I agree with many points Luc brings up, although I have to agree right now that at this point in time, scarcity is an issue. The rewards being paid out seem to have a negative effect on the token price. Because APY is also much higher than on many other chains, I do think it would be smart to reduce the inflation rate.
I’ve had some talks with several community and team-members about the inflation. My main focus with those talks was to try and find a system to make it sustainable for longer term out of the viewpoint of keeping the APY at a competitive edge in the growing DeFi landscape.
Considering this there are multiple factors at stake, which are:
- Rewards on farming and on staking;
- The Dev fund of the foundation and the way those tokens will come into circulation;
- Rewards for validators;
- New use cases like ICHI’s OneFuse;
- The result of all of these on the amount of tokens staked.
These factors together have an effect on the APY, which I have made calculations of. Conclusion of those calculations is that the parameters can have pretty drastic effects on the development of the APY over years, mainly depending on the amount of rewards that are being restaked.
The results of the calculations are as follows, with the first table showing the effect over the years of the APY with 100% of rewards restaked and the second table showing the effect of the APY with only 20% restaked.
In these calculations the spending of the Fuse foundation/ dev fund (except for the farming rewards) is not taken into account, because budgeting and prognoses were not available.
Conclusion was that because there are so many unpredictable elements, it is very hard to find a solution for maintaining the APY at a certain level that would work over the course of multiple years.
I agree with Rob that the current rewards are unnecessary now the Fuse ecosystem is developing the way it is. Scarcity would be the better strategy in my opinion.
Having said that, I think it would be smart to offer an APY a tad higher than that of other chains like Cardano and ETH. 2% seems to do that trick for now and probably the coming 2 years (depending on the spending of the Fuse foundation and the Dev fund).
My proposal would be to go with the proposal by Rob and to re-evaluate semi-annually if the offered APY is still competitive or should be adjusted.
The idea of the Bonus pools is brilliant in my opinion, although I think it is smart to offer smaller size pools and introduce new pools periodically on the basis of how quickly the last pool sold out. This creates extra buzz and sense of urgency to lock tokens for a longer amount of time.
By the way; it seems that the team is willing to fund the bonus pools from the Foundation. Over time this could be adjusted to be funded out of tx-fees or other network income.