All of your rationales and logic make sense. However I want to add a bit on the part I quoted, sticking KNC value to ETH value does have its own downside, which is the correlation between KNC and ETH while KNC can be an independent economic.
Look at what Kyber is doing right now, everything has to contribute ETH as the fee, it means all trades (or in general, all service transactions) have to be evaluated in ETH, which is very hard and inefficient on-chain, the only way to make it possible is doing the calculation offchain just like Binance evaluates their trade with BNB value.
One point I think you are missing:
With burning model, we remove supply and distribute value to all of the holders, fair and square, people will have to look at it in a very longterm perspective to see the effect (like 10 years). With inflation model, there will be many more ways for people to access/make the tokens (preferably, by making use cases for Kyber) and if someone will just hold it for a bet in its value in the future, they apparently keep value for those new minted token, people can see its effect in a very short term perspective (like weeks). Being able to see short term outcome creates excitement and momentum for things to happen.
This is a big mental jerk, people are fooled thatâs why they think they are getting free money from inflation. People want big gains in short time, this will only create a bubble. How you guys know all those protocols are not just bubbling right now? Is just inflation based inclusion. And inflation based funding, nothing else.
We donât know if it is a bubble or not until it happens. What we know for sure is the amount of users bootstrapped with the ecosystem is big and they are real, they even join the community and build up ideas as well.
On the other hands, as in the protocol design wise, I think the team is trying to make more things to be possible so the DAO has more options to evolve itself. It doesnt have to limit the possibility. If you donât agree with minting more tokens, just vote NO, and if the whole DAO follows, never mint any tokens IS ACTUALLY A POSSIBLE OUTCOME.
Team should just focus in ETH second layer solutions to be actually competitive, be the first one using second layer solutions, to be ahead of competition, and get that nice volume, and nice liquid ETH. instead of looking into bubble based inflation inclusion excitement.
Like how much KNC they need to print to actually achieve a second layer solution kyber DEX? To attract all those DEX costumers, just print it right now, one time only event, and letâs get over with it. People just want to trade cheaply. Is not rocket science, people is attracted to the cheapest sources. And if possible include KyberDAO in the second layer solution, so not only big guys can vote and receive rewards.
ALSO inflation based governance model will be abused, how it will work? they will set a governance 5-10% year supply inflation and gather all that KNC in a pool and pay that to developers proposals, or KNC will be printed just when is need it, for the amount if requested by a certain proposal? I do not agree with either of the two, but the second is better.
I agree the team should focus on/do a lot of things but I agree to them that creating a whole new range of possibilities is the necessary foundation to grow and react to market changes. In the past year, Kyber fell off from competitiveness is because everything was very conservative and strict.
It all depends on the DAO decisions. With the DAO, we have to assume that KNC distribution is fair enough (and minting more tokens is a very important possibility to make it fair) for the DAO to make wise choices.
If buyers were looking for token scarcity then ETH or BTC or AAVE or SNX should never go up in value because these are all inflationary assets. How each unit of token can capture value is far more important than whether there is a 1% or 2% or x% inflation. If 1% inflation brings 10% value appreciation per token, then the buyer is better off so for me this argument of âinflation is badâ does not hold.
I think you missed the main point of the proposal we brought up. That is, the new minted KNCs wont be for the team, but for the ecosystem. That means we as the team wont necessarily be, and unlikely be, the recipient of the additional KNCs. We wanted to make sure that the new KNCs issued are meant to be translated to much more growth of the Kyber ecosystem in general, and thus bring much more value to existing Kyber stakeholders, including KNC holders.
While im really impressed by your enthusiasm, and I am thankful to have you around joining the discussion on this important topic, I have to be frank and let you know that im not sure if you get things right. Please try to provide concrete examples to support your argument, or make it clear that you only speak for yourself, not all LPs.
We have seen enough examples from Compound, Aave, Uniswap, Sushi, etc on the importance of incentive to attract LPs and draws more liquidity to the network/ platform. None of them give ETH as return to LPs, yet still billions of USD worth have been contributed.
Nevertheless, the whole idea is to let KNC holders to vote on the proposal later on via KyberDAO. Its the decision by the whole Kyber community.
Besides the 3 points which I mentioned above it might make sense to add another point which just came to my mind:
4.) Mint an additional reward pool (e.g. X million KNC - decided by DAO) just ONCE to jumpstart Kyber 3.0. This reward pool is then used for specific & limited campaigns. E.gâŚ
allocate X million KNC for extra rewards if a LP transfers his liquidity from specific other DEFI protocols (vampire marketing like SUHSI did so sucessfully).
allocate X million KNC extra rewards for âfirst moversâ within the first X days.
allocate X million KNC extra rewards for pools with highest trading volume
âŚ
I think the added âone time inflationâ would be more than compensated by the resulting hype/FOMO & significantly increased usage of Kyber 3.0 if the 3 other points I mentioned above are also implemented (especially the burn mechanism to counter the effects of the inflation).
How exactly is BTC an âinflationary assetâ??? There is Max supply of 21 million BTC and there can never be created more then 21 million⌠Iâm not sure about the other 3 coins/tokens You mentioned so I wonât comment them⌠but BTC has no inflation of itâs max supply and it is not an âinflationary assetââŚ
If Kyber team starts minting new KNC whenever they need some cash for whatever reason - then we will have KNC max supply increase all the time, and it can lead to potentially UNLIMITED amount of KNC and that is something I donât want to see⌠You know what coin has infinite max supply? DOGECOIN !!! a fcking meme coin⌠Is KNC gonna become a meme coin?
I see that you are considering using Aaveâs governance framework as a template for your own gov upgrade. It seems the primary reason to do this is to allow for multiple quorum thresholds, voting periods, and timelock periods based on the importance/risk of a given proposal. This in turn makes it safe to make the new KNC token upgradable, as it would be held under the most stringent timelock and delay thresholds.
One other architecture you can consider is using the Compound governance framework. This is already in use in Compound and Uniswap, with several other protocols on track to adopt it as well. This may allow you to create a more modular, tailored governance system to best fit KyberDAOâs needs.
For example, if you wanted to have higher quorum and proposal thresholds for any actions that change the KNC token implementation, you could deploy a 2nd governor alpha contract with higher quorum and proposal thresholds, a longer voting period, and a longer timelock. Both this and the main governor alpha (which handles less important proposals) could accept a COMP forked KNC token as the measure of voting power.
Are there any other features of the Aave governance framework that are particularly important for KyberDAO governance? I could be overlooking other key selling points beyond having multiple security thresholds for proposals.
These other protocols are rewarding LPâs with illiquid tokens. LPâs only care about profitability and what they really want is liquid profitability. In any case, Kyber is different because it rewards LPâs with real liquid ETH.
Now that said, these printed tokens will give greater profitability to LPâs because they are printed out of thin air and a big part of that will be dumped in the markets, this might attract more liquidity but at expense of KNC holders.
To make the ecosystem grow, you just need to make it cheaper for the user to trade, NOT inclusion via inflation. The cheaper it is for them to trade, the more ETH KyberDAO gathers, the more is paid to LPâs in liquid ETH, the more is paid to KNC holders in liquid ETH, the more the token will be worth.
KNC holders will thank you because they are paid in liquid ETH, LPâs will thank you because they are paid in Liquid ETH, and users will thank you because they are charged cents compared to other platforms.
Just make KyberExchange the most competitive and cheapest platform to trade, and the whole ecosystem will grow as a whole, and everyone will get REAL LIQUID ETH. Later when we receive ETH from traders BIG time, we can convert some of that ETH to KNC via KyberDAO for inclusion purposes. Just donât print out of thin air.
Hi everyone, I felt like sharing my opinion after reading about the proposed changes to the knc token. Overall I am against an inflation model for the Kyber Network. Kyber Network was initally set up promoting a deflationary model which is why I took an interest in it just as I am sure many other knc holders did. To go against this feels like a kick in the teeth and as some others have stated makes me question why I bothered investing not just some money but also time and effort to educate myself about the protocol to begin with when theyâre just going to change the fundamentals like this.
I also believe inflationary tokenomics would genuinely be bad for the protocol. All this is going to do is dilute everyoneâs stake in the overall token supply which in the long run would be bad for the value of knc as well as the eth rewards the protocol pays out. I understand that it might seem tempting at first to inflate the supply to try and encourage more people to use Kyber but this is just prioritizing short term gains instead of long term value. Many of the other defi platforms are sucessful not just because they have some inflationary token that they pay out but because of their features and ease of use. The dev team should focus on adding more useful features and I like a lot of the rest of what theyâve proposed in the kyber 3.0 upgrade. If they ever are in need of cash for funding they can propose a vote to the dao to get some of the network fees for a certain period of time to help further development.
I donât see why the majority of existing knc holders who have a long term mindset would want inflation. There are over 90,000 knc token holders and right now unless youâre in the top 1000 gas fees are making staking unviable, the transaction fees it costs to stake and then continously vote to get rewards are much higher than any rewards you get paid out. Part of the sucess of Kyber is going to depend on eth 2.0 being able to scale and other layer 2 solutions. There will then hopefully be more activity on the ethereum and kyber networks in total as well as reduced gas fees. This will then make staking more viable for all the knc holders and actually give them a larger net return from increased eth rewards. Until then I donât feel like a vote decided by just a small percentage of the largest token holders to switch to an inflationary model is going to be representative of what all knc holders want as a lot would probably like to stake but are unable to in the current environment.
Also remember that we are in a crypto bull run right now, whether or not some of these other protocols that have inflationary tokenomics will be able to hold onto most of their token value in the long run is not certain. I would much rather knc stick to itâs current value proposition rather than being to some worthless inflationary token that is just paid out to tempt lpâs or other people to use the protocol. More added protocol features and scaling will lead to higher rewards and token value over time. I know the dev team said token supply would be dynamic and controlled but this will eventually just be abused. Even if Kyber only has moderate activety right now (which I believe will increase eventually for the reasons Iâve mentioned) one of the good things about it are that the tokenomics are solid and canât be used to screw over already existing token holders.
having a treasury for the team to use to fund initiatives = good, doing so through inflation = bad.
please take a look at how cardano does this.
I would support a one time supply increase where new coins go to a treasury that still needs approved proposal, but the possibility of yearly inflation just seems insane. supply increase should need like 50% of all knc voting yes, and timelock for 30 days minimum.
using the treasury supply should also have limits, like, treasury canât draw down more than 25% in one year.
fees should feed into the treasury, then all types of rewards come out of the treasury, this becomes one pool of funds that we are all taking care of, rather than a confusing fees = voting rewards model.
treasury should be predominantly knc, but could also have other coins from partners or eth. this could help with partnerships and maintaining the value of the treasury during big price fluctuations.
all other concepts posted look good, my main concern is how new supply is created, how much, how easy it is to create and how it will erode my % of total market cap.
there should be no need to burn knc if it is not in circulation. (treasury could be considered non-circulating coins until approvals enable its use)
if thereâs a desire to create a price effect like a burn, you could propose to use coins other than knc in the treasury to buy back knc on a price curve over a period of time.
These proposed changes are fundamental enough that long term investors should have a means to opt out. And not âsell your tokens,â I mean a means to opt out that respects their time/ energy invested. The decision needs to be: We vote to adopt the inflationary model and if it passes, the ânoâsâ are given the option of a convertible note that still shares fees. Snapshot oldKNC/ ETH relative value, retain 1:1 ETH some ratio in an escrow. If newKNC performs well, then the ânoâsâ will convert via smart contract at the present market rate. If newKNC doesnât perform, oldKNC holders can sell for ETH at the snapshot rate. Then you can inflate all you want.
I also think we should be careful in âcomparing w/ other successful projects.â Those projects are successful b/c of the *utility of their business models. Uniswap was successful before the airdrop. As was 1Inch. SNX isnât a inflation protocol, itâs a trading protocol. Issuance, inflation, debt, all of these are financial tools that augment and expand successful business models that already exist. None of these was an arbitrary business model that wasnât working before but now does b/c tokenomics and enthusiasm. What is the âkiller productâ weâre investing in again? Have we fixed the fee issue? Moved up in the dex rankings?
As a dividend token, KNC does provide real value b/c it pays on sheer volume disbursed in the highest quality non-BTC token. Tie changes to better executing that infrastructure/ utility story and creating true value, not what feels like financializing the project.
Now they not only want to pay LPâs with inflation, to give them high ROI, they also want to give away to traders free KNC from inflation. Is just insane. Traders and LPâs DONâT CARE about being included, they want high profitability in a liquid currency (ETH) and traders want CHEAP transactions in ETH. Only interest in KNC as an asset that pays dividends in ETH will attract investors, included LPâs and Traders.
All those other protocols are making LPâs earn illiquid tokens that they have to exchange to ETH, we already making them to avoid that step by paying them liquid ETH.
