The seventh proposal discusses the dynamic inflation rate (7% - 20%), the current state of commissions for the LikeCoin chain & CosmosHub, the specifics of proposal 7, and the next companion proposal, which far exceeds the current rate. The choice of a community communication channel was also discussed.
The Republic is moving to the next step.
A few days ago, I sponsored Proposal 6 to raise the inflation rate to 7%, but for some reason I announced the abortion of Proposal 6.
On Monday afternoon (201207) at the LikeCoin chain community meeting, the team and the validators discussed Prop 6 in detail. After the inflation design of the cosmos hub, there was a preliminary consensus on the design of the inflation rate in the cosmos hub and whether it is applicable to the LikeCoin chain.
Proposal 7 - Change the existing inflation rate from 2% to a dynamic range of 7% - 20%.
This means that now from a minimum of 7% to a maximum of 20% of the total number of LikeCoin will be generated per year.
Impact of Dynamic Inflation
As of Monday's community meeting, the total number of LikeCoin is 1,010,284,824 (about 1 billion), 7% is 70,719,937.68 (about 70 million) and 20% is 202,056,964.8 (about 200 million).
But as @Terence said in his article about the inflationary design of the cosmos hub.
Inflation on the Cosmos Hub has a dynamic mechanism, the more people delegate, the lower the inflation and vice versa. So what you see as inflation is by no means the real effective inflation, as you can see from the following simplified example. When Cosmos Hub's total commission rate is 50%, the theoretical inflation rate is approximately 13.5%. But the incentive to generate inflation only goes to people with tied interests, so if you delegate to atom, your Real Inflation Rate of Return ("RI") is actually 27% (for people who don't delegate, their RI is zero). If the total delegate rate drops to 40%, the theoretical inflation rate rises to roughly 17.4%, and for those who delegate to atom, the RI rises to 17.4%/0.4 = 43.5%. If the total delegate rate rises to 67%, the theoretical inflation rate falls to 7% and the delegate RI = 7%/0.67 = 10.4%. If the total commission rate rises to 75%, the theoretical inflation rate is still 7% (because Cosmos Hub is set up with a 7% cap and 20% ceiling), and the principal RI = 7%/0.75 = 9.3%. If the total delegate rate drops to 30% and the theoretical inflation rate is capped at 20%, the delegate RI = 20%/0.3 = 66.7%. Note that the above is a simplified version and that RI is also affected by other factors, e.g., RI does not change immediately after a change in the total delegate rate, but is realized in stages; e.g., RI will be higher or lower if the block time of the network is faster or slower than the original assumption, i.e., if block generation is faster or slower than the original assumption.
This is true for LikeCoin. Let's do the math, the current total of LikeCoin mandates is 312927492 (about 300 million), which is 30.97% of the total.
Let's say we set 67% as the ideal commission rate, as commented in @leafwind's reconstruction of LikeCoin's development data. So when the delegate rate reaches 67%, inflation is reduced to 7%.
Theoretically, for every 5.1538% increase in the commission rate, inflation decreases by 1% until it reaches the minimum threshold of 7%.
So the current inflation of 30.97% would theoretically be around 12% if Proposition 7 were to go into effect. But the RI, which is the real inflation rate of return above, would be 12% / 0.3087 = 38.8%.
In the case of commissions above 67%, inflation is not adjusted downward, but remains at 7%, but as real commissions increase, so real returns decrease according to the above equation.
LikeCoin current commission status
The actual situation is as shown in the figure, there are 158598201 LikeCoin that have not yet migrated from erc-token (about 158 million), and there are about 170 million LikeCoin in the development pool. The total number of delegates already delegated will reach an unprecedented 640 million.
This will have three main effects
The security of the LikeCoin chain will be greatly improved.
More users for migration
The dau and mau of likeland may increase significantly (the number of appreciative citizens may also rise).
In practice, however, there are several problems that need to be faced in order to produce the above effect
The first is the use of the development pool, which is designed as a decadal creative fund to help media and creators, and the team cannot decide how to use it. The second issue is the delegated commission for certifiers.
The second is the issue of delegate commissions. The current delegate commissions of between 40% - 60% allow delegates to adjust their commissions according to their own circumstances, but if this is followed by significant fluctuations in the inflation rate of the entire platform, the commissions will have to be adjusted as well. How much is the commission adjusted to? Still waiting for community consensus.
These are the possible effects of the adoption of Proposal 7, and if adopted, the possible supporting proposals such as Proposal 8 and even 9, not only for the team and the validators, but also for every community participant, every stakeholder, and every citizen who appreciates the Republic.
In addition, the community meeting also addressed the issue of communication and collaboration among validators (active members of the community). Although the community is not a company, it is still an organization, and efficient collaboration will help further the project.
Because Proposal 7 and its companion proposal will have a significant impact on the community, this paper will then enter a period of three weeks from the date of publication to solicit input not only from the validators, but also from stakeholders in general. So no matter you agree or disagree, your opinion is step by step to help the community, I hope you can have a different voice.