RFC: Proposal to burn 400M RING from Darwinia on-chain treasury.

[hackfisher]

The proposal to burn 400 million RING tokens from Darwinia's on-chain treasury addresses several critical points regarding the token economy and governance of the Darwinia network. Let's dissect the proposal for clarity and understanding:

Treasury Size and Governance Risks:

The Darwinia treasury currently holds over 800 million RING tokens, constituting a significant portion of the total token supply. Such a large treasury could pose management and governance risks if the existing mechanisms and practices for governance are not effective. The proposal suggests that burning 400 million tokens would mitigate some of these risks by reducing the treasury size to a more manageable level.

Sustainable Treasury Inflows:

Even after the proposed burn, the treasury will continue to receive 60% of new issuances each year. This rate is deemed sufficient to support community and ecosystem proposals. The continuous inflow ensures the treasury remains funded for its intended purposes without being excessively large.

Incentivizing the Community:

Burning a portion of the treasury tokens can serve as a significant incentive for the existing token holders. It shows a commitment to managing the token supply proactively, which can stimulate community enthusiasm. Token holders may perceive this action as beneficial to their interests, leading to increased engagement and participation in the ecosystem.

Combating Inflationary Pressures:

The proposal also addresses the issue of high inflation within the Darwinia ecosystem. By reducing the total supply through a burn, it counteracts the dilutive effects of inflation on token value. This action can help maintain or increase the perceived value of Darwinia's ecosystem investments, encouraging continued or even increased investment and involvement despite the inflationary pressures.

In summary, the proposal to burn 400 million RING tokens from the on-chain treasury is aimed at improving the governance structure, incentivizing community participation, and combating inflationary pressures within the Darwinia network. This approach suggests a strategic move to balance the token economy, support sustainable development of the ecosystem, and enhance overall confidence in the governance practices of the network.

[2xJDubs]

This is definitely an interesting idea as right now the treasury spend is minimal and there it a very large amount of value held by the treasury. Some sort of management does need to implemented. Currently the treasury brings in a minimum of 7.635M RING every month and that will increase each year as emissions increase for the next 10 years which will continue to lead to growth if the treasury is as under-utilized as it is now. Based on that I would like to suggest a different approach.

1. Burn 200M RING
2. Take 200M RING and setup an ecosystem fund with the direct idea of supporting the development of dapps and projects using Darwinia's tech. This fund can be administered in a different fashion than the treasury where the time it takes and support needed to receive funds is lower than it is now. Right now with the Governance Support we are seeing, it is a struggle to even get 0.5% of the supply voting, it would take 20 days to approve a Medium Spender Treasury track proposal. This is a long time and a lot of effort needed as shown by what has been needed to pass some current proposals.
3. Implement the treasury monthly burns. I propose something around 5M to 7M.

I feel the steps above will keep a healthy treasury that still can fund activities over time will not growing overly large again while also adding an ecosystem fund would be helpful to attract developers to use Darwinia's technology. Maybe some of the ecosystem fund could be delegated to active governance members that are trustworthy so voting doesn't fall as much back to the team.

[SasoLithops]

I warmly welcome burning of 400M Ring tokens. Although burning tokens from treasury can be a shot in the leg(as treasury is giving up a lot of income) I think Ring high inflation excuses such decision.

I find this to have positive outcome for:

• token holders (less Ring available, good for token value)
• governance (as it lowers total Ring ammount and quorum 0.5% can be reached more easily)
• inflation risk (although the new minted Ring ammount stays the same there is no more abundance of Ring waiting to be put on market)
• Whole Darwinia ecosystem as more attractive tokenomics can attract more new holders/users

I also welcome Jesse's idea of ecosystem fund I think we can start a new thread and ask for funds from the treasury(it will still have well over 400M Ring). I think this ecosystem fund can grow slowly in value with more traction it attracts so we don't burden the treasury with one time ammount.
With this decision there is no need for monthly burns, however we can always burn more in future if we are not successful in attracting new developers to Darwinia ecosystem. I think only if treasury funds are being used regulary we have a healthy project. And if ecosystem fund is the way to fund future development what will be the purpose of treasury?

[danairey]

Not a very detailed reply but I love this idea.

[fliks9999]

I support burning of 400M RING as it brings huge potential benefits for token holders, governance, and the darwinia ecosystem.

[JuneCribb]

Whenever I hear a “Burn”, all I can think of is an increase in price/ value.

If this will help manage and reduce the level of risk of funds in the treasury, it's all good.

Other opinions like that of Jesse can be considered too.

[TobiasAlfred]

Can't agree more about the burning plan,which will bring huge positive effect on the project.and meanwhile the dev should focus more on leading Darwinian into new hot developing areas instead of struggling on the polkadot platform.
And what's more important is that the project dev should focus more on marketing,and bring the Darwinian back on the table just like wormhole.

[dorbitalchemist]

TL;DR: Fundamentally opposed to burning. Agree with proposed dApp/project development platform (200M). Consider using 200M to port/restart Evolution Land for visibility and use case as GameFi is big.

Fundamentally opposed to burning 400M tokens. There is absolutely no guarantee that burning 400M RING will increase value/price - in fact, it likely will have no impact at all other than wasting $2M USD that could be better utilized (as partially proposed). This has been pretty well established, and burning only works in very specific cases.

Things that do drive a projects' (and its associated token) value: visibility and use cases.

@2xJDubs idea of an ecosystem fund is a very good one. I'd also recommend the following (if possible):

-Port Evolution Land to Darwinia and restart development. GameFi (or however you wish to refer to it) is already big, and is just going to get bigger. This would be great for visibility and showcasing, and I enjoyed the game (and I recall many others enjoying it)
-200M RING is sufficient to hire a small team of devs to build this out
-200M RING could also be allocated to dApp/project development as suggested

Simply throwing away resources doesn't seem prudent.

[hackfisher]

Firstly, Burn does not conflict with ecological support, as even after a burn of 4M, over 4M remains available as treasury reserves for ecological funding. Both strategies can be implemented concurrently. This proposal serves as feedback regarding the inefficient use of funds previously. The existence of unburned and ineffectively allocated funds introduces management and governance risks, including the risk of such funds being deployed inefficiently.

The initial deployment and investment into the ecosystem represent only the first, minor steps towards completion and success. Typically, service providers or application developers are required to convert to stable assets (e.g., USDT) on the market to cover development costs, salaries, etc. Absence of continual investment in Darwinia from the external ecosystem could lead to these RINGs being sold on the market, thereby affecting price expectations. Idle or inefficiently allocated funds pose a risk, prompting this proposal to advocate for the burning of funds that cannot be utilized effectively as a preferable solution.

Is every expenditure towards ecological applications or construction inherently beneficial? Certainly not. If an application or construction fails to enhance the utility or use cases for RING, or if it does not utilize Darwinia Msgport or Darwinia EVM+, it yields no benefit to Darwinia and might even be detrimental. This negative impact arises not only from the wastage of RINGs but also from the necessity for service providers or ecological constructions to meet development costs and salaries, compelling the sale of RINGs on the market, which in turn depresses RING prices and undermines investor confidence.

Moreover, echoing previous sentiments, given the current likelihood of a bull market cycle, I advocate for an extended cycle of ecological investment. However, financial resources constitute merely one aspect of this strategy. More critical is the engagement of suitable ecosystem participants whose plans demonstrate Product-Market Fit, ensuring their market survival. Their application products should enhance the utility of, or contribute to the burning of, RING. I oppose the indiscriminate allocation of Treasury funds with the mere press of a button in the hopes that use cases and utility will spontaneously emerge. Identifying these ecological builders, allowing them time to outline plans, find PMF, deliver applications, and cultivate a user base takes time. This is an ongoing process. We cannot and should not aim to allocate all funds at once. Proposing to burn those RINGs temporarily surplus to requirements to reduce management risk and investor concerns is precisely the recommendation of this proposal.

Note:
For discussions on the strategies and destinations for the deployment of treasury funds, please refer to the Requests for Proposals (RFPs) within the collaboration repository. Detailed suggestions or plans from ecosystem projects or DApps are welcome to be submitted there, either as an issue or a pull request.

[Laki389]

Of course, full support for burning 400M $ring.

Also, this prompted me to suggest something about Max Supply, which according to CoinGecko is 10B.
Is this amount still correct/relevant?
Because according to the former Darwinia papers, that amount should have been reached in 40 years.
But in Genepaper v4, there is a schedule for the next 100 years.

Also, I assume that there will always be a need for some inflation due to the staking mechanism? (even after those 40, 100 or whatever many years).

If this amount is no longer accurate, relevant, I would suggest getting off Coingecko as it just scares people.
The vast majority of people will just switch to another coin while looking at Coingecko/CMC, very few will search through documents and genepapers that that amount will happen in 100 years.
In a time of fast living and looking for the next meme/project that will make 100x.

But as I wrote, what would happen when there are 10B coins? How will staking take place? Where will the staking rewards come from?

But this may be off-topic and an occasion for a new discussion on a post specially opened for this.

[Emmanuel20242024]

ha ok, indeed. 😉

[AurevoirXavier]

Because according to the former Darwinia papers, that amount should have been reached in 40 years.
But in Genepaper v4, there is a schedule for the next 100 years.

I'm not sure where you saw this, but the code always specifies 100 years.

[Laki389]

I'm not sure where you saw this, but the code always specifies 100 years.

@AurevoirXavier Sorry for the late reply.
In this Darwinia Medium article from June 4th 2020.
https://darwinianetwork.medium.com/darwinia-native-token-ring-2edff029b20e

Because of this article, it has always been known throughout the community that the 10B Ring will be reached in 40 years.

[hackfisher]

I just checked the code around Jun 4th 2020, which should be v0.6.1

https://github.com/darwinia-network/darwinia-common/blob/ac9323464a676f5b575639e192999ecd20a81d62/frame/staking/src/inflation.rs#L20

https://github.com/darwinia-network/darwinia/tree/v0.6.1/runtime

At that time, it seems that only Crab was alive and Darwinia is not live yet, and the code indicate it is using the same formula in gene paper which actually can schedule to infinte years (far more than 100 years).

Before burn mechanism was introduced in DIP-3, it will reach 8.48 billion in 40 years(Can say around hard cap?).

The description in Medium article from June 4th 2020 was not so accurate, there was a word "around" but the writer put in the wrong place, it is possible the writer was trying to say "reach around hard cap in 40 years" instead of "reach hard cap in around 40 years".
(Note: unlike runtime or smart contracts, medium articles are not subjected to strict reviews and checks before being published. They could be at the level of an intern's work from a workgroup in 2020, especially considering there was no ChatGPT to help with translations back then. )

What I suggested was removing the Max Supply data in GoinGecko and CMC.

I completely agree with this suggestion. This cap setting has no practical significance but can easily cause a lot of misunderstandings. My feeling is that most people do not accurately understand the difference between current supply and max supply. Max supply is often mistakenly perceived as the actual supply, which can be alarming. Now, with the burn mechanism in place, it is even less likely to reach this number, and it may never reach it at all.

[SasoLithops]

Although I in a way agree with removal of max supply I think however having a Max supply it shows we don't have infinite supply.

That is an important factor in research.
For example XOR(Sora) has max supply infinite. They had 350.000 tokens in circulation for long time, now they have 90 billion. Huge inflation. Token went from cca 1000$ to 0.000015$ atm. All because no hard cap on max supply.

Point is if Max supply not written one can assume no hard cap.

"Problem" with us is we will not reach that max supply soon. Maybe we could republish a Medium article on this to remind/teach Darwinia community that although max supply high it should not be reached in 100+ years and will lower in time with burns.

[Laki389]

https://www.coingecko.com/en/coins/darwinia-network

[Emmanuel20242024]

totally for the burn especially if the treasury always receives 60% of the tokens engraved each year, this will clean up the unused treasury and avoid unnecessary or incorrect expenses. funds flow more intuitively towards promising or essential projects when there are fewer of them.

[spazcoin]

I would recommend looking for ways to generate revenue from these Darwinia Treasury assets while maintaining governance control over the tokens. (POL or I like to call it Treasury Owned Liquidity) Specifically single-sided deposits into protocols using Darwinia's XCM sibling accts on each chain.

That's already starting with DCDAO ref 2 deposit into the HydraDX Omnipool of 25M ($125k). Once that operation is complete and Darwinia community gains confidence in Omnipool deposits, I would recommend increasing it to 200M RING or $1M. Interlay and Astar are already moving that way.

The other TOL opportunity I've noticed is deposits into lending markets. Interlay has a money market and Hydra and Bifrost are launching one soon. Deep DEX liquidity depth is critical to enabling a larger useful lending market for each token. $1M of RING DEX depth would support a lending pool depth of $500k. Then Darwinia Treasury could deposit $100k-200k into any RING lending market and earn fees from borrowers.

So just keep this in mind as a possible use for 320M RING (200M to Omnipool, 40M into lending market on Interlay, HydraDX, Bifrost).
Note one side effect that this will increase the market cap/FDV of RING because tokens in the parachain Treasury acct don't count towards MC but DEX deposits do.

https://twitter.com/spazvt/status/1770665346933964920?t=3R197CvutxStxl_-dWSvlQ&s=19

[Emmanuel20242024]

excellent idea, also after the possibility of buying/selling the ring on hydraDX is it possible to do the same thing on acala, interlay, stellaswap, picasso, polkaswap..... this will also help to make the token ring more liquid and to publicize the project.

[spazcoin]

Most DEX work on Uniswap v2 or v3 model which use many liquidity pairs for tade routing. You must pool the two tokens into LP and then deposit that liquidity into the DEX. The negative for protocols and treasuries is that you'd have to sell a large amount of your token (depressing its price) in order to get the other token to pair with. (Like selling RING for DOT or USDT to make RING/DOT LP to deposit) The Omnipool design is unique that you only need to deposit a single token, making it ideal for treasures which hold a single token.

[JatinPathi]

Good initiative to burn the tokens but I dont think its necessary. Call it the good old dilemma of anything that is proposed, there will always be an opposite opinion. Dropping in some question and suggestions below.

Question #1.
Any reasons behind the management and governance risk? Who is in control of the treasury? Any governance lead currently for the DC DAO?

Suggestions:
#1
If 100% on-chain treasury pose a threat, how about creating an oversea DAO LLC and custodian/administrator followed by a bank A/C. This way it would be legal and hold people accountable. It's a long shot but worth it where the network's presence as a DAO can be done more easily throughout the world according to each country's regulations; i.e Events, activations, presence across various ETH and NFT events as a DAO.

#2
Burning 400M $ring is a lot! How about using the funds for cross community participations for more exposure and better marketing. Some examples include hosting ETH Global rounds, Gitcoin Grants etc.