Yes. I think this a good idea. It should benefit all participants in the network and prevent “bad” delegators and indexers from abusing it. Just like the deposit tax on the way in.
Allowing delegators to withdraw without the thawing period just to level the playing field is not the right approach in my opinion.
For the purpose of moving on.
Do you support @graphgod1 s proposal for a token burn to be instituted?
With respect, you operate under a certain set of arbitrary assumptions for economic behavior (that a certain business decision is unconditionally suboptimal, no real incentive to rush the market, etc.) that are rather interesting.
In almost complete lockstep, with perhaps p2p’s prescient criticism as an exception, indexers have decided to disturb the delicate equilibrium of power between themselves and delegators. This is mostly under the pretense of having the ability to cover operating costs or react appropriately to certain volatile aspects of the indexer role, but GIP-0002 in effect is “we must push through an inequitable proposal, and later we promise to return the favor”. The precedent itself is disturbing, and it isn’t the “little guy” indexers that are most vocal in favor.
The responses almost uniformly follow in a similar vein as yours, asserting that bad things won’t happen because it doesn’t make sense for people to myopically pursue short-term gain – have you examined in any way how human beings play around with money, especially when they have a known advantage in market timing relative to others? Is it possible with enough advantages that short-term gain can easily be consolidated into long term gain? There is this naivete that delegators are supposed to just accept as a matter of course, but at the end of the day we decide to delegate or not and who to delegate to. Delegation is one thing, but no one is interested in being an indexer’s piggy bank.
Where this is going? Out of this will be an organic emergent trust-based perception of indexers independent of the primary delegatory function, i.e. assessing indexer viability based on more technical performance (entirely contrary to how BR had explained the desired functioning of the dynamic). Trust will be based on who delegators perceive might manipulate the market (while their own funds are locked away for some % APY that is almost laughable in crypto relative to even amateurish swing trading). Voting and communication will be tracked and analyzed vis-a-vis how well an indexer might advocate on behalf of delegators in the future, examining behavior during this nascent phase in GRT governance getting a head start on self-benefitting proposals (obviously most delegators and holders are still asleep at the wheel – however, delegators that are involved are watching like hawks how indexers vote and talk in these forums).
A token burn for indexer rewards as proposed here is a suboptimal solution to an unforced error. Lower the undelegation and unstaking of reward cooldowns to something more reasonable so that delegators can participate more reactively (while still keeping the .5% token burn on delegation so it isn’t exploitative) and indexers can also react to volatility in operating costs.
Either we all play by the same rules, or capital will leave for greener pastures. You have to consider not the likelihood of malicious actors, but rather how impactful they will be. A handful working together could easily manipulate price to the detriment of other parties, especially when you know how many GRT are locked away and therefore totally unable to respond to the manipulation. No one should have to trust anyone else unconditionally in order for this to work, and “it won’t happen, don’t worry” is the biggest red flag imaginable.
I support it as a delegator. Make it happen ! It’s a good way keep things fair is to make all parties involved are accountable.
I don’t see how a 0.5%/1% token burn would alleviate the issue that @graphgod1 describes.
Math alone seems to indicate that the daily amount of rewards won’t impact the market at all.
Daily rewards full amount is around 800k GRT, with only a fraction of that amount going to indexers, the vast majority going to delegators, and 24h market volume has been orders of magnitude higher than that amount. I’m not a trading expert at all, nor a knowledgeable financial advisor, so feel free to correct me here.
That’s completely false, and I’m starting to get irritated about having to constantly correct this, there are multiple indexers that have voiced concerns about having immediate reward withdrawals with GIP-0002 (even before it was known as GIP-0002), myself included.
You can check for yourself, I think it’s evident if you read all the threads about the matter here on the forums.
Staking is mainly for people that want to have exposure to an asset, with very low risk, while getting the added benefit of getting some extra APY from it.
By all means if you want higher raw APYs there are plenty of other options out there.
Indexers, delegators and holders all have the same voting power.
There is currently a BIG issue with indexers that needs to be resolved sooner rather than later, and the issue is that indexers have no way of extracting part of their rewards without screwing themselves and their delegators by shutting down for 28 days.
I would’ve preferred a different approach to GIP-0002, but it’s an already tested and audited (from what I recall) solution, which can be pushed sooner rather than later.
We are not playing by the same rules.
Indexers have a lot more risks, they can be slashed (lose part of their stake, or even 100% of their stake), they have to pay infrastructure costs (currently out of their pockets, with no way of accessing the generated rewards, not even with GIP, since that would only account for future rewards), they also have to pay operation expenses to keep the indexer working (protocol interaction gas fees, at least once every 28 days, usually more than once every 28 days currently), they have to have personnel maintaining the infrastructure (ETH node, indexer infra).
And it’s only going to be worse when more subgraphs come into play, and larger infrastructures become a requirement.
Delegators have a 0.5% tax on delegation, and the same 28 day thawing period for undelegation as indexers have if they want to unstake.
You know that indexers also have their stake locked, and even worse, they have most of their stake locked behind a 2 year lock contract, right?
Also, you realize that the daily amounts of GRT that could potentially start moving after GIP-0002 aren’t significant enough to move the market that much? (even if 100% of indexers were malicious and wanted to manipulate the market)
This is the part of all this that disturbs me the most. We’re only a few months into mainnet and already we are seeing the small group of indexers tweak things in their favor while ignoring legitimate critiques and concerns from the rest of the community, including other indexers. Why can’t we wait for the change so delegators get the same ability to send rewards to a separate address? Is the situation really that dire that indexers can’t survive another month or two? Why can’t we apply the 28 day thawing period to rewards withdrawal? Is the situation really that dire that indexers can’t survive another month or two?
This whole attitude “indexers need this right away and oh yeah delegators we’ll get to you at some point we totally swear” leaves a really bad taste in my mouth. Sure, indexers have more risks, but they are already getting significantly higher rewards as a result. I agree they should be able to access some of those rewards to cover costs but rushing through major changes like this is not healthy.
I’m not sure what the split is offhand, but let’s say it’s an 80/20 split, 20% going to delegators. There are currently 1.2bn tokens in circulation. This means that over the course of the year, the circulating coin supply is potentially inflated by 58,400,000 (4.8%), just from indexer rewards, as they auto sell everything to cover expenses in a worst case scenario.
A 0.5%/1% token burn as indexers (and delegators too if that’s easier or more fair for everyone) withdraw rewards doesn’t solve the worst case scenario, but it seems like an easily passable line item on a big windfall for indexers that will at least help to offset the supply pump.
Also don’t think we should drop the 28 day unthaw period, but I’ll stay focused on the token burn.
Partially true, Indexers have a higher reward potential, but not all indexers are experiencing significantly higher rewards as a result.
This is all calculated with publicly available information btw, and the spreadsheet is publicly available too.
By split you mean how much of the ~800k daily issuance goes to indexers?
It’s currently 33%/66% 66% going to delegators, and it will probably keep changing in favour of delegators as more and more indexers compete by lowering their cuts. (Actually the real daily value right now is probably close to 20/80 in favour of delegators, since the image below represents the total since mainnet launch, and the first month protocol cuts were a lot higher than they are right now, on average)
Having said what I said earlier, the figure would be a lot smaller, although the following comment still stands in any scenario. There’s no real reason to sell 100% of your rewards as you generate them, as having them compound will yield a higher long term benefit.
This could however be taken as a worst case scenario. Even if we assume the 4.8% inflation on the circulating supply from a whole year of rewards automatically being dumped on the market (which also assumes that indexers get 80% of the rewards generated, which isn’t really the case, so the 4.8% figure would actually be significantly smaller), that’s not even that much, considering that there will also be some curator program unlocks, early investor unlocks, and some other forms of locked tokens being now unlocked and available for trading.
We can take Solana (and probably many others) as an example of how more circulating supply doesn’t mean price dump scenarios.
(there was a roadmap of all the unlocks, I can’t seem to find them right now, maybe someone has them handy and can upload it after my comment).
Also, as you said, 1% burn would only make the 4.8% figure go down to ~4.76%, so it really wouldn’t matter anyways I guess…
@graphgod1 we are also forgetting (I say we because I also totally forgot) that end users will buy GRT to be able to query the network.
Right now there’s no real querying going on, but that’s not gonna be always the case. (Remember that this is just the bootstrapping period of the network).
So having a ~4% yearly inflation on circulating supply (on a real ultra worst case scenario that is totally not the one we are right now), will also experience more buying pressure by end users actually using the network.
There is an incentive, at least for US-based indexers, as they are taxed on the value of the token as they receive it, so that adds some level of risk to not selling right away.
Even more of a reason to limit any further supply pumps. It’s not simply this 4% bump, it’s this on top of everything else.
The point of the token burn would be to incentive folks into keeping their coins delegated longer. For example, they may sell only every 2-3 months or less than they would have otherwise.
The token itself is inflationary by design (although there are some burning events on curation market and delegation taxes, as well as some others that I can’t recall under which circumstances are triggered), so circulating supply will most likely go up over time. (current inflation is 3% yearly)
Having locked stacks being unlocked doesn’t mean that everyone will go dump as soon as it’s unlocked, that’s why I mentioned Solana as an example.
Indexing and delegating is a business in an on itself, with a real use case, with real (already existing) users, assuming that every coin that gets unlocked will go directly to the open market and impact the price is a pessimistic view on the protocol tbh (it’s not an invalid view, of course anything could happen, it’s just not that likely).
I’m getting lost with all the messages, delegated longer (as in a burn applied to delegators?) or rather to disincentivize indexers to withdraw rewards often?
In the worst case scenario the supply pump would be negligible reduced by a burn, and if the indexers actually wanted to dump, a 1% burn wouldn’t stop that.
What I’m trying to say is, the main (hypothetical) issue you described wouldn’t be solved by applying a tax on withdrawals, and also isn’t probably an issue to begin with.
The main issue with the proposal (GIP-0002 I mean) is that delegators feel left out, because it impacts indexers. That’s an issue I totally agree with.
It’s somewhat controversial (albeit it does have some reasons as to why it’s made this way, which can be totally up to discussion, and have been for the past month and a half) because it gives indexers a choice that delegators don’t currently have.
Let’s keep the conversation on topic, in this case about the proposal by @graphgod1.
Thanks!
I’m not sure which way this will get implemented, if at all. I’d like to keep it simple so If it’s easier to get the token burn applied to both indexers and delegators, then the answer is both.
I’m not assuming that the indexers are working in cahoots to send the token to zero, I’m simply saying putting a tax on the way out may incentivize indexers to maybe sell a little less, or sell only every few months rather than auto dump everything. /
You are thinking of it in terms of math. One number cancelling out another. I am talking about it working on folks behavior. They may sell less and/or less often with a tax on the way out. Although it does help a bit to offset the total numbers in a worst case scenario.
Ultimately whether we go with my proposal or not, something should be done to offset this supply pump. I think we are all open for any suggestions you may have.
But even if the GIP isn’t approved and doesn’t get implemented, eventually the rewards are going to be used to pay for infrastructure anyways, since indexers using their rewards to pay for infrastructure and profit is kinda the point of the business (indexers will eventually sell, it’s part of the indexer business, much like miners sell ETH/BTC to pay for their associated costs).
So the “supply pump” is part of the nature of the tokenomics, Indexers generate GRT, sell GRT to pay for stuff they need to keep the indexing working. There should also be an opposing force that would buy those GRTs to pay for queries, since GRT is an utility token (much like ETH) that needs to be used to pay for the usage of the network, and the machine goes on and on.
Burning tokens to keep the protocol in check (from an inflationary perspective) is a valid concern, although this doesn’t have a lot to do with GIP-0002. That’s what I’m saying.
Regarding GIP-0002 tensions, I’ve always said that it’s better if the GIP-0002 proposal included a 28 day thawing period, to avoid generating tensions with delegators as they feel left out. My stance on that hasn’t change at all.
I agree with graphgod1 here. We support GIP-0002 and indexers needs but delegator’s behavior influenced by this modification and the price appreciation of the token needs to be taken into consideration for the long term benefit of all participants. His suggestions seems to me like a good start for a discussion about what could be done to bring things back into equilibrium.
I totally understand that these tokens are bought and/or earned by indexers, and they will sell them eventually. That’s understandable, and as you said a part of their business and the tokenomics. Of course there’s folks to buy the coins being sold by indexers, and that’s great.
I’m simply saying that incentives should exist to keep the tokens locked up. A token burn seems like a decent starting point…but 110% open to suggestions.
…and I agree with you on the thawing period, too.
Talk is cheap. You choose with your vote, and the vote is in favor of something that multiple indexers evidently found concerning enough to talk about before it even became a formal proposal. It isn’t sensible to get irritated, though I am sympathetic – people are just looking at the vote and seeing a subset of indexer responses as equivocation masquerading as principled dissent. The core issue, the inequity of the proposal and its potential market implications and centralizing effects, is largely ignored; if there is any broader message to glean from the pedantic dissection of the many responses posted here and other threads, it’s that descending into the hypothetical minutiae is the only way “in favor” concludes he or she may formulate a coherent response. Perhaps there is the secondary objective to tire those in dissent, as we often see as a social dynamic in forums and real life. The reason for this is clear – GIP-0002 is misguided, it was a mistake to rush it, and treating its formulation and necessity as fait-accompli just salts the wound.
No one has time to read all the messages on the forums (they’ll get a highlight reel, which is good enough), nor is that necessary; forum posters and indexers aren’t the intellectual vanguard of this enterprise and GIP-0002 is quite easy to see through. Regarding the proposal here, doing a token burn to offset a misguided policy changes the risk/reward component of the calculation – the calculation is still there and there will be many times where reward easily beats the token burn.
I do hope when you see all of these people talking, speaking their minds, that you find it encouraging. I certainly do. Trying to play the classic forum game of “dispelling ambient ignorance”, classifying ignorance as a different assessment, merely ends in the propagation of a different kind of ignorance. It will be interesting to see how the subsequent GIPs are ushered in, and to what degree they continue to foster a sort of power centralization that is at odds with one of the principal objectives of this project. It’s a great project with brilliant ideas, so let’s hope that in governance this initial bit of turbulence can be quickly rectified.
Stake compounding is the major incentive right now, if you always take out 100% of your rewards, you will get less and less rewards overtime, since your stake would start to become smaller compared to that of other indexers that don’t take 100% of the rewards all the time.
Ideally you would want to withdraw as less as possible to allow for maximal compounding of the rest of your rewards.
Big indexers that don’t rely on their rewards to keep the machine going might not even need to withdraw rewards at all (they’ll probably do so once in a while, but most of the time they probably won’t, and I’m talking form the perspective of the indexer I’m running, which some people consider to be one of the big ones)
Indexers shared a concern and pushed a change forward. As a delegator, I completely understand that and support what they have done. Our ecosystem must have dynamic and elastic properties that allows it to adapt to new parameters without the Us vs. Them narrative.
That is why I created an account today and I am currently voicing my opinion as a delegator on this proposal.
We all want the success of the network and in my opinion all concerns and worries from all sides must be heard and dealt with collectively in a mature manner.
What percentage of your monthly indexer rewards are you planning on selling if/when GIP-0002 is implemented?
