Discussion: Honey Issuance Policy

🍯 Honey
#21

@lkngtn Besides Honeyswap, where do you expect fees to come from? We’ve removed governor fees from celeste, as it will be funded by the pool in the first place, and there isn’t currently any fee mechanism for gardens, although that might be a good place to add some.

EDIT: Celeste could provide some fees if we set up a service to call settlePenalties() or draft() as and when they are needed to be called actually. For clarity, the fees we have removed from the original version, which are being funded by the pool, are those made from periodic (eg every 30 days) subscriptions, which are sent to all jurors that are currently available to resolve disputes (/align the stars or some ethereal interpretation :sweat_smile:).

4 Likes
#22

I think option 1 is an extreme measure and shouldn’t even be considered. It is better to keep it as is than make such a drastic change in the issuance policy.

I am personally a fan of the Fixed Issuance per Block for the mid term since there are pretty much no honey inflows to the common pool. On top of there being low inflows, we have no oversight body implemented to supervise and guarantee that a common pool funded project will secure the periodic deposits to the common pool. We need to vote and establish what should be the terms of a contract between a profit-maker project and the DAO.

I am a fan of the 3rd option as well, assuming the price of HNY is never taken into consideration and that we use the variables @lkngtn mentions. If the pool has enough HNY in % of the total supply we do not have to mint more. There is an issue in implementing this too soon if the available HNY in the pool goes below the threshold, at the same time the HNY gets minted so does the total supply increase. If the inflows of HNY don’t balance with the outflows we will get ourselves a compounding Inflation rate, and quick dilution of the HNY and likely decrease in price.
An issue with dynamic inflows is that since holders have no incentive to allow tokens to be minted, projects without a profit-focus or that are “too big” might not get the investment they require.

In conclusion, i think we should change towards a type 2 model with fixed issuance rates until we reach a point where the expected issuance rate (implying it’s predictable) with the type 3 model gets close to the type 2 model we implement. To determine the right amount to issue per year, and the threshold is not an easy problem to solve. But i believe we set the fixed rate and then determine the threshold when we feel the DAO is ready to move towards a Dynamic Rate.

At this point in time making predictions about what this year of inflows will be is way too hard, so i am not excited for early adoption of dynamic issuance.
I believe that in the future, a good way to minimize the problem of big holders not being particularly interested in passing expensive projects can be solved with a conjugation of two things: Quadratic Conviction Voting, leading to a lower power of the holders in the Pool, and a Bee Fund, an investment fund which would use the Conviction Voting we have now, which would allocate funds independently or with the Common-Pool to focus on for-profit projects that will direct dividends to the Fund and the Common Pool as per contract.

11 Likes
#23

I think its feasible to have dynamic HNY issuance, and at the same time a maximum inflation (or even inflation growth) tolerance.
I agree with luigy, i like fixed issuance for the early stages.
Having said that, dynamic issuance offers a huge array of possibilities and possibly the optimal one(s).
But as others stated above, there are also lots of very bad dynamic issuance policies. so an open discussion seems to me the best way to go about this, and that will take time.

The first option is the worse case scenario in my mind:

  • Changing the issuance to 0 in these early stages may stifle progress, since new users will tend to get less rewards, and thus feel less pull to participate in the project.
  • For the coming public, changing to 0 the issuance only to change it later again, looks like erratic behavior and unprofessional. ( in contrast, option 2 followed by option 3, gives enough flexibility to make a smooth transition between both, since issuance may be similar at the beginning)
  • Over time, the common pool can be emptied (unlikely tho)

i have two questions:

  • How could Quadratic Conviction Voting be practically applied? in my mind whales could simply divide their capital into different wallets. ( i think you can vote without a brightid verification, and even if it was necessary whales could bypass this fillter)
  • How is this Bee Fund different from the common pool? if big holders are not interested in a project in the common pool, why would it pass in this investment pool?
    If the requirements for projects are lowered in the investment pool to make it more likely to get approved, how do we make sure that these projects actually add value (or at least not decrease it)?
4 Likes
#24

  • Quadratic Conviction Voting will require a Sybil Resistance mechanism and currently we have BrightID for those purposes. Whales may be able to bypass such a resistance with collusion, but so can the lower staked members. On top of this, a proposal can be disputed in Celeste, so any party that was attempting to disrupt the Common Pool would have to break through the two systems which would make it extremely costly, both reputationally and financially.

  • A Bee Fund is different because it would only focus on profitable investments. Whereas the common pool will keep funding all sorts of programs that focus on the community and core features of 1hive like honeyswap, celeste, faucet. The difference in between the two pools is as i explained in this post, is that the votings are done differently. The Bee Fund is just basic conviction voting, whilst the Common Pool has the quadratic implementation. On top of that, you have to allocate Honey into the Bee Fund, so you will have an even bigger incentive to move Honey into the fund, now that the Common-Pool votes are quadratic. This is the mechanism that makes the bee fund interesting, and creates a strong incentive to stake in it if the proposals going into the Bee Fund are legitimately good. Worth mentioning that quadratic voting will lead to an harder threshold to get funded for bigger projects, pushing those into the Bee Fund as intended.

4 Likes
#25

I find number 1 to be the best Choice for the time being. Six weeks would be Plenty of time to come up with something without rushing into a long term decision.

#26

:raised_hands:t3: :raised_hands:t3:

#27

Do we have any official time frames for an issuance policy change? is there any proposal up for voting in the honeypot?

1 Like
#28

No, not yet. We should be coming back to this in about a week after farming is established

3 Likes
#29

I am not very technical and I do not have the knowledge to contribute to the technical discussion regarding issuance.

However, aside from the fantastic 1hive community and the ease/convenience/inexpensiveness of Honeyswap, the primary attraction of HNY to me is the low token supply. I and many others will likely be very turned off if the issuance rate is increased or if there is not a definitive cap set for the overall supply of HNY that will ever exist.

My proposal is to put a hard cap of 30,000 HNY that can ever be created. This means that if you want to start issuing rewards for content, contributions, participation, etc., then you will not be issuing whole HNY (eg, 1, 2, 5, etc.) but fractions (eg, 0.05, 0.1, etc.).

HNY is divisible to millionths of a decimal just like Bitcoin is. Keeping a low token supply will inherently increase the value of HNY and attract new investors and contributors. Increasing the token supply will be hugely aversive to me and other likeminded investors who are much more attracted to projects with low token supply that don’t have the ability to magically create new tokens and dump them on investors.

If I wanted to invest in an asset that is susceptible to inflation overtime, I would have just kept my money in USD. If anything, make HNY deflationary.

tl;dr - my proposal is to end any further discussion of increasing token issuance, hard cap the total supply of HNY at 30,000, and definitively state that there will never be more than 30,000 HNY.

6 Likes
#30

Hi @Pressure, I think you reconsidered this idea, seeing your recent posts about the issue and your proposal on the Discord channels.

Maybe you could explain here as well what changed your mind and what your current thoughts are?

1 Like
#31

Although ~60% annual inflation might be much, it’s not as if all that HNY are automatically put into circulation as they are being minted. The community still controls how HNY from the common pool is released into circulation. Now considering that some form of dilution is important if we are to have a healthy economy, i think doing anything now that limits the qty of HNY issued will actually be counterproductive.
If 1Hive is to continue with its philosophy, which is rewarding value with HNY, it means that the DAO must always have HNY in its vault so that it can continue funding its growth and continue with its culture of rewarding value which i believe is extremely crucial as 1Hive is still in its infancy. For that to happen it is either we devise new means of revenue that will ensure a constant and reasonable flow of HNY to the honeypot, or we continue to mint HNY.

IMO if we’ll continue to mint HNY which is what we are doing right now, then we have to be extremely cautious of how the issued HNY is released into circulation so that it won’t cause too much inflation and massively devalue HNY(this is obvious of course). And also we have to progressively slow down its minting over time(kinda like bitcoin) in such a way that with time it’ll take a considerable amount of time to even mint 1HNY
I might not be an expert in economics but one thing i’m certain of is that for something to qualify as money it has to have amongst other properties be a store of value, and for that to happen it has to be limited so that it can’t be reproduced at will diluting its value over time. What this simply means is that either we cap HNY issuance or we massively slow down its issuance to something like 1HNY per year or something. Just my 2 cents.

#32

People are pulling liquidy because honey price is falling. Honey price is falling because of general market conditions but also because the perception is honey has moved quite swiftly from an extremely low mint coin to a high mint / inflation coin. In my opinion to obtain liquidity, honey needs a maximum mint proposal.

An awful outcome would be a deflationary death cycle, where freebie hunters outnumber everyone else and endless votes for free honey are passed, which are worth less and less and more and more gets honey get printed. If we lose the exclusivity of honey, everything within the ecosystem will suffer, especially liquidity because impermanent loss of honey pairs will be guaranteed and the harvest product unwanted.

#33

Instead of incentivising lp’s by farming, why not give more in trading fees? I think because of the low fees, why would you choose to add liquidity here if your pool isn’t incentivised?

I think a solution, and attention grabber, would be to raise the amount paid out to lp’s in trading fees. Doing this would bring liquidity to all pools simultaneously and incentivise the lp’s to stay though turbulent times.

Just a late night thought I had

I think if fees paid for providing liquidity were more attractive than our direct competitor than the money moves this way.

#34

The fees for trading is exactly the same as uniswap. You pay 0.3% of your trade with every transaction which is paid out to the liquiity providers. The gas fees are unrelated.

2 Likes
#35

I understand that the payout is the same. I also understand the gas fees are much less. To entice liquidity to move from one platform to ours, we need to be better than uniswap in every way. 0.3% of trading fees isn’t very enticing considering they make that for just sitting where they are now.

Also, raising the percentage would naturally start filling the pairs with liquidity without giving away new honey. This solved the problem of which farm to incentivise next because all of them would now be incentivised. This will also stop the “why not my pool” syndrome.

Run a “special” for 30 days and triple the fees paid out to 1%, then drop it back to .5 to stay a couple points better than uniswap or revisit and adjust in 30 days.

I think it’s important to show we are faster, cheaper to use and pay better than any other platform out there.

#37

Is it possible and advantageous to offer a fee percentage that is based on time? Meaning the longer your an lp for a pool, the percentage you earn increases to a max %. This might keep lps longer than a 30 day duration compared to farming.

#39

@Pressure I agree with setting a 30,000 HNY cap and possibly posted this suggestion on the chopping block prematurely, but I think this is an important issue. There are many points to be made on the matter in regards to the previous thread:

  1. This is not a matter of issuance. While this effects issuance, the issuance mechanism would still need to be decided. Setting a hard cap would involve burning tokens minted beyond 30k.

  2. 30,000 hard cap is not arbitrary. With 25,377 token supply, 30k is the closest multiple of 10k, which would be favorable.

  3. The biggest argument for a hard cap is that we would protect our rights and vote in the Hive. Without a hard cap, there’s always the possibility of dilution, which is unappealing to serious investors and contributors to the community. With each additional token minted, the value of my votes diminish.

  4. HNY is divisible to the 18th place value. As the value of the token appreciates in tandem with the value of the community appreciating, individuals will still be able to partake and purchase what ever amount of HNY they wish to purchase.

In closing, setting a hard cap on the supply does not restrict the involvement of future participants. However, not setting a hard cap or setting a higher hard cap disproportionately dilutes the value of current participants.

I posted the suggestion/proposal (as I didn’t realize this thread was simultaneously occurring) Support if you agree: https://1hive.org/#/proposal/54

2 Likes
#40

Can you explain what isn’t arbitrary about 10000 as a multiple that we should be targeting?

This implies that those who come before should always have more power than those who come after, and that value created earlier in the life of the DAO should have more weight than that created later.

With each additional token minted, it’s possible for another person to have a vote. It’s possible for more voices to be heard.

Just because it’s technically feasible to buy 0.00000000001 HNY doesn’t mean people will want to own such a small fraction of anything. Even discounting the psychological barrier to owning such a small fraction there are logistical barriers too: quick, how many zeroes are in that? Is 0.000000000001 more, less, or the same number? What if we start measuring them in microHNY? Where does 0.0001 uHNY fit between those values?

I’m not sure this is evident. We decide how much we dilute our own value by process of vote, therefore we decide the correct proportion of value to dilute.

2 Likes
#41

This implies that those who come before should always have more power than those who come after, and that value created earlier in the life of the DAO should have more weight than that created later.

I don’t think this implication holds true. If I purchase 0.5 HNY and don’t keep up with/follow the community, a year later the HNY I purchased will be significantly lower because of the dilution. If issuance is capped, being an early adopter doesn’t guarantee that you will always have “more power”. Instead, it ensures that the value of said token purchased a year earlier will retain the same level of value relative to the community. Nothing is stopping a newcomer investor from purchasing more HNY from me than I originally purchased as an early adopter and thus having more voting power than me. The only thing, theoretically, stopping that person from purchasing or earning the same value as me is the presumed increase in value HNY would have appreciated over that period of time.

I am still torn about this topic, because with ongoing issuance we dilute the value held by the known whales, but by capping the maximum supply and removing issuance the everyday investor with less HNY can confidently hodl their HNY knowing it will not depreciate in value because of inflation.

I actually think it’s less fair to expect all members of 1Hive to actively be a part of the community indefinitely and at all times, without break, following their investment. Many of us have other careers and are not in this full-time. If someone invests 0.5 HNY now and doesn’t keep up with the community, their value will be significantly diluted in years from now if issuance and free distributions for community efforts/contributions are not controlled.

The reason I pulled my proposal for a $30,000 hard cap from the Honeypot is because I still need more time to think about what would be best for everyone. When I created this proposal, I only had the perspective of a newcomer/early investor. Having spent some time in this community and now heavily involved in multiple aspects of it, I don’t want the max. supply to be arbitrary, I want it to be meticulously calculated and well-planned so we all benefit long-term. That may mean a $30,000 hard cap is best, that may mean modifying the current issuance protocol is best, but at this point in time I am not sure what is best.

1 Like
#42

Before or at least in parallel to the hard cap decision we need to establish what we want our theoretical inflation/deflation rate to be over the next 10 years (obviously this can change but we should have an idea) then we can better determine the hard cap. I personally would love to see an inflationary followed by a deflationary then a very modest inflationary tapering off to a cap.

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