Dynamic APY for ATOM

Miscellaneous
1

Dynamic APY Adjustment Proposal for Cosmos Network

Abstract:
This proposal aims to introduce a dynamic Annual Percentage Yield (APY) adjustment mechanism within the Cosmos network. The proposed mechanism adjusts the APY based on the staking percentage and the price range of the native cryptocurrency. By implementing this mechanism, we aim to incentivize participation, align rewards with market conditions, and maintain a healthy balance between network security and economic incentives.

Motivation:

  1. Incentivizing participation: By adjusting the APY based on market conditions, we can provide appropriate rewards to different types of investors during bull and bear market cycles.
  2. Aligning rewards with market conditions: A dynamic APY allows us to offer higher rewards during bear markets, thereby supporting long-term investors and providing a cushion against potential losses.
  3. Balancing network security and economic incentives: By considering the staking percentage, we can ensure that the network remains secure while encouraging active participation based on the economic health of the network.

Proposal Details:

  1. Price range-based adjustment: Define specific price ranges for the native cryptocurrency (e.g., $1-$10, $11-$20, etc.).
  2. APY adjustment based on price range: Determine the APY adjustment percentage for each price range. Higher price ranges may lead to lower APY, while lower price ranges may result in higher APY.
  3. Staking percentage-based adjustment: Consider the staking percentage on the network to further adjust the APY. For example, APY decreases when staking percentage exceeds a certain threshold (e.g., 66.7%).
  4. Governance process: Establish a governance process to propose and vote on any changes to the APY adjustment mechanism. Ensure that community consensus drives decision-making.
  5. Implementation considerations: Collaborate with developers, validators, and token holders to design and implement the dynamic APY adjustment mechanism within the Cosmos network. Perform rigorous testing and auditing to ensure security and stability.

Expected Outcomes:

  1. Improved participation: The dynamic APY adjustment mechanism is expected to incentivize increased participation across different market conditions.
  2. Enhanced long-term investor rewards: Higher APY during bear markets would support long-term investors and encourage holding the native cryptocurrency.
  3. Network security: By considering the staking percentage, the mechanism will help maintain a secure network, as rewards adjust based on the level of participation.

Next Steps:

  1. Open discussions: Initiate community discussions to gather feedback and gauge the community’s interest and support for implementing the dynamic APY adjustment mechanism.
  2. Proposal refinement: Incorporate community feedback and refine the proposal, addressing any concerns or suggestions.
  3. Governance voting: Submit the proposal for governance voting within the Cosmos network to determine community consensus.
  4. Development and implementation: Collaborate with developers to design and implement the dynamic APY adjustment mechanism in a secure and audited manner.
  5. Testing and deployment: Thoroughly test the mechanism on testnets, ensuring it functions as intended and meets the desired objectives.
  6. Mainnet activation: Activate the dynamic APY adjustment mechanism on the Cosmos mainnet after successful testing and auditing.

Conclusion:
By implementing a dynamic APY adjustment mechanism based on both the staking percentage and the price range, we can enhance participation, align rewards with market conditions, and maintain a secure and economically incentivized Cosmos network. This proposal seeks community support and active engagement to refine and implement the mechanism, ensuring its successful integration within the Cosmos ecosystem.

1 Like
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should wait till the tokenomic revamp ?

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So as price increases, more people will be incentivized to unstake? Seems it would make the network less secure without any real benefit. Plus, many whales already sell off their staking rewards daily. Token might end up printing faster and dumping harder, creating a snowball effect in an unintended way.

I understand that limits can be put in place, but this seems like an unnecessary undertaking.

4

I see your point. But the lock up period is for 21 days so i doubt there would be a huge sell off. Im sure people have some ATOM unstaked just in case of price appreciation. Have a stash for taking profit and some for holding long term with staking.

Without this proposal people would still sell with major price appreciation. You have to understand some people are crypto enthusiasts, some are simply investors. I feel this space sometimes wanna live in Utopia and not accept the reality.

With high APY this hurts price appreciation, hence whales (and validators) selling off rewards. Lower that APY with price appreciation and the selling pressure wont be as bad. People will continue to stake, even if the APY drops a few percentage points per price range/bracket.

Cosmos has some of the highest APY of any blockchain. Gradually lowering the APY wont hurt the chain. Most validators will be against this because some of them have huge stakes making a decent income off staking. Whales could be validators as well.

There needs to be a healthy balance with validators and investors.

Cosmos has great tech. With mass adoption Validators will be rewarded through staking and price appreciation.

That high inflation, may turn off some traditional investors/financial institutions. Or smart money may continue to dump rewards on retail. Imagine how much money smart money could or is making by staking. This is still a risky asset class, so they will continue to dump rewards to mitigate risk. Lowering the APY gradually cools down some of that selling pressure.

5

Of course. May not need this proposal.

1 Like
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I am opposed to changes that make it necessary for the hub to be aware of the price of atom. That kind of thing gets really complicated.

7

I see your point, but they need some kind of deflationary mechanism or a max supply. The unlimited supply will hurt Cosmos in the long run.

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