WEP 4(rev.2): Block Reward and Community Driven Monetary Policy

Author Andrey Andreev <aandreev@wavesplatform.com >
Last update 2019-08-29

We have revised the proposal, added governance (remuneration management by WAVES holders), and described the motivation and goals in more detail.

Abstract

  • We are proposing the introduction of a reward for blocks’ generators.
  • This reward will be added to the blockchain with additional WAVES tokens.
  • The amount of the reward will be regulated by miners’ voting.

Motivation and Purposes

The Waves economic system is designed so that free funds can be withheld from circulation, thus increasing demand for WAVES tokens. This is possible due to the leasing mechanism.

At the moment, however, this mechanism does not work well enough. Holders of WAVES do not seek to use available funds for staking and leasing sufficiently, because leasing does not generate much income. As of July 2019, income from staking (and leasing with 100% payments from node owners) was less than 1% per annum in WAVES.

We want to increase interest in staking and leasing and increase demand for WAVES by introducing a decentralized monetary policy that will increase the value of WAVES. This will be achieved by introducing a miner reward, which will be emitted for each generated block.

The reward amount will be managed by the Waves community through voting, thus introducing a decentralized monetary policy management.

Specification

1) Activation of functionality
When activating the functionality, the value of the miner’s reward should be set to N WAVES.
The initial value (when the functionality is activated) is N = 6 WAVES.

N = current miner’s reward

2) Changing the total amount of WAVES tokens
The total amount of WAVES tokens to be added to the miner’s reward should be increased by the amount of emitted coins.

3) Use of the coins by the miner
A miner receives a reward when they create a key block. The miner must be able to use the received reward in the first transaction of the first microblock created after the key block.

4) Interest and voting periods
After activation of this functionality for the period of T blocks, miners should be paid a fixed amount of reward. For V blocks before the end of the period, a vote must be taken among miners to change the amount of reward. At the end of the voting period ( V ), the results are applied for a new period of ( T ) blocks and are not changed until the end of the period. The new period comes every T blocks.

T - Period of validity of voting results. (100,000 blocks)
V – Voting period. (100,000 blocks)

5) Voting for the change in the amount of reward
During the voting period ( V blocks), miners should have the option to vote for a change in the reward amount by adding the proposed value of the change in the reward to the block header. It is not a negative number multiple of M that is accepted as a vote. This number describes the amount of reward in WAVES tokens, which, in the miner’s opinion, should be accrued when the block is created.

6) Determining the amount of reward
After the end of the voting period, the votes must be counted according to the following rules:
The miner’s ( K ) voice is compared to the current reward ( N ) in 3 categories:

  • (Up) For increasing the amount of reward - K > N
  • (Save) For keeping the current amount of reward - K = N
  • (Down) For reduction of the amount of reward - K < N

The proportion of each category in relation to all votes is calculated. If more than 50% of miners have voted for an increase or reduction in the amount of reward, the amount of reward for the new period ( T ) shall be changed to M . In other cases, the current amount of reward shall be saved until the next period.

  • (Up) For increasing the amount of reward - N + M = N_new
  • (Down) For reduction of the amount of reward - N - M = N_new

If a miner votes with a ( K ) that is not a multiplicity of 0.5 WAVES, the block with that vote should be considered invalid and not accepted by blockchain.

M – Step of measurement of miner reward (0.5 WAVES)

N_new – Amount of reward after voting

The amount of reward cannot be lower than 0 WAVES.

7) REST API methods
The following REST API method must be provided:

  • Current miner’s reward
  • Amount of blocks before the next vote

Possibly needed methods:

  • Miner reward and the period of validity of this reward at the specified height
  • Current total supply of the WAVES tokens
  • The supply of the WAVES tokens at the specified height

Designations used

Designation Value Description
N On feature activation, 6 WAVES. Further values are determined by voting. Current miner reward amount
T 100,000 blocks Period of validity of voting results
V 10,000 blocks Voting period
M 0.5 WAVES Step of measurement of miner reward
N_new Further values are determined by voting. Amount of reward after voting

Rationale

With the introduction of the reward for block generators, the generation of blocks becomes profitable, as we estimate it will bring in 4.5% of annual income in WAVES, and in the beginning, up to 7.2%. This will attract new blocks’ generators (i.e. new nodes) into the Waves ecosystem and new participants willing to earn money. This should increase the demand for WAVES.

We expect that funds that were previously held on the exchanges will be rather staked or leased, which will reduce the supply of WAVES. This should activate the deflationary mechanisms of the Waves ecosystem.

We believe that most of the funds received as a reward for the block generation will not be put into circulation, but will be used for re-stacking and leasing. This proposition is based on the fact that, unlike Proof of Work, Proof of Stake does not require expensive computing equipment to generate blocks. Over the past month, more than 170 Mainnet nodes were generating blocks, and currently, they are not paid for block generation. They will not have the need to sell the rewarded WAVES, and the best strategy to increase their income is to re-stake/lease.

We chose a target annual revenue of 5% in WAVES to make staking/leasing attractive.

At the time of writing, the total generating balance is about 43.6 million WAVES. We expect a rapid increase in generating balance by 10-15 million WAVES after a successful vote for this functionality. Therefore, in order to ensure the target revenue of 5% per annum, we have chosen the reward for generating block 6 WAVES in the near future. (See the table below.)

Generating Balance, mil. WAVES

Block reward, WAVES 43,6 55 60 70
6 7.23% 5.73% 5.26% 4.51%
5 6.03% 4.78% 4.38% 3.75%
4 4.82% 3.82% 3.50% 3.00%

In order to manage the profitability of staking and leasing by WAVES holders, we are introducing a mechanism for selecting the amount of blocks generating reward, which is a community-driven monetary policy. Holders of WAVES will have the opportunity to vote to change the reward amount for generating the block.

Changes

  • In the voting the miner specifies an integer value of the amount of reward.
  • Voting period of validity
  • Period of validity of voting results
  • To change the amount of reward over 50% of votes are required
5 Likes

Looks good, but I’d prefer a possibility to stop the additional reward during one voting period.

It is possible that at some point N(i+1) = N(i) + M * K(D) decreases. Waves should be burned then

Is there any documentation on how to put data in the block header?

Added description “Threshold values of the amount of reward”.

1 Like

All about MRT function but MRT not used. Thanks for that. I lost everything because of Waves. Mrt was my last investment.

I liked the idea.
IMO, max reward is too much (8 waves). I am worry about centralization and risk of centralized exchanges. Lately binance started to distrubute staking revenue to their costumers. We will see many of them involved in future. It is dangerous to have such a huge inflational rate potential which will be voted by miners.
Waves didn’t come with inflation idea and you have to keep the inflation rate low as you can. Also don’t think we need 8 waves per block. Just decrease the max limit with 5 Waves.

Voting idea looks nice, but I suggest a few adjustments:

  1. Voting for numeric parameter (miner reward) using arithmetic mean is not the best choice. I suggest to use median voting in this case.
  2. I propose miner to specify target value, not its change. E.g. if I am sure reward should be 5 WAVES per block I would prefer to specify this 5 constant in my node’s config and not to change. Currently depending on current value I’ll have to write there +3 or -2, and change it after every period.
  3. 250000 and 150000 voting intervals look too long, I’d prefer more dynamic system.
  4. 8 WAVES max value looks rather artificial, if we make miners responsible for determining reward level, why not to let them choose any level they want? I would limit the speed of grow, e.g. max increase per period is +2 WAVES.
  5. Why not to start with initial reward level 0 WAVES? This looks reasonable since it is actually current reward level.
3 Likes

We don’t need such a huge amount to incentivize miners. It can lead to make rich richer. Waves didn’t built with inflation you have to solve the incentivization problem with less damage(low inflation).
We need incentivization for miners and sustainable network. The best solution is inflation (for now). Also we know the inflation not fully supported by community. That’s why you have to do it with low inflation. If you won’t burn the fees , 2-3 waves per block quite enough. Sasha never did things normal. First he was against inflation, today he is ok with 8 waves per block. :slight_smile: Do things without breaking ppl hearts.

1 Like

Inflation is not a sustainable incentive!
you are thinking only in the short term, most people have kept their waves and leased exactly because they have no inflation, because it is an efficient and constantly developing platform

you are thinking only with emotions, just because she had such strong devaluation you think you have no inventive to keep holding waves and running full nodes

this will be a tragedy, I hope you don’t even put it to be voted!
You guys who want inflation are losing their minds

Inflation: more expensive “tax” than we pay!
“Inflation is taxation without legislation”

No matter if this inflation is low, it will always erode the platform’s entire monetary ecosystem in the long run.
People will lose confidence in the platform if such changes are made!
Changing the rules of the game with him running is a very wicked scam!

Be aware that this is not a FORCED currency!

Dislike! Show me at least one crypto without additional reward in block.

1 Like

In long run deflation model proved unsustainable. Or we must wait another 3 years. Or may be 6?

1 Like

Guys I invested in waves from beginning exactly of the reason we do not have inflation at all, no emission of new coins - inflation in the long run makes prices of waves lower on the market, which makes transactions more cheap but does not increase amount of transactions (they are cheap now as well) and in the end reward in fiat will be lower. Where is the guarantee that earned waves won’t be used to flood the market with newly earned waves? If we compare annual increase in waves only then yes you have imaginary increase on year basis of about 5% but amount of waves in circulation will be also increased by 5% which probably will be on the market. Now small calculation: If waves team proposes that with this change about of 10% Waves will come and start mining also meaning that the same 10% will be back on exchanges because of the inflation we have on the price of waves token its self. Who is going to uphold the earned waves when the price on currency dropping and continue to drop by the means of inflation?

I still believe platform should continue to work on attracting new users to platform who will create new transactions - this is the only way of making waves more profitable without introducing inflation. Don’t forget that even Etherium is thinking also that amount of Etherium is very high already.

If you still are going to continue with this proposal as it is i’ll vote against it even it means to receive less income in near future but in the long run with increase of transactions community will win and demand for waves will increase. Don’t forget that we can increase cost of transactions for now as a mean of reward increase. As the price of the waves for fiat is at it lowest its just a proper way to deal with it - let’s say we fix minimal transaction cost to some level in fiat, and that’s it - we have sufficient model which will allow us to decrease fees if required, but minimal level cpuld be set (ie at half of highest fiat value, meaning that tx feed could be increased right now by 6 times - which will have absolutely same effect on amount of reward lessors will receive and as we price of waves rises, fee of transaction decreases untill waves are at its fiat level and after that transaction will stay on fiat level with possible miner voting to increase this level)

I might consider to vote in favor for inflation option only if:

  • amount of key blocks emitting new waves will be limited by 25 blocks per day per node (that way will at least increase decentralization) - meaning that right now only about 1/3 of all generated block will create new waves, but the urge for decentralization will also be increased (similar idea as a node program support).
  • emitted waves can be transferred/sent/spent only after 100-250k blocks but will participate in generation of new blocks right after they are created. That makes a mechanics to use waves to generate more waves and probably that waves will be left for generation.
  • we can vote only in favor of decrease of rewards. We cannot have a model where we could destroy deflation system.
  • amount of waves created per block could be lower than 6 waves (2-3?). 6% per year is damn very high…

And also please explain what means:
3) Use of the coins by the miner
A miner receives a reward when they create a key block. The miner must be able to use the received reward in the first transaction of the first microblock created after the key block.

Does that mean that miner should distribute the created coins right after they are created?

2 Likes

I agree that increasing the earnings of miners is necessary by increasing the number of transactions.

Which voting period(V) is correct?
100,000 blocks (in “4) Interest and voting periods”) <= Is this typo?
10,000 blocks (in “Designations used”)

Even if the inflation system was like you proposed, it would still be evil!

The idea was to propose a finite inflatory model, but i totaly agree that inflation sux and other mean should be used like:

  • node programm support
  • distribute DEX fees to nodes (partial)
  • MRT buy back

The only progress there could be is via mass adoptation = a lot of transactions.