Reducing Validator Rewards

TL:DR - Lowering staking rewards to keep in line with the market-rate and increase the emission run-rate


Context

Post-burn, in January 2021, validators accrued ~1,579 FTM in fees, in January 2022 this number increased to ~1,912,780 FTM.

In June 2021 ~102,928 FTM was paid to the validators compared to ~1,834,672 FTM paid in June 2022. (Source: Fantom Network Transaction Fee Chart | FtmScan)

This trend signals the growing strength of Fantom’s dApp community and numbers of users adopting the Opera network, and is inline with increased network activity.

With the current trend, validators and stakers of the Opera network are in a position of strength to now address the ending of staking rewards (emissions), estimated to be completed in ~2 years from today.


Emission Estimation

Max Supply (Max Supply - Burned FTM) = ~3,167,199,793

Rewards Per Day = 534,247

Circulating Supply = ~2,770,317,593.63

(3,167,199,793 - 2,770,317,593.63) / (534,247x365) = 2.03 years


Proposal

This proposal seeks support to:

  • Reduce the current emission rate to keep inline with the market-rate and extend the duration of emissions

  • Prepare the Fantom network for the next stage of growth, becoming one of the first layer 1s to operate optimally post its emissions scheduled

  • Formalise a post-emissions structure, enabling more time to take into consideration community feedback, internal analysis and macroeconomic conditions

In response to decreasing the staking rewards, validators will:

  • Increase duration of rewards, providing more time for dApps and protocols to generate network activity, increasing transaction fees/revenue
  • Explore alternatives to increase and diversify revenue streams (e.g. providing price feeds, decentralised services for protocols, readjustment of burn and fee optimisation)
  • Realize the benefits of major upgrades including FVM-deployment and node upgrades boost performance and lower operating costs for validators

Market Comparison

Currently, the staking reward rate is set at ~13.91% (with a 12 month lock), which is above the market-rate average compared to other notable networks and L1s. For example:

  • ETH ~4.08%
  • SOL ~5.36%
  • Avalanche ~8.6%
  • BNB ~4.92%

Voting Choices

The vote will have 5 choices. (Please note this only pertains to staking rewards and is not a max cap on total revenue or transaction fees):

  1. 3% p.a. - Ending in ~9.4 years
  2. 4% p.a. - Ending in ~7 years
  3. 5% p.a. - Ending in ~5.6 years
  4. 6% p.a. - Ending in ~4.7 years
  5. No change - Ending in ~2 years

I am trying to figure out why some people dont see reducing the rewards as a good thing in the long term. because lower emissions = more runway and less inflation + more time for tech + biz dev development = higher token price.