Thanks for sharing your ideas. Very interesting. I celebrate that there is people studying and discussing these topics.
Some thoughts:
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How did you set those boundaries in the inflation rate (3%, 1.5%)?
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One important thing to think about is how the new inflation will affect the earnings for those who stake their assets. I understand that (in your scheme) the inflation rate is gradually decreasing, but let’s assume it’s currently at 3%. With 250 million ATOMs being bonded and 364 million ATOMs in circulation, a 3% inflation rate translates to a APR of around 4%. So, the net yield is roughly 1% per year. For most validators, this won’t be enough to cover their expenses, and potential delegators might not find it attractive either. For instance, a delegator could opt for US Treasury bonds with a 5% interest rate and significantly lower risk instead.
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Although less inflation may be desirable, as was pointed above, we need first to have other revenue sources to reward validators/delegators.
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I understand that your idea is that, once the inflation rate reaches 3%, these alternative sources of revenue will be already replacing it. According to your projection, this transition should occur within three years. The critical question here is whether it’s realistic to replace the current rewards from inflation with income from other sources in such a short time frame.
To provide a ballpark estimate, let’s perform some quick (though not highly accurate) calculations. In three years, the network would need to generate approximately $250 million in revenue from these alternative sources to fully replace the income currently derived from inflation (if we make the calculation for the first year, we need $170 million, or $210 million in 2 years). These calculations are based on the current inflation rate of 14.3%, a circulating supply of 364 million ATOMs, and a constant price of $7 per ATOM . Do you think that those goals are reachable? (by the way, We should double-check these numbers) -
I am not very convince about not having your scheme tied to the bond ratio. How do you plan to incentivize more staking if the bonded ratio falls to, e.g., 40%? Your scheme does not react to such a situation.