If you’re referring to USD value, this is not what I’m suggesting. Macro economics are far too powerful for that. But it is exactly what I’m suggesting if you are referring to ATOM’s performance compared to other tokens. Just not within the timeframes you’re suggesting (e.g. not as a direct response to inflation a few months ago), but over multi-year periods.
This is a valid concern, but there are several ways to address this:
- Increase minimum commission rate
- Slow down the speed with which inflation decreases (i.e. give us more time)
- Build a stability reserve fund for operational costs during a bear market with funds saved from a bull market (working on it!)
- Tie inflation rate to a minimum USD ATOM price: e.g. if inflation is 3%, but lowest ~20 validators earn only 50$ a month on average, start increasing inflation until a max cap is reached (somewhat controversial ideal, not a fan)
- Change the minimum inflation to a higher amount in this current proposal
- Enable options to change the minimum inflation in case validators aren’t earning enough
Almost all of these are better options than not stepping away from the current model. I actually don’t think we’ll need most of these options in a few years from now, but if we did, I would be fairly confident to say the ATOM project has failed.
Keep in mind we’re going to 7% inflation before 2025 anyway at the current model, assuming we stay over 67% bond (which is logical given Liquid Staking). The discussion is really more about how we want to get there, and whether 1.5% is too low or not. @effortcapital might be better suited to give you some details here in terms of validator income at different price points. This might be helpful for our shared understanding here. Nobody wants validators to operate at a loss!
Yes, of course, there is a correlation specifically on the Hub because we built it into the software. However, this only explicitly tells us that a higher bonding ratio results in a lower inflation rate, NOT that a higher inflation rate would automatically mean more people would stake. The correlation as enforced by this software mechanism provides no data points on human behaviour.
The whole point of this conversation is about what happens when you don’t use this mechanism. The chart I shared tells you what happens. Nothing happens.
And yes, this is different per chain as @jBQ mentions, but there are plenty of chains included that don’t have heavy incentive programs, some of which have a similar mechanism to the Hub, and some that have inflation untied to the bonding ratio. Some have super high inflation, some very low inflation.
Unfortunately I don’t have access to historical bonding ratio data But I should get current staking APR / bonding ratio ratio soon, as it’s more useful.