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Anders Elowsson
@anderselowsson
My talk from Devcon on a Practical endgame on issuance policy is now up. I review the motivations, impacts and potential downsides of a reduction in issuance. This thread will visualize an automated gradual reduction in issuance, which I suggested in an answer at the end. https://www.youtube.com/watch?v=m91Wu6-cdwk
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Anders Elowsson
@anderselowsson
If the quantity of stake continues to rise and we reduce issuance, the yield differential between the new and the current reward curve may become very large. We could then consider implementing an automated, gradual reduction down to a new reward curve over a period of 1-2 years.
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Anders Elowsson
@anderselowsson
The easiest way to do this, shown in these plots, is to slowly bring down the constant k in the equation for the new reward curve. When k is infinite, both curves are identical. Staking yield with 300k ETH of MEV per year would be affected as shown here.
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Anders Elowsson
@anderselowsson
Issuance yield is instead affected as shown in this plot. The starting point and end point of the automated reduction can of course be adjusted.
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Anders Elowsson
@anderselowsson
Another example using the purple reward curve from the Practical endgame on issuance policy-post is here shown, but the curve is adjusted to peak at an issuance rate of i=2^-8=0.39%. A lower peak gives stronger guarantees on the maximum amount of ETH that can be issued each year.
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Anders Elowsson
@anderselowsson
This of course also means that there is a weaker guarantee that the quantity of stake is maintained close to current levels. The change in staking yield with 300k ETH of MEV would look as follows.
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Anders Elowsson
@anderselowsson
Here is the change in issuance yield. Whether this automated graduated approach is worth the additional implementation complexity will depend on the shape of the new reward curve, the quantity of stake at the time of the switch, and the sensitivity among stakers to abrupt changes in yield.
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