Governance Deep-Dive: Proposal #16

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Persistence governance is seeing growing interest from the ecosystem stakeholders, and we are witnessing collaborative efforts to bring improvements on all frontiers. 

On January 24th, Governance Proposal #16  was posted on the Persistence Chain, proposing parameter changes to improve XPRT inflation distribution among the ecosystem stakeholders. The proposal suggests the following changes to the chain’s parameters:

  1. Increasing the inflation rate with the change of the “mint” subspace “InflationRateChange” key value to “1”.
  2. Setting the “baseproposerreward” key value to “0” in the “distribution” subspace, reducing the base reward for proposers.
  3. Setting the “bonusproposerreward” key value to “0” in the “distribution” subspace, reducing the bonus reward for proposers.
  4. Increasing the community tax with the change of the “communitytax” key value to “0.1” in the “distribution” subspace.

These changes aim to distribute the XPRT inflation more equitably among the ecosystem stakeholders, thereby advancing the overall health and sustainability of the Persistence Chain. The proposal is being widely discussed among the stakeholders in the community as it is expected to bring positive changes in the inflation distribution.

Impact on the Core-1 chain and XPRT

The proposed changes aim to address the concerns surrounding the inflation rate and its distribution within the Persistence ecosystem. The first change pertains to the mint subspace, where the InflationRateChange key is set to 1. This is a significant change as it affects the rate at which the inflation can change when the staking ratio deviates from the target staking ratio (making it a lot more reactive), thereby impacting the rate at which new XPRT tokens are minted.

Moving on to the distribution subspace, the baseproposerreward, and bonusproposerreward keys are set to 0. This change effectively eliminates the rewards for proposing new blocks and incentivizes the community to focus on other aspects of governance, such as community involvement, proposal management, and decision-making.

Let’s understand with an example:

If the XPRT distribution per block would be 1 (it’s currently higher, but just as an example, using 1 to simplify), now 0.0367-0.05 XPRT goes to the block proposer and their delegators (depending on how many validators commit to that block proposal). The rest goes to community tax (2%), and the remainder is distributed to all validators and their delegators. 

Once the parameters are changed, the distribution to the block proposer will be 0, hence this 0.0367-0.05 XPRT gets distributed proportionally to all validators and their delegators instead.

Finally, the communitytax key is set to 0.1. This tax is meant to fund community-driven initiatives and encourage community involvement in the governance process. By setting this value, the community is effectively given more resources to impact the Persistence ecosystem positively.

In the future, the Community Pool can fund and support public goods (such as CosmWasm, on-chain monitoring, and analytics tools), community events, and educational initiatives.

Other Concerns and Suggestions

  1. Community Pool Spend for Proposal #2 (530,000 XPRT) and Proposal #13 (450,000 XPRT)

The proposal shared the concern about using the community pool by the core team to fund incentives when it should have been through ecosystem funds. 

To the concerns, Abhitej Singh from the Persistence Core team responded:

  • 100% of the allocated XPRT for Proposal #2 was used to incentivize XPRT/UST pool LPs. Hence, allocated XPRT directly flowed back to the community.
  • Proposal #13, submitted by the Dexter team (a collaboration between AstroTech Labs and Yeti Labs, working closely with Persistence Labs), also committed the majority of allocated XPRT as LP incentives.
  • While there might be an overlap between the objectives of the community pool and the ‘ecosystem development & growth’ allocation, both proposals were put on-chain and voted on by the community.

Regardless, the more important takeaway is that we need to rework the tokenomics and more clearly define the purpose of each allocation.

2. Contributions to the broader Cosmos tech stack and ecosystem

The proposal mentioned that the XPRT community pool should be utilized to fund the public goods in the Cosmos ecosystem, and the proposer asked for the Persistence team to contribute more to the Cosmos community.

To the concerns, Abhitej responded:

  • Find contributions of the Persistence Core-1 team to the Cosmos tech stack and the ecosystem here 3.
  • Additionally, all Persistence Github repos are public and can be leveraged by the existing or new teams building within the Cosmos ecosystem. An ongoing open-source contribution is regarding the automated upgrades of the graph firehose nodes, which should enable all Cosmos-based chains running the graph indexers to do the same.

3. Manually fund the community pool with 1M XPRT or drop it amongst long-term holders and supporters

The proposal highlighted that the long-term supporters and stakers of XPRT should be rewarded with an airdrop from the community pool.

Most of the community provided feedback stating this suggestion needs to be concretely supported with a framework or action plan. Just airdropping XPRT to the stakers doesn’t assure long-term benefit for the community; instead, we should work on better models to incentivize the Persistence ecosystem stakeholders.

Further Action Points (as per the forum discussion)

  • Action Item 1 [Ongoing]: The core team is working on the XPRT 2.0 proposition and will share revised tokenomics with the community for feedback before the upcoming inflation halving (tentatively early August 3rd).
  • Action Item 2 [Ongoing]: The Core-1 Chain team has consolidated effective governance practices and will share the proposition on best options for feedback. The idea is to have open and constructive discussions BEFORE any proposal is posted on-chain.
  • Action Item 3 [Ongoing]: Provide an in-depth walkthrough of the FDP allocations and gather feedback from the validator community. Toward the same goal, a thread was published through the Persistence handle, and over the next two weeks, the Core-1 team plans to have multiple activities engaging the community to improve future FDP rounds.
  • Action item 4 [Planned]: Open feedback form for FDP Round 1 to gather all inputs and make Round 2 even better. It’s an iterative process, and we require constant feedback to make FDP more effective.
  • Action Item 5 [To start]: Align the efforts between the Core-1 team and the teams building within the Persistence ecosystem and identify public goods that need improvement and funding. Targeted funding will help both Persistence and the broader ecosystem.
  • Action item 6 [To start]: Launch an extensive research campaign to find ways to improve current chain mechanisms to promote decentralization further.
  • Action Point 7 [Started]

As a liquid staking hub, the Persistence community must collectively emphasize the ideal bonding ratio we want to achieve once liquid staking XPRT becomes the default over XPRT.

With Liquid Staking becoming more prominent, inflation adjustments based on the staking ratio might need to be revised.

  • Action Item 8 [Planned]: In line with Action Items 1 & 2, clarify community pool objectives and usage

Read the complete discussion on the Proposal #16: 

Final Thoughts

Overall, these changes are designed to bring positive changes to the Persistence inflation distribution and advance the ecosystem in the right direction. 

The proposed changes will bring more transparency and accountability to the governance process, encouraging collaboration and community involvement. With these changes, the Persistence Chain is poised to continue growing and thriving and provide value to its ecosystem stakeholders.

The Persistence Core team is committed to making the network more inclusive of the community in decision-making and welcomes the initiative from the community members to advance the Persistence ecosystem.