Firo Tokenomics Discussion with upcoming Halving

With the upcoming supply halving in mid September of this year, many community members have raised whether the block reward distribution or tokenomics of Firo will be revisited. The last time this was done was in May 2022.

Currently it is divided as follows:

50% Masternodes
25% Miners
15% Dev reward
10% Community Fund

Based on the current code, if no change is made, the development fund and community fund will be ceased and the block reward will go 50% to miners and 50% to masternodes.

This was a deliberate decision to ensure that if there is any extension of the development or community fund, it would require community’s support and feedback rather than just maintaining the existing division.

There are three questions that need to be answered:

1. What should the block division be after the halving?
This is self-explanatory and basically regulates what should be the respective percentages between masternodes, miners, development fund and community fund or should the funds exist at all.

2. Should the existing halving schedule be maintained or should it be relooked at?
We follow Bitcoin’s halving schedule which halves every 4 years. While this served Bitcoin well and was suitable when there was no ecosystem at all, the industry has changed and most projects now have faster emission cycles and are already almost fully emitted with only a tail emission remaining (for e.g. XMR).
Also to consider whether halvings every 4 years are correct or instead adopt a more gradual reduction of supply.

3. Whether we should consider adopting a tail emission with/without dynamic blocks
Personally, while this problem is not going to happen for a while, it would be good to answer this sooner rather than later. I strongly believe in the need for a tail emission to have stable security instead of one that fluctuates based on the transaction volume which ebbs and wanes. The only value of not having a tail emission is to say ‘fixed supply’ which is a strong narrative for many people. Bitcoin will face this problem sooner than us so another option is just to wait for them to face those issues and then adapt it then.

Before anyone weighs in as this is a very important decision, I hope everyone considers the following:

  1. Thinking that masternodes will become unprofitable if no change is done is not necessarily true. Masternodes rewards are a fixed amount spread across the number of masternodes. If hosting a masternode becomes unprofitable, they will drop off and economic equilibrium will be re-established as now less masternodes are now sharing the reward. We currently have over 4000 active masternodes, even in the worst case, dropping to 2000 still provides good security.

  2. Development of Spark has been delivered and the most difficult parts of our tech stack have been more or less delivered. If core team’s fund is extended, this will lead to the development of Spats (Spark Assets), the transition of mining/masternode rewards to Spark and/or curve trees (that will give global anon sets). The community needs to decide whether it values these additions or should development move to pure maintenance which requires a much smaller budget.

  3. I would advocate against removing mining rewards completely. While their role in the ecosystem has diminished for quite a few years now, to move to a pure masternode model requires a lot of technical challenges since the masternode model was always designed to be together with PoW. While it might be tempting to move to a PoS model or so, I personally think our development time is better spent on developing game-changing features that improve the privacy and utility of Firo (such as Spats and Curve Trees). I forsee that some mining pools would drop support of Firo with the reduced mining rewards in any case.

  4. Community should weigh whether it wishes to continue the Community Fund and whether it values its role as an independent body outside the core team. While a lot of its funds have been used in supporting the core team, it has funded good proposals such as Vosto Emisio’s graphic design proposal which forms the basis of our social media postings and also various audits. Should the Community Fund Committee have a bigger role in governance?

I have many other thoughts on the issue but will post this first to start the ball rolling!

Additional thoughts:

  1. HashCloak is open to doing an economics audit to examine the impact of various block reward allocations. This should start soon-ish and would be funded from the funds in the MAGIC Firo Fund that is separate from the core team budget.

  2. One way to balance keeping core development funded while making sure that if Firo maintains a certain average price over a certain period (let’s say 6 months), then core will commit to do a hard fork to reduce the development fund and redistribute it proportionately to the miners/masternodes/community fund.

This gives incentives for the community to also support the price increase without feeling that core is being enriched by it (which is never the intention).

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One of the things worth considering that I ran by HashCloak is whether it would be worthwhile to have an economics audit to determine the effects of masternode numbers to security and the impact of various block reward divisions. While the decision ultimately rests with the community, it would at least run some simulations and have some data to base it off on. We can apply to Magic Grants to use some of the funds in there to do this if the community thinks it’s helpful.

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I know it may not be a popular idea, but it may make sense to lower the CFC % and route it to the Dev reward, as there’s generally a deficit due to ever shifting market conditions.

Perhaps we could have 20% Dev reward and 5% Community fund? and have the excess fall back to the community fund?

Realistically keeping the network maintained and iterating should be a bigger focus.

All of this is my opinion*

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I can only say keep it up and don’t give up. One day Firo will be a privacy pioneer :fire::fire::fire:.

Whatever the outcome, I will remain as firo holder :sunglasses::+1:

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We do not know what the Firo price will be when halving. We cannot risk financing the development, as well as paying the Core team, so I suggest increasing the Dev reward by 10%, by reducing Miners and CFC by 5%. Masternodes reward as it is now. I see the future distribution of the block as follows:

50% Masternodes
20% Miners
25% Dev reward
5% Community Fund

Additional study is needed on other issues raised.

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50% Masternodes
25% Miners
15% Dev reward
10% Community Fund

Keep above for another 4 years.

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Reducing miners rewards did not kept the price above 2.7$ historical resistance I think mining is the thing that give the currency most value it consist of hardware cost and electricity so, do not not make that mistake again especially now FIRO exist mostly in top mining coins and mining itself is the only thing make advertising for the project while recent posters I did not see any value at it.

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We can give:

  • 5% to dev team as basic dev and maintenance which could increased if needed from project backup fund.
  • 20% as backup fund to be controlled by project to be used in advertising “especially small influencers” and balancing price at some range and fund extra development needed.
  • 25% for the miners as existing as backup for network and more distribution.
  • 50% stay the same for master nodes as main network security.

This is a very thought provoking post @reuben

I am going to float this idea with the community…

I am not sure if any of you have heard about Wownero (a Monero forked) and their very different approach to their supply curve and emissions in the long term.

Wownero do not have a halving schedule. Instead that have a fixed supply with a very elongated 50 year distribution curve.

There rationale is to ensure the coins are distributed fairly and gradually over time. This is necessary as people are slow to realize the benefits of solo mining (and in Firo’s case staking too). It also take time for people to understand the social implications of privacy on their freedom and security (which privacy coins provide).

By gradually distributing the coin over a 50 year period, Firo will allow for the demand to increase over time thus creating a more sustainable and stable ecosystem as it allows more people to participate in the network but either PoW mining or PoS master node.

So in summary, my radical idea would be to drop the halving cycles and move to a more elongated distribution curve that drip feeds FIRO to same buckets as being discussed but over a longer timeframe. The amount of the Firo payouts would gradually get smaller over time (based on math and the distribution curve).

This is just my thoughts.
Please share your ideas on this thread.

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As a CFund member I agree with your thesis with the proviso that when Firo gets above say 20USD then the old terms are re-instated.

Re halving schedules … whay have a huge change all at once … at Decred the emmision is changed every two weeks or so by a tiny amount. Smooth creates no jolts in the system.

My ideas.
I prefer the gradual cut in block rewards approach, no more sudden harsh decrease every 4 years. Then after all Firo have been mined, there should be a little bit of coin emission in each new block. This does not cause any harm and more importantly, enhance network security.

About rewards distribution, I vote for 50% MN, 20% miner, 25% Dev, 5% Community. Development should be prioritized at this moment. After Spats and Curve Tree, any surplus in Dev fund can be transfered Community Fund.

What should be focused on now along with Dev is adoption. We should have an official mobile wallet with good UI as people nowadays use smartphones alot. Also we need more businesses accepting FIRO as payment. Then, come awareness, more people with privacy concerns knowing deep enough about FIRO. I bet this group of people will become bigger and bigger as CBDC rolls out in the near future.

About network consensus, I prefer the POW + Master Node approach.

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I agree with raising the dev fund slightly, but not at the cost to the CFC. Perhaps both miners and masternodes can take a 2.5% cut for a total of 5% added to dev?

I really think tail emissions are the way to go, probably best kept at the current block reward level. I don’t think the exponential supply reduction is really viable in the long term, not even for Bitcoin, which I expect to undergo fee death a few cycles after this one. Especially for Firo, where the block reward is barely enough to fund additional development, I see it as being particularly problematic. Even gold has a small amount of inflation associated with it, and I think it’s far more worthwhile to have a few percent inflation than it is for the project to die due to a lack of funding and masternode operator interest.

As for the allocation of the block reward, I would say more should be allocated to the dev fund, as without the funds to continue to develop technically, the project will become stagnant and moribund.

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I am for miners reward to get lowered and possibly also community fund. Community fund is good initiative, but recently there were not much good proposals. Dev team seems to be essential for development of core features and when market will be more positive surpass of resource can be used for promoting/advertising the project.

My suggestion:

60% Masternodes
15% Miners
20% Dev reward
5% Community Fund

or

55% Masternodes
15% Miners
20% Dev reward
10% Community Fund

I agree mostly. Although I did like the progress Vosto made with marketing and forming some kind of ‘brand’ identity for lack of a better term. That kind of thing and investment lasts a long time and is good value imo.

However I think the bigger problem, is if the community has a good idea but doesn’t have, for instance dev skills. The idea cannot go anywhere. It feels we get pitched lots of things we don’t need and few things we do.

I think we need a job board. Community posts ideas, or things missing from Firo that they want to see. Then we deliberate if it should go on Job board. Then devs can provide quotes for things we are actually looking for.

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Both seem good with me.

Hi, Firo community,

Since May 2022 Firo has continued to sink into the cryptocurrencies ranking. The increase in the masternode remuneration to 50% of the block reward has certainly made it possible to avoid the worst, but it is not enough to bring back the Firo project, as I explained in May 2022 (you can read ll the arguments in the May 2022 topic).
For FIRO to move up in the ranking, it is absolutely necessary that the remuneration of the masternodes exceeds 50%. The more this remuneration exceeds 50%, the more Firo will rise.

So here is my recommendation for sharing the block reward:

  • 65% for masternodes (70% if we remove the community fund)
  • 20% for miners
  • 10% for developers (this remuneration must eventually disappear, as planned at the origin of the project)
  • 5% for the community fund (which has absolutely not proven itself since 2022), or even 0% (removal of the community fund).

Do note that while I respect the sentiment, I don’t know if masternode number increase leads to higher prices since even if it’s up the yield is not going to be that significant with the halving.

For the development reward being reduced there it would probably be just maintenance mode at those rates and the cessation of research. This may risk delisting on more exchanges too since one of the reasons why Binance keeps us despite the decline in price is our active development. This is of course speculation but having spoke to a Binance rep informally, this was something that was mentioned.

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Sure, we can definitely create that in this forum. We do need more forum moderators pro bono though !