Inflation and Staking - the details


#1

As reported by @rawzeee: Tezos will use a non-dilutive inflationary policy set at a rate of around 5%. Non-dilutive means that if 100% of the network staked, 100% of the network would receive about 5% more tezzies each year, thus making the effect of the inflation neutral. If people do not choose to stake but you do, you will earn proportionally more than the inflation rate and thus be rewarded on net. Conversely, if you are selected to validate block(s) and do not for the entire year, you will not receive any additional tezzies and your stake will proportionally shrink by about 5%. Delegates are likely to share some of their block reward in a bid to attract more delegation. This can be amended by stakeholder vote in the future.


#2

As a total newcomer to Crypto , i would like to get my head around this statement , how do we know if the network is 100% staked ? also what is invloved in validating blocks


#3

There is much to still be detailed on the Staking and Validation specifics, but in general terms, this is what I have gathered from the various conversations. Please provide corrected information if you have it:

You will need to perform the following to Stake and Validate:

  1. Control some number of Tezzies - rumored to be 10,000
  2. Pledge those Tezzies to the staking process for a “cycle” which is rumored to be about 90 days (whitepaper said 1 year, but that will change). During that cycle period, you will not have access to your Tezzies.
  3. Keep your staked Tezzies connected to the internet, so that blockchain calculations can be run on your computer (not processor intensive)
  4. In doing this, you will be rewarded at the conclusion of the cycle with ~5% annualized (probably prorated) return. So your 10k Tezzie stake will be worth 10.5k if you stake for a calendar year.

Not all Tezzies will be staked. There will be a mechanism to delegate your Tezzie staking rights to someone else, and you may get some of the return based on your agreement. Some people will have less than the minimum tezzie staking requirement, and some people wont be bothered. So there will be less than 100% staked, and this means that the overall inflation rate will be less than 5% across the economy.

Also, I believe you will need to have your Tezzies staked to be eligible to vote for protocol changes.


#4

One thing that still need clarity (at least to me) is the min number of TZ required to stake (I believe) is based on the total amount of Tezzies available (estimated at 1billion). If at the end that total is below or above 1B will the required roll or number of TZ to stake adjust?


#5

Arthur Breitman gave more details about staking Tez in this thread:

Here is what he said about the amount needed to stake:

“As it stands 1/1000000 of the total original amount in circulation, but thinking of making it 1/10000000.”

So at this point, a roll would be around 650 - 700 Tez.


#6

10,000 would be outrageously too high. I hope they come to a more reasonable number! If there’s mass adoption you wouldn’t want the beginning value required to stake be 5,000$! (I wouldn’t think)


#7

More like 5000 XTZ to stake. 10000 is too high if they decided


#8

When you’re staking, does that count as “activity” on your wallet? The reason I’m asking is, I recall reading about tokens getting destroyed if a wallet is inactive for a year.


#9

@murbard made a statement that wallet destruction would not be implemented. But inactive tokens would be taken out of the voting role until the wallet was reactivated.


#10

That’s great news! What are the various ways we would be able to keep the XTZ tokens active?


#12

If my voting Tez and staking Tez are one and the same, then staking pool owners may work to ‘buy’ my votes. With this information users of staking pools should demand access to voting their individual tokens especially if the pool is demanding a fee.


#13

Please keep it around 600 else my tzOven will gather dust.


#14

I like what moonbaker is saying. Two years from now when Tezzies are trading at $1000 / XTZ :wink: just having 1 whole Tezzie should be enough to stake.


#15

Personally, I would prefer the number to be closer to 2%. 5% is high to incur on anyone not able/or willing to participate in the staking.


#16

I agree with you. I don’t count myself eligible in the staking because of internet and power supply issues in my country


#17

Note that it would be possible for someone to stake on the cloud. Ie: you start a Linux virtual server on say DigitalOcean cloud service where you install tezos software and register it for staking. And this can be done without having to store your tezzies private keys on this cloud server, so security is not compromised. But still, this means spending monthly fees to such cloud service for the bandwidth and computation, hence the need for being paid back. It is indeed difficult to evaluate the costs, but the compensation will be a combo of fixed amount (the new tezzies created) and variable (transaction fees which will be charged based on market forces of bandwidth, and computation - well I suppose they will be variable).

I understand the principle in not capping the creation of tezzies : it is a way to make passive holders pay the stakers for the benefit of securing the network. One can argue that this might be a problem for Bitcoin once all coins have been mined in 2140 where miners only get rewarded via transaction fees. This means all those who are holding their coins (and hence not generating transactions) are not compensating (in dilution or other means) to miners, only the folks making transactions are doing so. Perhaps not as difficult a problem, but the burden will all be on those making transactions. So no cap is justifiable in some way. Beside, isn’t gold not really cap when you consider our technology making it possible to mine in more difficult places than before (Have you seen these giant mile deep open pits - impossible during the roman times)

Thinking more, I can see businesses popping up to create dedicated tezos staking cloud computing facility for many tezzies holder to use. This means the bandwidth usage is combined since we are talking about sharing transactions, hence economy of scale on that factor - only the other factor left: computation power to execute smart contract - which fees will cover. Perhaps that’s just another argument against 5% (but rather 2%).

And yes, there is this too:
Delegated PoS means that Tezos token holders can delegate someone else to validate on their behalf if they do not wish to participate in staking directly (e.g. lack of time, knowledge, or resources).


#18

Nicely put together…it all sounds like a messiah to all my worries.

Thanks mate


#19

Yep, already working on that business model.

As of right now, it will be based on Joyent’s Triton/SmartOS containers, secure and hardened, a benefit for this type of work.

But don’t tell anyone okay.

PS
Your book, The Book of Satoshi is a must read for all blockheads.

7457206_6_l


#20

Cool!
Ok I won’t tell anyone. :slight_smile:

PS: Thanks!


#21

I don’t know how easy it will be to reduce the inflation percentage. Inflation of 5% benefits those who have larger positions in Tezos and I assume more technical acumen. Don’t see that they would vote to voluntarily reduce if they are gaining a bigger piece of the pie while others are diluted.