It is possible to summarize the proposal as two main differences with the current model.
(a) Uncouple voting rights from resource rental rights, and give a portion of inflation rewards to voters.
(b) Remove block rewards.
We agree with the arguments given by Block.one about point (b). We believe that the reward distribution after eliminating block rewards will be more harmonious and will avoid the painful struggle for position number 21. We also expect that under such modification, top standby producers will have to produce occasionally so they will need to have a high quality node.
Regarding point (a), we believe that the proposed model is valid. Our main concern here is to keep a low inflation rate so that the following types of token holders are not strongly penalized:
- Passive token holders.
- Users that hold tokens and do transfers.
- Active users that invest their EOS on defi.
Users of the type (1) and (2) are desirable and should be welcome, otherwise EOS might face the risk of isolation. On the opposite side of the spectrum we have the very active users of type (3), who also provide a lot of value to the ecosystem by offering decentralized alternatives and very often allowing better deals than centralized exchanges, including operations involving other blockchain’s tokens. Therefore they incentivize genuine network activity. Next we have to ask ourselves what kind of value do voters provide? Some of them will add a lot through their dedicated choice. However a great choice for one person might be bad to others for subjective reasons with no underlying truth to it. Some other voters might simply vote to obtain inflation rewards plus eventual rebates (which we consider legitimate). The protocol simply cannot distinguish between good and bad votes, so our preference is to choose a low voter reward rate in order to favor the other previously described types of token holders. If the EOS community were to publicize a staking programme to attract profit-seeking users, we would recommend to focus on the many defi possibilities and even REX staking while we keep working to expand EOS utilization.
We will now analyze the BPs reward rate. This can be measured and set in terms of annual inflation. The report by Prysm Group suggests a minimum of 1.2%. This number is proposed after considering the current rate of 1%, the cost faced by BPs, which is reported as higher for producing BPs and the forthcoming removal of block rewards. We believe that the increase from 1% to 1.2% might not be sufficiently justified. We think that this economy can find a good equilibrium point without raising the BP share of inflation. Therefore, we recommend staying at 1%. To claim this we have considered that even if 1% or 1.2% seem to be a low rate, this amount goes entirely to a small number of entities. This is an important difference between EOS and other blockchain ecosystems where inflation rewards are distributed among a very large number of entities. In those cases, even if the distribution follows a Pareto pattern, they are rewarded in proportion to investment (whether as stake or work) and this has proven to be economically virtuous so far. Thus, the difference between EOS and those other systems must be acknowledged, and BP inflation rate should be preventively kept as low as possible in our opinion.