RFC-000-046: Transitioning to Ren 2.0

[Maggie]

Hi

I do appreciate the effort put in this proposal however I think that for the community make an educated decision we may need some info/clarification

I think the main feedback revolves around 4 big points:

1. Where is the 12.5% coming from? Can it be lower? What is the breakdown that lead to this number. Answering these questions may help the community understand if for example minting can happen on stages.

2. What are the reviewed timelines even if they are not accurate? Knowing how much time the release of 2.0 can be brought forward will help investors/community understand how temporal this negative effect of inflation would last.

3. The way the proposal is written it made some think that the 50 M was the same portion to be released immediately. Re-reading the proposal I think they idea was only to defined that 50M was intended for development and that a portion of this is released immediately as part of the vesting schedule to be defined by community. Is this the case? If yes, this will clarify that the foundation has always control of the release of funds.

4. RenDAO must have a critical control of RenFoundation through either election of DNOs to sit on the board of RenFoundation or something similar.

I personally I think is sensible to think in self-funding and that some inflation must be required. A combination with rfc-45 may help with reducing the amount of inflation required.

Cheers

[shiny]

I just proposed this idea in the discord general chat, the buyback and burn. You beat me to it!

So yes - let’s

A) create a DAO. Put the community in charge of Ren
B) create new Ren tokens for Ren 2.0 with 125 million extra
C) those 125 million extra tokens will be in the hands of the Ren community to spend wisely and with community intent. No spending without transparency, good plans, plenty of research and discussion
D) create agreement where a certain % of all darknode income gets allocated to a special fund, overseen by a special group wise in the ways of the market, to buy back and burn Ren tokens at the best times until the day we are back at 1 Billion tokens and free of our debts.

[Amaguq623]

Doubtful we’d see burning tokens to get back to original levels, may be more likely see future requests for additional mints in order to continue with development toward the magical decentralization.

As with the willingness of the development team to run to Alameda in the past (always wondered if the original founders just used this as a platform to get their foot in the door at Alameda), the current RFC seems to be repeating the pattern of trying to subsidizing development costs without really having an effective business plan in return – the current yield is lucky to see 0.009BTC per node per epoch. The payback value of 1,250 nodes, would probably be about 7.5 years.

I wonder if this RFC just looks like moral hazard from the development team repeating itself.

If you go for a major exchange thinking you’d get much more volume per epoch, (i.e. Binance takes the protocol), they will just gut it and take what is needed; such as getting their Thorchain to actually work correctly in order to front their liquidity pools. Ren will probably get evaporated in the process, which would be unfortunate. But that’s business.

Although I will say, if the planned surplus minting in 125M new Ren dilutes the token price down to $0.05, I’d grab a few more nodes.

[shiny]

David proposed in discord the issue that with inflation reducing Ren value along with darknode rewards reduced to payoff the inflation, it’s a double hit. Could reduce attractiveness to run a node and thereby hurt overall security.
Just wanted to post here to have in this discussion as a viable negative to this idea.

[autonomous]

The 12.5 % inflation was hard to digest at first. Even with that being said, this might be our best solution to date for the implied transition.

Of course the Ren DAO will have a lot of power now. Who and how many are on the committee? What are all of there qualifications? How and why where they chosen? What are each of there roles on the committee, if they differ from one to one?

Is there any information on the forming or already formed REN DAO?

[martign0]

Whatever the path we take, I think the first step is to get any proposal coordinated properly with active participation of the community. I propose to get rolling up a vote to chose a interim committee. The interim committee will have as “interim objectives”:

• Coordinate and release for voting (in coordination with RenLabs) the alternatives concluded on this RFC46, to build a healthy treasury. The main objective is to guarantee full transparency and enough information in all options, allowing an educated decision by the DNO.

• Review and release for voting the proposal of a project plan prepared by RenLabs (including as a minimum, deliverables, budget and key indicators) to release any funds that would cover the first 6 months of engineer expenses, and any other activities, to fully deploy Ren 2.0 as soon as possible.

• Prepare and release for voting a proposal of how RenDAO will operate, the structure and specific roles and responsibilities (check proposal RFC-000-044: Facilitate discussions of a Governance Framework post-Alameda Collapse - #5 by martign0)

I feel that the only way to get out of this situation is coordinating activities properly, we must have the DAO structured and in control of the next steps, which will be key to shape the future of the protocol.

[DavidPerkins]

Printing tokens to sell on the market to fund development is a double hit. First, dilution. Then, selling.

Withholding a percentage of Darknode revenue to then buy back those tokens is a triple hit.

This should be strongly considered in the context of security.

[striker33]

    My impressions on the RFC-000-046: Transitioning to Ren 2.0

• I think the idea of a foundation is great and also the best
  way for decentralization.

• Inflation is inevitable and the right way to go, we just need to
  be clear if we really need 12.5% or if 10% is enough or if we need 15% that still needs to be clarified.

• I would suggest that we collect all the opinions again here and then make a vote.

• The concern I have is that more and more interoperability protocols are coming up with very interesting solutions. We all don’t know how good they will be, but we don’t know that about Ren either.
  @Susruth can tell you what Ren can do at launch. Think only EVM with bridging is clearly too little. We need to generate a lot of attention. That goes very well with new innovative functions.

• We as a community should show a sign of strength and take the lead of Ren 2.0

[shiny]

Further points-

Not all Ren will be sold immediately, much will be held for future uses. Perhaps, and hopefully much, will be burned before used as token price itself increases with project success, therefor less Ren needed, and alternative forms of funding are arranged. Any form of funding will eventually tax the nodes though, or in some way cause them to lose revenue. Paying ourselves back can be adjusted to lower % easier than paying someone else back. We can even set a delay, 1 year for example, before the tax is activated.
% taken from nodes can be very small, but at least it is a clear path to eventual return to baseline.

Edit: want to add that I am in favor of trying the other methods, to repay investors with future rewards, as long as trying this does not delay development or release significantly. If we can influence other investors in this way that is great, but we now know VC’s only want tokens, according to Max.

[striker33]

@DavidPerkins

Printing tokens to sell on the market to fund development is a double hit. First, dilution. Then, selling.

Withholding a percentage of Darknode revenue to then buy back those tokens is a triple hit.

This should be strongly considered in the context of security.

      In general, I see many advantages from RFC 45.

• But also a very big risk and danger for Ren 2.0 and do we really want that.
  In Ren 2.0 the darknode operators will become very important and if a certain % number goes to the investors, many people will consider running a node. We should look to get as many different darknode operators as possible. This will only work if the return (95-100%) goes to the node operators.

• Unfortunately, we have to consider all points when we are already in a bad situation.
  We also need long term revenue for safe further development of Ren and that can only be done by continuous inflation. Or if it is enough that 5% of the revenue goes to the CEF for the further development of Ren 2.0.

• Especially since we do not have 2000 operators at the moment because some people run 5-30-50 nodes at the same time.
  We should not risk the decentralization.

• Do you see no risk there?

[striker33]

@shiny

Not all Ren will be sold immediately, much will be held for future uses. Perhaps, and hopefully much, will be burned before used as token price itself increases with project success, therefor less Ren needed, and alternative forms of funding are arranged. Any form of funding will eventually tax the nodes though, or in some way cause them to lose revenue. Paying ourselves back can be adjusted to lower % easier than paying someone else back. We can even set a delay, 1 year for example, before the tax is activated.
% taken from nodes can be very small, but at least it is a clear path to eventual return to baseline.

Edit: want to add that I am in favor of trying the other methods, to repay investors with future rewards, as long as trying this does not delay development or release significantly. If we can influence other investors in this way that is great, but we now know VC’s only want tokens, according to Max.

I would agree with that as well. If it doesn’t delay the development and we can hire more developers directly and get a few million from the VCs for the treasury, it would be quite interesting.

But the problem with the incentives to run a node at Ren 2.0 would remain.

[Wake_222]

My suggestion would be:

• If the investors accept David’s proposal that you fund the Ren Labs team with it.

• But for things like incentives for 3rd developers/treasure chamber (to speed up Ren 2.0 launch) we need the inflation.
  After all we would save 5% inflation and would only be at 7.5% which is definitely still bearable.

Especially since the 7.5% inflation would be completely in the hands of the foundation.

[Christoph]

I would like to apologize for my partially harsh questions and answers. It is not an easy time when you are a ren investor. But I realize that inflation is needed and the team needs funding.
I just hope that we can achieve success soon.
But please also just give us more updates and information. @MaxRoszko

[Arviee]

My take on this might seem controversial at first and it is to increase the supply even more, but please bear with me as I explain where I’m coming from.

My line of thinking comes from these 3 postulates:

1. Darknode Operators are ESSENTIAL part of the Ren 2.0 ecosystem and they SHOULD NOT be diluted, penalized and what not.
2. We are going to have burning mechanisms implemented, that are eventually going to offset the effects of inflation.
3. Inflation does not matter in a truly successful project and if a project is not successful, than it also does not matter, inflation or no inflation.

So what I propose is that in addition to what this RFC suggests, we mint say 12.5% more REN (exact numbers are to be discussed, of course) and allocate it to Darknode Operators under special conditions that I think are fair and long term oriented:

• In order to qualify for this incentive, DNOs would need to run their nodes on Ren 2.0 for one year. Meaning there would be a 1 year cliff for the first 12 months of incentives.
• The rest would be vested monthly over 1-3 years under the condition, that they’re still operating nodes.

The benefits of this are twofold:

1. Incentivize node running and guarantee an impressive level of decentralization for Ren 2.0 from the very start.
2. Offset the dilution from core members of the ecosystem.

A lot of intricacies can and should be discussed, like exact numbers, whether new node operators are to be accepted in this incentive program, if yes than how, should there be a different allocation depending on the DN age, option to introduce auto-staking of these incentives (perhaps through Ren Base?) and much more…

But for now, I’m very interested to see if the general line of thinking above makes sense to the community and what they think of it.

Thank you!

[Wake_222]

Hello Arviee thank you for your idea.

• I am very enthusiastic about your proposal and think you have raised some very important points that should definitely be taken into account.

• I think that this way we can also create a lot of additional incentives for Ren 2.0, especially when at the beginning of Ren 2.0 the volume and fees for the dnos will not be that high yet.

• I suggest, since Ren 2.0 is a completely new network also do not take into account the current dnos even if it is a small disadvantage for me and you …is. I must honestly say it is a completely new project so there should all get the same rewards. So we have the great opportunity to become one of the most decentralized projects from the start.

[sotashinokomata]

Totally agree on the goal that we should ensure DNOs are incentivized to stay on and help relaunch the protocol in a fully decentralized way.

I find the long-term vesting idea interesting, but I wonder how the large unlock events would play out from a network safety point of view and how it could negatively impact potential burning mechanism. Worth to think about.

In recent days I came to think that perhaps the simplest way to protect DNOs from dilution is to keep the current 10000 DN limit regardless of new REN supply. And perhaps even start with a lower limit than that.

From a game theory point of view this seems to me it could have plenty advantages as it incentivizes to bond sooner than later, and stay bonded at the risk risk losing your slot otherwise. It also leaves some room for the DAO to adjust token inflation in the future, for gas usage, partnerships and attracting builders (including maybe a program like StarkNet’s where the dApps generating the most gas usage get rewarded) while having no negative impact on any burn mechanism that we might implement later on.

Would be very interested in David’s opinion about keeping the 10k DN limit, or potentially dynamic DN limit, with regards to Renbase.

[Wake_222]

• I don’t think we need to worry about unlocking the tokens.
  Until then, the Ren project should generate enough volume for the operators that many-all will continue to run their nodes.

Keeping the upper limit at 10000 nodes is wrong from my point of view.

• I think currently all people who are a dno operator have exactly so many ren tokens that they can operate one or more nodes accordingly.
• If you leave it at 10000 nodes it will automatically become less dnos. Especially for people who only run one node it can lead to a problem. But those people are actually the most important because theoretically it would be best if everyone would run only one node and that from their own server.
  Then we would be one of the most decentralized projects.

[Spinflight]

This might be a curious take…

Could be this is a good thing. We certainly need legal certainty and the team should do whatever is required to achieve this. We also need to pay the team for their efforts, if that means inflation then so be it.

However I think Ren needs something else even more. Publicity. As Loong as they spell your name right etc. The crypto world seems to see a bridge hack and loss of funds on a depressingly regular basis, hence Ren’s reputation with $13B transacted safely - you’d think this would be of prime concern to the funds and institutions who use bridges a lot. Frankly gaining majors customers might be more important than the details and minutae of the deal itself.

If the team’s running costs are $700k a quarter though why do we need 12.5% inflation for this?

[Amaguq623]

I like alot of the ideas here.

To give everyone some idea on what the DN income track record has been. Looking over the past year and a half, the DNs have generated avg of 0.0094 BTC per epoch per node. Per epoch, lowest value at 0.0072 BTC and highest value at 0.0180 BTC; std dev +/- 0.0025 BTC – A one year lock-up gives you about 0.11 BTC per node (at $20,000 USD BTC that’s $2,200 per year (bear markets suck) – Granted, at $2M USD BTC, that’s an annual income of $220K USD for running just one node – hopium at its finest).

Significant limitations. Obviously, we all feel the income levels per epoch should have been much higher under Alameda, if they were actually working on growing these protocols (instead of the massive amount of fraud, spending millions on parties, extravagant real estate, jet setting travels, etc etc).

Ren is essentially seen as a red-headed step child in the marketplace for defi protocols, even though it’s one of the best concepts for blockchain liquidity along with security, and being affordable for non-institutional investors to take part in. We will still have to deal with an anemic income flow to the DNs. The cost of bonding the node, running the node (which really isn’t that much), gas fees, not to mention opportunity cost of watching other protocols just crush it on their ability to generate market cap. Ren should have been a major player in cross chain liquidity, but the focus has all been on developing the infrastructure – and Ren still isn’t decentralized.

[MaxRoszko]

Some thoughts here in response to questions that have been brought up:

Inflation details

The amounts suggested in this RFC are only suggestions, estimates based on what we think would be sufficient to successfully deploy Ren 2.0 and grow its ecosystem, with room for margin. If the community thinks there are better concrete options, those suggestions should be raised and discussed, and could be part of a vote itself with multiple inflation options. Important to note that lowering the proposed inflation would put the Ren Foundation at a financial disadvantage given that funds are required for continuing development and incentivizing the ecosystem to grow. The funds would be in control of the DAO through the Foundation, and are meant to last a long time, with no immediate need to spend a big portion of it aside from the initial grant to fund Ren 2.0 deployment.

If dilution is a big concern for darknode operators, one option is that darknodes get a portion of the inflation to remove the effects of dilution, although this potentially means that the inflation number will be higher. Another option is to keep darknode bonds for current operators at 100,000 REN, while future darknodes would need to bond a slightly higher amount to keep the 10,000 darknode limit, making current darknodes premium ones.

Development timeline

The development timeline is highly dependent on the funding approach that is chosen by the community. If a non-inflation approach is chosen, it’s not known yet when Ren 2.0 could be live, likely delaying it by months compared to the inflation approach. If the RenBridge spinoff approach is taken, it might further delay deployment to account for additional features needing to be supported.

If the inflation approach is taken, the development team would be able to continue with the roadmap laid out in the Ren 2.0 announcement, with a slight delay due to the current situation. The “Merge” between Ren 1.0 and 2.0 would also no longer be necessary given that the Ren 1.0 network will already have been sunsetted.

Ren Foundation practicalities

Regardless of which funding approach is taken, the process for getting the Ren Foundation started should begin as soon as possible, as it is critical for the Ren ecosystem to have a real world entity that is able to in a fully regulatory compliant and transparent way provide funding to protocol and ecosystem development, via grants.

But if a non-inflation approach is taken, it is important to consider how the Ren Foundation will be funded, since without funds the DAO is not empowered to govern and affect Ren ecosystem development.