got suckered into debating you on why I think āa one time supply injectionā of 500m REN is a terrible idea. But Iām just not going to do that. Iām not going to engage in any more DAO Community Theater until someone shows up with a lot of details on what the hell we are building now. Ideally a white paper which clearly explains the technology and the target market, and how this is all going to fit into Catalog and whatever else weāll learn about next week. And how those Avax subnets will or will not be part of that vision. Letās start there, shall we? And once we can all agree on that, then I promise Iāll come back here and tell you why I like your staking suggestion, and also like the idea of renDAI as the gas token.
But not until I see actual details on what the hell is going on at Ren, what we are really building. Because, Iām gonna be honest here, itās starting to get a bit crazy, donāt you think?
14 Likes
Introducing inflationary measures seems to be the easy way out of all the troubles that we are facing today. I have many gripes and few solutions to what is being proposed.
Inflation and corruption
I believe this is a slippery slope in general because there is temptation by people to be able to create money out of thin air. Thereās been chatter that relying on DNOās to vote on everything is inefficient so we would probably end up with a group that controls the monetary policies of Ren (i.e. the inflation lever). We could eliminate the temptation to control the inflation lever and introduce a fixed inflation rate as outlined in this thread (ex: 70M Ren / year, non-compounding) - sure, but who is to say that another proposal doesnāt come out in the future along the lines of āWhoops, we over / under estimated how much growth we wanted, hereās a proposal to increase / decrease emissions.ā My point is that there is no turning back once we sacrifice the original intentions of the token.
Side note: I donāt think we should follow what Ethereum has been doing. They continue to change their tokenomics and it seems to keep favoring those who have assets and hinders newcomers (they are turning into the āhavesā and āhave-notsā when it comes to being able to run a validator)
Utility
It sounds very convenient to allow REN to be used as a gas token to pay for transactions. I would personally argue that Subnets (and any other actor) should be allowed to pay in any Ren-supported asset. I imagine this is not possible today because we would need oracles for non-USD assets. Still, the whitepaper has been removed and a new one has not been released - are fees paid for value transacted, computational resources, or both?
Foundation funding & inflation
Iāll start by saying that Foundation sounds like a good idea. I donāt like the idea of inflation as the only source of funding and no other alternatives being proposed. Inflation is being proposed because āthere is not enough in the Ren DAO to bootstrap new applications.ā Which leads me to:
- Is there any evidence of teams wanting to build on Ren but are not able to due to lack of funding?
- Why are we not marketing the bridge?
- Why are we not calling for bootstrapping from partners, Alameda, or the community to further bridge usability?
I imagine if we could increase volume through the bridge then we could easily garner support to increase the CEF reward cut to start funding all of this work and bring the CEF cut down over time. I donāt imagine that we need to fund everything all at once - have the community vote or the treasury working group decide on what projects to fund.
5 Likes
I am generally supportive of this proposal. The foundation makes sense. Iāve had good experiences setting these up for other projects and believe they are best practice in the industry now.
As for inflation, I havenāt heard any viable alternatives. We obviously need more resources. Our current free cashflow is an order of magnitude less than what may be required. And we donāt have any more token reserves to sell to institutional investors. So we need to authorize more shares and accept the dilution. But Iād like more information on the complete future vision and an assessment of the current business.
Future vision
We have not yet gotten a holistic vision for Renās next chapter. It would be easier to evaluate the proposed evolution (pivots?) if leadership painted a cohesive picture of the future. I donāt care about the format. It doesnāt need to be a white paper. I just want to be pitched on the updated grand plan.
The original narrative was that we were first to market and cutting edge. That was a compelling investment thesis. Now weāre no longer early, and our tech advantage has yet to become a business advantage.
Now it really feels like weāre being asked to reset expectations and instead support a David vs. Goliath narrative for the next chapter. And inflation is supposed to pay for a very expensive slingshot. What makes the team confident that we will succeed? What is the investment thesis going forward?
Current business
An updated investment thesis needs to also include an honest assessment of our original business model. Is this a pivot because revenue growth from our core product is no longer expected to be meaningful? Is there an interdependency that prevents core products from succeeding without L1 development? Or is this just the next big swing, and the team is still confident in substantial revenue growth based on our current offering?
I assume the vast majority of DNOās believed the efforts over the last two years on decentralization and H2H would lead to a substantial increase in baseline revenue. And that L1 efforts would be additive moonshots. If the team has doubts about that premise, please just tell us. Or if the team doesnāt have concerns, but also doesnāt want to lose ground on the bigger L1 swing, and needs us to be patient about baseline revenue, then just say so.
Many of us stuck with Ren through the previous pivot away from darkpools. All of us have been patient over the last 2 years since RenVM launch. Iām guessing most will support the teamās proposals. But weāre so tired of the guarded answers and having to constantly guess about the health and potential of this venture. Taking a step back and leveling with us will go a long way to restoring faith.
7 Likes
We agree that L1 development is essential for REN. The purpose of this dialogue is not to debate the cost and benefit of inflationary tokenomics, but to discus whether this specific proposed L1 model which was widely successful in 2021 is a good fit for REN. Projects such as AVAX and KAVA have been successful with this model, but I do not think it is the right fit for REN.
Another model, based specifically the xDAI āGnosisā chain, would be a much better fit for REN. In this model, the native token of the L1 would be renBTC, and fixed-supply REN is used by DNOs and validators for bonding. Both DNOs and validators would be incentivized with renBTC. Users of the chain would not have to acquire REN and could simply bridge native bitcoin to gain access. This model would also create an entirely new use-case as a payments layer as Bitcoin adoption continues. REN is less suitable for on-chain liquidity pools due to relative price volatility, where renBTC as a native asset would be ideal for on-chain liquidity pools.
The renBTC model does not solve the issue of funding needed to ābootstrap a whole new ecosystem of applicationsā however āthere is a source of protocol revenue going to the Ren DAO treasuryā which is significantly less than the funding programs deployed by AVAX and KAVA. The xDAI āGnosisā chain is relatively quiet with a few key projects developing. The renBTC chain would perhaps also be relatively quiet with a few key projects developing.
To conclude: inflation is not inherently bad, but I am opposed to changing the tokenomics of REN, as an well-established digital asset. The renBTC model could be built without compromising the integrity of the REN token. The renBTC model by comparison may have advantages and disadvantages which can be discussed.
2 Likes
i like this idea except abstracting all value to btc, lets do this but with ren token itself, xREN, where all value can be paid with any token and is automatically extracted to ren to pay which i think already exists as technology
This idea (xREN) may require more input from oracles than renBTC chain due to changing relative token values.