The Zilliqa whitepaper is stating block rewards shall decrease over a period of 10 years. Almost three years after mainnet launch, the block reward is still a fixed number, i.e. 204,000 ZIL. This proposal suggests implementing decreasing block rewards starting at 31 Jan 2022 - the 3rd anniversary of Zilliqa mainnet launch.
With the current issuance rate, the remaining tokens will be fully distributed within the next three years. The proposal assumes that three years will not be enough for Zilliqa to mature in a way that rewards can be paid only by transaction fees. This is why we have to lengthen the reward distribution by reducing the issuance rate.
The proposal suggests a simple approach that results in an issuance rate of 0.5B ZIL per year starting at the 5th year. The 3rd and 4th years shall be used to linearly decrease the issuance rate from 1.89B ZIL to 0.5B ZIL.
The motivation has been stated clearly in Chapter VIII of the Zilliqa Whitepaper [1]:
ZILLIQA has a finite supply of 21 billion ZILs. The smallest
unit being 10ā12 part of a ZIL. Each final TX-Block comes
with a block reward that generates new tokens. The block
reward will be spread over a period of 10 years decreasing
over time. We aim to mine roughly 80% of the tokens in the
first 4 years and the remaining 20% in the next 6 years. The
token emission will be āsmoothā in the sense that the block
reward does not reduce drastically after a certain number of
blocks. The smooth reduction in the block reward means that
the network hashrate can be expected to be stable as the reward
reduces over gradually over time.
After 10 years, we expect to have reached significant scale
both in terms of the number of nodes in the network and users
executing transactions. By then, we expect the market to have
stabilized upon certain rates of transaction fees to fully sustain
the running of the network without a need for new tokens
entering the system as rewards.
Specification:
Starting from January 31, 2022
Reduce DS Block reward by 7.5 ZIL each DS epoch for the next 20,000 DS epochs.
After 20,000 DS epochs, the new DS block reward will be 54,000 ZIL
The new issuance rate will be ~0.498B ZIL per year.
PRO:
Lengthen the reward distribution allows the Zilliqa ecosystem to further grow in the meantime
Smooth decline in reward issuance avoids any non-linearity effects
Reduces sell pressure on the market ( Bitcoin halving effect )
Increasing ZIL price due to reduced sell pressure potentially compensates miner reward reduction
CON:
Less mining rewards could result in reduced miner interest, potentially compromising the security of the network
FACTS:
Reduced block rewards affect both, miner rewards AND staking rewards
To my knowledge there are two potential implications of this proposal worth considering:
This will reduce both miner rewards AND staking rewards
Zilliqa mining is currently subsidised to a certain extent by eth mining so a reduction in miner rewards too early could reduce the viability of some miners, potentially compromising the security of the network.
You are right, this proposal will reduce the rewards of both, the miners and the stakers. I believe this is only fair.
In a few years, ZIL will be worth either a lot or nothing. If itās a lot, miners will be fine. If itās nothing, miners will not care anyhow anymore.
thank you for being around and participating in the governance process!
Yes, the block reward is shared by miners (60%) and stakers (40%). By reducing the block reward, both will be affected.
Most Zilliqa miners are doing dual mining with Ethereum. Zilliqa is a lucrative side business for them. I donāt think anything will change as long as we have Ethereum PoW. IMHO, the transition from PoW to PoS of Ethereum might have much more effects on Zilliqa hash rate than the implementation of this proposal can have. Also, as you pointed out, rising ZIL price will also help to keep Zilliqa mining attractive.
Hi, you will need a poll option for people to vote for or against the idea for minimal of 3 days. Check if this can be assigned a Zip by the team to then put up for voting.
before setting up a poll I wanted to receive more comments and input from the community on the proposal. Once you set a poll you canāt change the content of the proposal anymore.
Thatās great! As long as we know whatās at play.
Thanks for bringing this up. Looking forward to the Devās input as reliance on miners and stakers would also be an important point of incentive to maintain network etc.
I have no idea on the impact in terms of overall sustainability on the infrastructure and agree moving ETH to POS will impact much more vs this change.
I support declining inflation for both staking rewards and mining. If we cut staking rewards Iād also like to see the unbonding period removed or drastically shortened though. Lower % apy plus a 12 day unbonding would not be very enticing for new users.
Wow Julian - nice pickup out of the whitepaper. I like it, and makes sense, and is to the vision set out in the whitepaper. I also support declining inflation.
The main question for me - if this is in the whitepaper - is it something that needs to go through a vote?
@Drew im also with you about the unbonding period, but that I believe is already being discussed in here? its better off to not confuse/compound lots of things into 1 proposal.
Im not sure why it never progressed, but it should do in some fashion.
I agree with @darthgus that we should not confuse too many different topics into one proposal. Letās go one by one. The proposal below is about early unstaking, I think we should discuss about it there:
First of all I would like to thank all of the amazing humans who have had a role in bringing Zilliqa to life. Secondly Iām not sure why this topic has not been brought up sooner. My problem is with the onboarding of new ways to spend your crypto and how more people will find utility in some and hodl others.How will Zilliqa compete going forward? I have been an investor for about two years now so Iāve reaped many benefits that Zilliqa has sowed. I would love to keep going forward with this project to see how it matures, but in all honesty I feel there is a disconnect from milestones delivered and price appreciation from said goals. Is this a bi product of the high inflation rate? Idk for sure. Iām not sure if deflating the issuance going forward will help this project gain traction going forward. I for one feel better about getting your total supply in to circulation as soon as possible. Thatās when youāll get true price discovery. Good luck to all that have read this. You are way ahead of the ācurveā.
If we continue the rewards at the current rate, the total supply will be reached in less than three years. This would be a total of 6 years of operation. At this point, all necessary rewards have to be covered by transaction fees.
In fact, Ethereum achieved to gain enough traction within the last 6 years to reach this state. Conservatively speaking, I would not bet Zilliqa can grow at the same pace as Ethereum as it is missing the first-mover advantage in the smart contract platform field.
Considering this, I tend to disagree with you and stick to my proposal to lengthen the reward distribution by reducing the reward issuance - as of course already indicated in the white paper.
With that being said and after 1 week of discussion, I will:
Add a PRO and CONS section to the proposal based on the feedback provided by you and
First, to state my personal position, I am not against a reduction of inflation.
However, there are a few issues in the proposal I will like to surface out.
Jan 31 may not be realistic as it will need to be timed with the next major upgrade, which will likely not be ready by then. Forcing a premature upgrade or an upgrade containing this change will not be ideal. The timeline should be more flexible. The next upgrade is critical for DApp dev and we will want to properly test it out. i.e Scilla External lib, gas limit adjust, max edges, lots of fixes, improvement etcā¦
The impact on reduction of staking reward is not well defined. The proposal should clearly quantify it.
Why 1% Quorum? I have trouble to comply with the 20% quorum requirement from ZIP-12 any longer. A lot has changed since ZIP-12, a significant amount of $gZIL is locked in other protocols, e.g. Pillar, and CEXs where it canāt be used to participate in the governance process aynmore.
thank you a lot for sharing your thoughts with us!
I understand your concerns about the schedule. In fact, 31 Jan, was only used as it is a symbolic date. If a mainnet upgrade is not ready at this point in time, then it is simply not possible. Rigorous testing always has the priority!
In fact, the implementation of the update does not require a specific start date. With the next possible mainnet upgrade the smooth reduction of block rewards will start and should last for the next 20,000 DS epochs.
Do you have any suggestions on the possible impacts of the proposal?
1% quorum is too little. we will end up with problems faced by uniswap community.
I agree the process needs to be revamped but the core team may need more time to revamp the process. We are currently extremely tight and the festive season makes it even tighter.
Streamlining the process, consulting the core team on feasibility, and adjusting quorum is like some of it. Right now, some proposals are not implementable, others have an unrealistic timeline, other is namedrop team members for implementation without consultation with the specific team member.
I am open to suggestions. Ideally, supplement it with dev call and other forms of engagement to come up with a high-quality proposal.
For such a proposal, it will be more ideal to keep the date open and propose the core team provide a monthly update on the progress. Right now, the community might assume it will happen on 31 Jan if the proposal pass and that will backfire hard on the proposal and the community as a whole if it didnāt happen.
Basically, provide an updated table to show the community the impact in a clear and concise manner.
Again, thanks for your proposal. As mentioned, I am not against it, but what I am trying to do is to look at it more holistically and ensure the proposal is clear and balance to everyone.
I hear you that 1% quorum is too little. What do you suggest, 10% ?
After one week of voting, we have reached only 6,79% participation. We also have to consider 26K $gZIL are locked in Pillar protocol and are not able to vote!
I believe the proposal has been already widespread in the community, but may I ask you to retweet my tweet below with the @Zilliqa twitter account for maximum reach? Letās see how much participation we can get!
the $gZIL community has decided on this proposal. The vote has ended on Dec 29, 2021. With 9,1% participation the 20% quorum has not been met, but under the current circumstances - with $gZIL locked at multiple places where it can not be used to participate in the governance process - a significant amount of participation has taken place. With three weeks being live, everyone who has interest in the future of Zilliqa had time to put their $gZIL to vote.
Breakdown on some $gZIL whales:
ZilSwap DEX: 34.4k $gZIL (6.13%) [1] ( ā can vote, but LPs somewhat sleep on their voting rights )
PILLAR Protocol: 22.5k $gZIL (4%) [2] ( ā can NOT vote )
KuCoin CEX: 9.2k $gZIL (1.65 %) [3] ( ā can NOT vote )
Inactive Wallet: 8.2k $gZIL (1.48%) [4] ( ā forgot about his $gZIL ?! )
Ignite DAO Whale: 4.95k $gZIL (0.89%) [5] ( ā has voted )
CEXIO: 4.6k $gZIL (0.83%) [6] ( ā can NOT vote )
Surprisingly none of them has voted. Currently, I do not LP my $gZIL so I donāt know if voting while providing liquidity was possible on this vote. But I remember it usually worked.
Long story short, IMHO meaningful participation has been achieved and I consider this vote as successful. Also, as pointed out by @darthgus earlier, as this is in the white paper, a vote on this is not necessarily needed at all.
With respect to implementation of this proposal, I suggest this happens on the next planned network upgrade ensuring meaningful testing of the new feature - the specific date given in the proposal was non-sense.
Thanks for the discussion @yusa. Seems that the quorum has not been met. 1% or <10% is way too low IMO. Especially for crucial decisions like these that directly change the game theory for the economics and security of the network. Perhaps 20% is too high but we can discuss this together. I have also decent amount of gZIL and I didnāt vote because i wasnāt sure yet and needed some time thinking. I was leaning towards no and I spoke to others as well that have a lot of gZIL that were still uncertain. Because people do not vote does not mean that they are not lurking. Decisions like these will have long-term impact for the protocol and the voting period was also very short.
Just as a thought experiment regarding quorum, letās say there is another vote for an upgrade that 100% of the network fees will go to gZIL and 0 to ZIL. Then 1% - 5% votes on this proposal and the gZIL holders work together to pass it. Should this be approved?
Edit: I will come back soon to write my own concerns with this proposal (not as a Zilliqa team member but as a community member mostly)
