Proposals to reduce the $Alphr inflation
At present the inflation rate with LP farming rewards is too high, given the number of participants. This is causing a negative price feedback loop. In addition to this protocol usage rewards will commence in August adding further inflation. I believe some small tweaks could improve this situation considerably.
Once the DAO is fully implemented this week I will be putting forward 2 proposals to change the tokenomics to reduce unnecessary inflation. These tokens will instead be kept in the DAO controlled multisig, the community could vote to later burn them or use them for DAO expenses.
- LP farming
The pool of tokens labelled as “Liquidity” in the litepaper are currently scheduled to enter circulation at a rate of 125,000 tokens per month. With the majority of these being used for the LP farming rewards. Any spare tokens from this pool were pegged to be used to provide liquidity on centralized exchanges. At present additional tokens are not required for this use.
I propose rather than reducing the LP farming rewards by 5000 Alphr per month linearly, we reduce it immediately on August 1st to 62,500 Alphr per month and keep it at that level until the programme ends.
At present the LP farming programme is causing unnecessary inflation and isn’t particularly popular (less than 100 participants). Alphr Labs main wallet is staking and I am personally staking, we are receiving over 75% of the rewards daily (this seems wasteful). By halving the rewards the people that are currently staking will continue to receive an excellent yield, but without wasteful inflation.
This will prevent 500,000 Alphr tokens from entering circulation, these tokens will remain in the multisig and if the proposal passes will be under the control of the DAO.
2. Protocol usage rewards
Allocating tokens for protocol usage rewards for 10 years in advance is perhaps unwise, as we don’t know where the protocol will be at that point and if it will make sense to continue to reward users in the same way. In addition to this a linear distribution of tokens for protocol usage rewards is perhaps also unwise.
I believe it is most important to incentivize early adopters and users, therefore my proposal reduces the protocol usage rewards distribution to 30 months and front loads the first 6 months to drive rapid adoption.
This proposal will prevent 2,000,000 Alphr tokens from entering circulation, these tokens will remain in the multisig and now will be under the control of the DAO.
I will set up the above proposals on Snapshot as 2 separate votes, as some agree with one but not the other.
If both proposals are implemented this will mean the DAO immediately has 2.5M Alphr at its disposal, a sizeable war-chest that will allow the protocol and community to move faster. This is in addition to the 2M Alphr tokens that are vesting as part of the community development fund, these are also controlled by the DAO.
