Supply Curve Nimiq 2.0 AMA

2 months ago on March 27, 2020

Today March 23th members of Nimiq Team participated in an AMA about the supply curve change for Nimiq 2.0. This blog post collects all the questions in single source of information for future reference.

Is the supply curve change set in stone or is under consideration?

It is still under consideration. We want to gather opinions and feedback from the community before committing to such an important change.

Does the community have a say in the decision?

Yes, we consider following a plan related to the one shared by @Big_Mac (#1. change curve yes/no #2. select from a couple of curve options as well as option for community to come up with curve #3. depending on data from #2 final vote on curve)

Will a voting (or round of votes) be held to decide on the curve change & what kind of curve?

Yes, we will propose a set of curves options (we're also considering feedback we got so far).

If voting will be held, what would be the window to ensure the majority has had time to give their vote?

We plan 10 days per round of votes. That way we keep the process moving but give it enough time for people to make up their mind. Also we would like top work towards releasing the much awaited staking calculator which becomes meaningful only after a curve decision has been made.

Has team nimiq decided how a voting should be held to be fair and minimize manipulation?

To make it fair, and give the decision to the community, we decided to not allow the participation of Nimiq Foundation and Nimiq's ImpactX Charity in the voting. The plan is for coinholders to vote with their balance (1 NIM = 1 vote) based on a snapshot of the blockchain at the beginning of the voting period.

What is being done to better market Nimiq and encourage adoption?

You can have a look at our "Strategy 2020" blog post (https://www.nimiq.com/blog/nimiq-2020/) or watch this interview about what [our] business development plans are for 2020 (https://www.youtube.com/watch?v=VApbXorN40w&t=7s) We are also working on some other ideas and potential partnerhips which we will publish as they get to a more concrete state! Stay tuned! 🤓

Should voting be on-chain (NIM or ETH?), or off-chain?

We think it should be on-chain (for keeping a public record) and in NIM (because that's what Nimiq stakeholders who are voting are holding).

So far voting with balance and voting with account age have been proposed – with both having pros and cons. There's also an option to have balance x age, which might be more fair to early OG holders vs newcomers, but is harder to balance?

Bringing age into play is tricky, especially as funds may have been moved which is a valid and normal thing to do. We have reviewed various angles and the safest, most straightforward is majority voting via balance.

How many NIM should be staked to earn reward optimally?

The more the merrier 😉 We are considering a low min. staking amount to keep the barrier of entry low. That being said, you are going to be able to stake as much NIM as you want by using a staking pool or by doing solo staking. Solo staking might be more efficient but a staking pool might be optimal for non-techies who are not familiar with maintaining a server infrastructure and keeping it online at all times. Something cool about Nimiq staking pools is that we plan them to be non-custodial, so the pool only has control of the rewards and not of your funds.

Also, we plan to make it super easy to stake, directly from your wallet, so everybody will be able to participate!

Is curve change planned together with the transition to albatross?

Yes, it is planned to come into effect with the change to Albatross. One reason for this is changing the supply curve requires a hard fork (as does the change to Albatross). Conducting a hard fork is a non-trivial task that requires a lot of preparation (contacting exchanges etc.). Thus, minimizing the number of hard forks is a sensible approach. Moreover, it simplifies the analysis of the new supply curve to the PoS setting and avoids any effects on PoW miners.

If the curve change is planned before 2.0 (which might be a good idea in terms of not changing too much of protocol at once) – have you considered the impact on the network security? Majority is looking forward to reduce the inflation, thous flatten the curve. This will lead to less mining rewards and potentially miners exiting.

As stated above, we won't change the curve before 2.0, so this doesn't apply.

Have you considered a dynamic reward mechanism (supply) where majority stakers vote on the reward? (I'm against)

Yes, we did considered it. But in the end we thought that it is unnecessarily complex and outweighed by the advantages of having a predictable supply curve. For stakers to be able to plan their operations and for investors to be able to analyze the possible return of the coin, the knowledge of emission ("inflation") not being an uncertainty is a big advantage.

And there is always the (drastic) option of doing a hard fork. As this blockchain-intrinsic measure is always an option, we will always keep open channels to discuss and decide together.

How do you think is the best way to handle voting so it is as legitimate as possible with little opportunities to manipulate the results?

The idea would be to have a specific block height where the voting ends and the balance of each voter is counted, that way moving funds couldn't be used to manipulate the results.

Hopefully this addresses your concerns, but if not, let me know and I can go more in-depth about it.

If a part of the community will be strictly against a change, does the community have an option to veto the change for an additional round of re-evaluation?

The reason we have the first round of voting (in favor or against changing the supply curve) is to accommodate the case where the community feels that they are strictly against the possible options that would be presented in the second round of voting.

Did the valuation expert provide a 'preferred' supply curve or did they only provide a range of curves to decide from?

In the process we realized that setting parameters is not something with a particular "optimum". Too many unknowns play into the bigger picture and over-parametrization needs to be weighed against reducing complexity (see the blog that discusses this in some length). To some good degree the settings become arbitrary and depend on individual preferences, given someones expectations for the future. But we were able to at least close in on suggested "bounds" from which we can work forward. Identifying where the stakeholders majority sentiment is, supports the voting-from-choices process, so I believe we are on the right track with this overall conversation and making sure voting takes place.

What is Team Nimiq's view on removing the supply cap? Should it be done now or left as a decision to be made in the future?

Our plan is to keep the supply cap in place and leave it for a future decision. Given the ~100 years ahead, the decision should be deferred to the future when more relevant information is available.

Not related to supply curve, but nevertheless: currently we have 1-minute block target and we have block rewards. In albatross the stakers produce blocks as fast as they can – how are rewards planned to be distributed/targeted? One per epoch? Dynamically by number of blocks produced during an epoch?

In PoW the rewards are constants and the difficulty is adjusted using timestamps. In Albatross, the rewards will be adjusted for each epoch based on timestamps. So, different epochs might have different rewards, but rewards effectively remain time-unit based.

When do you plan to hold the voting?

As stated in the supply curve blog post – https://www.nimiq.com/blog/nimiq-20-supply-curve-considerations/, we "want to hear and discuss all your opinions throughout March and, based on that, share more information regarding the next steps". We will stick to this plan and collect all feedback until end of March and then come up with a timeline-proposal for the voting within the next couple of weeks. After that, we want to kick-off the actual voting process as soon as possible (getting and auditing the voting tool will enter that equation).

How does the team expect the reduced emission rate to affect liquidity?

Since we are also changing to PoS at the same time, we don't expect the emission rate to affect the liquidity. It could affect liquidity in PoW (because miners would have less coins to sell) but in PoS there are no miners that need to constantly sell coins.

The stakers have a greater incentive to hold their coins which could decrease liquidity, but if that happens we can also expect it to affect the value of NIM (less selling supply -> more scarcity -> upwards trend at equal demand).

If it is possible to share – who were the financial experts, what organization?

As per agreement, we can not share full details. We looked at consulting companies (including Prysm Group) and realized they are charging an extravagant amount of money as their focus is typically ICO advising for new (non-payment) token issuance and they are mostly interested in getting a generous piece of the fund raising there. After continuous search we found an economic modeling advisor (former Morgan Stanley Smith Barney, now a director at Gemini Finance) who works in asset valuation and advised us in creating the assumptions & restrictions, reducing complexity and identifying reasonable boundaries. We also were advised about the arbitrary nature of this matter and the impossibility of there being "one optimal or correct" choice.

Voting on a change in the supply curve should be through HTLCs (aka vesting contracts) where the longer the amount of time the funds have been locked the more weight an account's vote should have?

We discussed giving more voting power to people that lock their coins for longer periods of time, but ultimately decided against it. The main reason is that if people lock up their funds for voting, then they will not be able to use their funds for staking, which we feel is a more important use of the coins for the community as a whole.

Has the team considered the loss of trust in the currency that may occur by changing the emission curve? Given the challenges coming to an agreement among the community, and potentially between the community and the team on the supply curve issue, are there any plans to create a governance model for these kinds of decisions in the future?

The reason we are bringing this decision to the community is exactly to avoid a loss of trust. We understand that if we took this decision ourselves the community would lose trust in the currency. But if it is the community itself to decide what we should do, then it doesn't make sense for people to loss trust in the currency.

We feel that having a formal governance method would hurt the project by being too inflexible and possibly contribute to centralization of power. By keeping the governance informal and decentralized we can better adapt to changes and become more robust overall.

Remember that Bitcoin and Ethereum also don't have a formal governance method and still manage to progress.

Originally posted at: https://forum.nimiq.community/t/nimiq-supply-curve-ama/629


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