21M FCT Hard cap

I have modelled FCT inflation with hard cap 21,000,000 FCT:

The inflation limit mechanism used:
1) 21 mln FCT hard cap
2) X% of remaining tokens (hard cap — circ. supply) are issued as ANO rewards/grants (I use annual recalculation of rewards in model for simplicity, in real implementation it could happen each X blocks — days, weeks, months)
3) FCT burns increase remaining tokens and inflation
4) There are 4 models — no burns, stable burn rate, linear burn increase, parabolic burn increase

This model IS compatible with:
a) Governance/Executive Committee update
b) Existing grant pool design
c) Existing ANO rewards / efficiency model
d) Idea of allocating FCT for Tier 1 exchange to get listed there
e) Idea of allocating FCT for Executive Committee for backpay funding of public roadmap milestones

I think this model may be implemented into factomd without hard fork (only auth nodes have to be upgraded to change inflation model) and without significant changes to codebase. Core Developers' opinions are welcome.
 
@Anton Ilzheev thanks for posting. Could you explain your thoughts on why burns are leading to an increase of remaining tokens? Isn't it the idea of the current model that burns lead to more scarcity and thus higher token price? Why would we step away from that part of the tokenomics?

Could you for the rest explain your thoughts on how this new model is going to influence token price short term and long term?

Thanks!
 
Could you explain your thoughts on why burns are leading to an increase of remaining tokens?
In proposed model ANOs + grant pool receive 8% of remaining supply.
Remaining supply = hard cap (21,000,000 FCT) minus circulating supply.
All FCT burns decreases circulating supply, and so increase remaining supply.

Isn't it the idea of the current model that burns lead to more scarcity and thus higher token price?
Yes, it is. And proposed model is in line with it also — e.g. 100,000 FCT burned — circulating supply reduces by 100K FCT, creating scarcity and higher token price.

Why would we step away from that part of the tokenomics?
Why do you decide we are stepping away from this? This part of tokenomics remains to be unchanged.

Could you for the rest explain your thoughts on how this new model is going to influence token price short term and long term?
The closer we are to the hard cap, the less FCT will be received by ANOs and grant pool — this leads to reducing selling pressure, increasing scarcity of rewards, increasing value of existing tokens, and higher token price.
 
Thanks for the answers. And what is the reason we don't go to 16 million as suggested by others, other than copying a do called 'golden standard' from BTC? I fear 21 million is still not leading to perceived urgency to buy the token short term for quite some time.
 
Hi Anton. Thanks for taking the time to put this document together.

What is the likelyhood of a linear/exponential burn rate? What would be the pre-requisite for something like this to happen?

I think the FCT price is going to have a big premium for a long while vs the actual usage which means that the burn rate is probably going to be fairly low for a long while.

I personally like putting a hard cap on the inflation as I think perpetual inflation is a turn off for most and in reality our runaway is a lot shorter than a few years.
 
And what is the reason we don't go to 16 million as suggested by others, other than copying a do called 'golden standard' from BTC?
You can copy and play with the table/model I shared in the first post.

There are several reasons for 21 mln:

1) We want reduce ANO rewards slightly over time, not instantly split it twice or thrice (in model 10 mln start supply, 11 mln remaining supply, 8% in rewards annually are in line what ANOs receive now — so we start from what we have, and slightly go down in terms of rewards). It's important to avoid a sharp drop in rewards in the beginning (when FCT price is not high yet) to keep the network stable, and what is more important to get this proposal approved by other ANOs :)

2) We want to allocate some funds — let's say 1 mln FCT for Tier 1 exchange and 3 mln FCT for Executive Committee — from the remaining supply. Current circ supply is 9-10 mln FCT.
Considering this numbers and p.1 above, 16 mln max supply doesn't fit well.

3) 21 mln is a golden standard for hard cap supply in crypto and people will be comparing FCT to BTC.
 
3) 21 mln is a golden standard for supply in crypto and people will be comparing FCT to BTC.
Overall I applaud a hardcap and would support this.

I do think that the 21 million number needs some more thought. Copying BTC feels gimmicky. Anything less than 21 million still has the same effect, if not better because psychologically a number like 19.95 million sounds far less than say 20 million.
 
I think the FCT price is going to have a big premium for a long while vs the actual usage which means that the burn rate is probably going to be fairly low for a long while.
Yeah, that's fair notice.

What is the likelyhood of a linear/exponential burn rate? What would be the pre-requisite for something like this to happen?
I don't know. Proposal is not about FCT potential burns.
It's also very clear from the model, that only exponential burn rate will be able to significantly increase ANO rewards.
 
I’d like to see a 5 year plan in place to get Factom 2.0 to a floor price that sustains the network.

Let’s combine a supply cap with a strategy and roadmap - leave enough room for 5 years of inflation after reserving a few million from the endowment.

That’s around 16m supply cap. That sends a strong bullish message to investors.
 
If we want FCT to rise, we need a stop to sell pressure over the next year. Inflation needs to be cut down quickly.

Unless the cap is near-term, it just doesn’t matter. It’s all good saying “my inflation tends to zero over infinity time”, but investors don’t plan to be infinity years old.

Furlough teams. Reduce the network and outgoings, and ramp infrastructure up again when Factom 2.0 is deployed.

Find fiat investors at $1.5, for the reserved tokens so not to flood the market. That covers a years infra costs upfront, tier 1 exchange and core dev.

Then when we restart - make inflation 20% of remaining endowment.

16m cap. 3m reserved. 4m left.

0 inflation first year.
800k 2nd year.
640k 3rd year.
512k 4th year.
410k 5th year.

This would be a meaningful reduction in sell pressure over time whilst giving us funds to get to that 5 year goal.

From there, we are supposed to be burning enough tokens to maintain the remaining endowment and therefore 410k inflation rate; sufficient to run the network.
 
Agree that we need an implementation that also short term impacts the token, not only long term with a status quo for the first year(s) to come.
 
Only hard cap is not sufficient change, more is needed otherwise you wont feel any effects in the next 2 years. That why i support Colins idea, which is more radical but is really needed in my opinion. A combination of limiting inflation, reducing ANOs and hard cap will do. Second token offering also seems very interesting
 
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