Token lock recap and next steps

#1

A while ago we opened a thread of discussion around implementing a lockup of farmed tokens with two options for consideration. A lot was said in that thread, and now I’d like to start fresh with a summary of insights from the original conversation so we can refocus.

Since discussion stalled on the original thread, we’ve had some conversations among the team about how to proceed. We haven’t felt confident about bringing a vote on either proposal, firstly because there was not a clear consensus and secondly due to some considerations I’ll list below after the summary.

Summary of previous thread

  • There was general support among participating community members to implement the original v3 locking scheme (two years or 30% utilization), but also some different ideas and open questions about how to handle the details
  • There was limited support for the price based scheme (unlock when price reaches $.10), in terms of individual voices, but it seems there’s a substantial amount of Grid capacity backing it and that’s how our votes are weighted
  • A price based scheme raised some concerns, especially with a price target of $.10

Additional considerations

  • Many farmers don’t follow announcements closely. Non voluntary locking of minted tokens will look basically like minting has stopped, and a percentage of farmers will likely just disconnect their nodes. Some percentage of farmers who understand what’s happening will also likely do the same
  • We don’t want a significant contraction of Grid capacity just before or during the launch of the commercial ThreeFold Cloud offering
  • What’s perhaps much more important than limiting liquid token supply is ensuring that there is a strong incentive for farmers to run workloads rather than an inverse incentive when energy costs rise. A voluntary lock with utilization incentive included can fix the situation without too much collateral damage, while also limiting liquid supply to an extent
  • The 30% unlock condition is neither a particularly strong incentive to run workloads nor compatible with a voluntary locking scheme that’s tied to a utilization based incentive (farmers who have the incentive to opt in are also those whose tokens would unlock first)

New Proposal

With the above in mind, we’d like to present a modified version of “option 2” from the previous thread:

  • Voluntary for existing nodes and mandatory for new nodes
  • Participating farmers get 50% of the revenue for workloads running on their nodes
  • All rewards are locked until either TFT reaches a price of $.10 or until a fixed unlock date is reached (one year from launch of program)

Next steps

While we think that the new proposal is a sensible move that addresses the biggest concern regarding its original form, we also respect the support shown for sticking to the original v3 token lock plan. We’d like to give some time to discuss after this reformulation, take a poll if there’s not a clear consensus, and then proceed with a vote, all in a timely manner.

Thanks everyone for your consideration and participation in shaping the future of the ThreeFold Grid :heart:

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TFT token lock proposals [Closed]
Start farming reward lock and utilization payments to farmers (closed, see new post to continue)
#2

I think the new proposal is a very good one. Existing nodes have the choice whether to opt in and voluntarily lock future farmed TFT or not. If they opt in they will be rewarded with 50% utilisation reward payable in TFT relating to workloads running on their nodes. Presumably these utilisation rewards TFT will also be locked @scott ? Potential new nodes, with this lockup model being transparent from the start, will have a clear choice, they either participate and lock or they don’t become farmers. A lockup of farming tokens may put some people off but that’s no bad thing short term given the current low level of Grid utilisation. I agree with the one year timeframe for unlocking but suggest the $0.10 price trigger isnt needed nor is it particularly helpful. That said I am supportive of the proposal.

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#3

I’m 90% sure that is there as Kristof is very fond of that plan in the github and forum discussion. But hey, with BTC cracking 30k maybe it isn’t pie in the sky.

#4

Few points to consider;

  • even with the one year of locking tokens; a farmer should ‘always’ be allowed to use his tokens for utilization. I know i’ve seen support to this suggestion of mine before, but it’s vital in the sale of certified nodes where we offer services to help farmers utilize their own nodes. For me, it’s a must.
  • in addition to the above; we sell a lot of certified (good quality) nodes to farmers who just want to contribute to a better network. They also like to use their own (home)nodes which means we should concentrate in getting more gateways- and gateway solutions out there. (PS. I’m getting some great support there from TF already) This would of course improve utilization as well.
  • we all know what’s going to happen the day it reaches 0.1 ct. Whoever clicked the button first…
#5

The reason I’m not keen on the $0.10 trigger is that its existence may create an unnecessary distraction and act as a price suppressant. Holders of unrestricted TFT will perceive an overhang of potential selling and want to get ahead of it, and while this may prove illusory putting a $0.10 price target out there also suggests that $0.10 represents an ambitious price target. For what its worth, and I don’t ever give investment advice, I believe these tokenomics changes coupled with rising Grid utilisation lay the foundation for a realistic TFT price that is way higher than $0.10.

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#6

I agree with the 2nd and 3rd points but don’t know whether/how your first point is workable in practice. I’m not for or against it, I am questioning from a practical mechanics standpoint

#7

As @michaelww just said it is not doable in practice since TFT are minted in Stellar and need to be on TFChain for usage purpose. If TFT is locked it means it is not minted in Stellar and cannot be transferred to TFChain account to be used for renting capacity (on own node or other).

#8

I think Kristof mentioned before this needs to be looked at. It’s simple; vendors world wide are an important part in the growth, marketing and succes of the grid. And they won’t sell a single node if they have to tell there customer to purchase an 800+ USD device and do nothing with it for over a year…

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#9

Replying to this one, I suppose these reward TFT from utilization will directly go to farmer TFChain account and no lock applied to them since they will not be part of the minting process.

#10

You have a great point there, the side effects of the 10 cent unlock would work against us.

#11

Some other considerations:

  1. Also not a big fan of unlocking everything when TFT reaches a price of $.10. The 1 year locking period (or other constant amount of time) by itself seems to be enough and will guaranty a smoother unlocking.

As a dev, not very happy in having 2 farming behaviors at the same time living in TFChain code since it is already complex to handle 1 behavior.
As a potential new farmer, not very happy in knowing that old farmers had the option not to lock (could seem unfair).

#12
#13

Thanks for the inputs everyone. It seems like dropping the price based unlock in favor of an entirely time based mechanism is preferred. I don’t see any downside here, except that tokens can remain locked longer.

Yes, that’s what I intended to propose. Here are the consideration on this point:

  • Especially while the token price is low, income from utilization can quickly surpass the minted farming rewards (a node with 50% utilization would earn about 3-5x its base farming reward, roughly, at current TFT price)
  • Providing farmers with some amount of liquid reward to cover costs might be nice, but it complicates both design and implementation (all or nothing is simpler). However as @renauter points out, these tokens are separate from minting, so it would be simplest to not lock them at all
  • Most farmers have been farming long enough to accumulate TFT they can sell if needed before the unlock

The proposal I’ve seen for how to handle locked rewards is to note them as IOUs on TF Chain and mint them on Stellar later (or potentially mint them directly on TF Chain). This is compatible with allowing locked tokens to be spent on workloads—they would just be deducted from the IOU balances. I think the biggest concern here would be the computational complexity added to the TF Chain runtime.

Personally I strongly support making this work if it’s technically feasible.

From the farming side, I think it’s okay to have a new deal for new nodes. We wanted to provide an incentive to early farmers in the form of the entry price, but so far that mechanism hasn’t taken effect. This can be one way to say thanks to existing farmers for their contribution so far.

I appreciate the thoughts on the dev side. Indeed simpler is always better.

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#14

Very interesting stuff going on here. Nice!

So working around what has been shared here, it seems we do have another variation on the proposition to lock farming rewards, with 2 points to decide further, as noted in parentheses:

  • Proposition: Farmers can lock their farming rewards for a given period of time
    • the lock period is 1 year, from the moment the node opts in the lock
      • This is to avoid big sell pressure if the period is the same for everyone
    • farmers that lock receive 50% of utilization rewards
      • Modality of the 50% utilization rewards (to be discussed, first make sure that 1a is doable by the dev team, second if the community wants this, and if it’s OK for the farmers)
        • 1a: this 50% is locked too
        • 1b: this 50% is not locked
    • Two options to the lock distribution (to be discussed)
      • 2a: voluntary for current farmers, necessary for new farmers
      • 2b: voluntary for new and current farmers
      • 2c: necessary for new and current farmers

In the long run, it could be a farming option that is always there: farmers can decide to have locked farming rewards for a given period and get utilization rewards, or they can decide to have unlocked farming rewards but no utilization rewards.

Note: I think it is easier in practice to not lock the 50% utilization rewards, and it gives revenues for farmers to pay the utilization running fees on their farm.

Note 2: Edited after @renauter comment below

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#15

Thanks @Mik for summarizing the proposal.
Just some comments…

It is 1a which is much more difficult in terms of dev introducing some complexity in onchain locking mechanism while 1b would be is “easy” to implement because direct transfer to farmer.

We could also have a 2c option (necessary for new and current farmers) or this is already accepted that current farmers will be able to keep some privilege?

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#16

Thanks @renauter

I adjusted my reply above. It wasn’t clear that I was talking about 1a and not 1b. Thanks!

For 2c, I think the consensus is that if it’s necessary for all farmers and that farmers are not aware of the change, it might lead to a lot of farmers not minting and then shutting down their nodes. This would be a big hit on the grid capacity.

That being said, I added it, so it can be discussed.

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#17

Since there is not a lot of utilization. Shouldn’t there be an incentive for farmers without utilized nodes to lock their earnings?
P.s. what happens to the validator nodes?

#18

I don’t think we should be offering any additional incentive for nodes that aren’t being utilized, even if it’s illiquid for some period of time. The practical option we have for nodes without utilization is to lock the minted tokens with no incentive, but we’re precluding that as described above because we want folks to keep farming.

The validator program will still be coming with a future release and staking yields might help to keep some additional tokens off the market. The current proposal is really about a minimal set of changes that can bridge us to a more comprehensive update later.

#19