Tokenomics and Funding: Division of Block Reward Discussion and Community Matching Fund

High Level Summary:

  • Firo has two issues, newly mined supply of Firo is being sold and the lack of community ‘participation’ due to the existence of a dev reward and difficulty of getting funding to do work for Firo
  • PoW no longer provides the security of Firo with masternodes providing it with PoW as a backup. Maybe overpaying for security and distribution
  • Distribution of coins with developed liquid markets is not as important and Firo has already existed for 6 years now giving sufficient time for distribution.
  • Instead of giving 50% of rewards to miners, to shift part of this to masternodes and the creation of a separate community matching fund.
  • This improves the security of the network, relieves selling pressure and allows the community to get funding for their research.
  • Increased usage of forums and Firo Crowdfunding System where people vote with their dollars and it gets additional funding from the Firo Community matching fund. Increased community responsibility and participation.
  • Core team does not have access to this new community matching fund and does not get any additional money with this new scheme. Eventually if the community gets mature enough to do this, the Development Fund can be phased out and shifted towards the Community matching fund.
  • Emission and token release schedule is NOT affected. This only affects the allocation of the block reward.

Rationale of this Proposal

I believe that one of the things that has been causing a price decline has been also the lack of ‘sinks’ of Firo when compared to other coins which have accelerated token emissions or centralized token allocation.

Another issue is with the existence of the development fund, there’s been an over-reliance on the core team to deliver on all aspects of the project even when the amount we get is relatively small. There’s been a lack of ‘ownership’ over the direction of the project from the community due to the existence of the fund which is common to most projects with a ‘Dev fund’. Basically the core team is expected to behave like an ICO/pre-sale project with full responsibility without the necessary funding while at heart we are a community project with most of the supply going to community members.

With our strong focus on having Firo to be mined by community hardware, it also often creates a lack of loyalty to the project with many miners just opportunistically mining Firo as it’s one of the more profitable coins especially on LHR cards.

Proof of Work doesn’t provide the main security for Firo anymore, that is being provided by the masternodes via its chainlocks and proof of work is primarily a fallback security mechanism from chainlocks and also a distribution mechanism of our coin. With over 50% of new supply going to miners, we are overpaying for the security provided.

If this new supply was going to many new people that would be fine especially those who would hold the coin or believe in it, however if you take a look at our mining statistics

We have only about individual 1200 miners earning about 3600 FIRO a day or 108,000 FIRO a month or 50% of new supply.

We are seeing similar issues with coins with similar tokenomics launched at roughly the same time as us for e.g. Zcash, Beam. Grin with an even more aggressive token emission schedule has also languished. Coins that have a privacy focus but a faster accelerated token emission such as ARRR (almost fully allocated within ~ 2 years) no longer have selling pressure from miners.

It may be prudent for the community to weigh in on this on how much they value PoW. I still believe in having some PoW component but I also believe that unlike the old days when the crypto market was in its infancy, we have much more developed exchanges and liquidity allowing people to acquire Firo for distribution. Token distribution happens also when price increases as people cash out or rebalance their portfolios as well.

The core team has also been shouldering much of the brunt of the work of the project and although our development fund was meant to be primarily for development we have also been expected to fund exchange listings, market making, partnerships and integrations though we are also supported by some community funding efforts that went well. A budget of 16200 FIRO a month is simply insufficient for all of this.

What may be interesting to explore with the community is a change of the distribution of the block reward.

Masternode rewards are also about 11% of APY right now and with the next halving is expected to drop again which would mean masternode numbers dropping and affecting our security.

Currently the block reward is divided as follows:

50% Miners
35% Masternodes
15% Dev reward

My proposal would be perhaps to change it as follows:

50% Masternodes
15% Dev reward
15% Community Matching Fund
20% Miners

This rewards the long term holders of the coin and for providing the infrastructure and security of the network and helping to shore up the loyalty of our existing users who are willing to host it in masternodes.

Community Matching Fund

This is still an idea in progress and discussion of how it would work is of course open with some details needing to be fleshed out but I wanted to give a high level overview of how this fund would be managed.

The community matching fund would be a similar thing to Gitcoin Grants . A separate committee will be established that would not give the core team a majority power to control the funds.

Instead it would match successfully funded proposals on the Firo Crowdfunding System which we would also limit the scope to. The way people vote is with their donations, meaning there’s a ‘cost’ to voting.

Matching funds would not necessarily be 1:1 matching but there will be an algorithm to determine the number of contributors to any particular proposal, and the more contributors to it, the more the funds available to ‘match’. Read this post for an idea of how this matching would work. But what this means is that while a whale may fund the entire proposal singlehandedly, the proposal would not get much additional ‘matching’ funds vs one which has a lot more individual donations of even small amounts which is more accurate of a community sentiment.

To prevent Sybil attacks and spam small donations to fake contributor numbers, donations to count towards calculation of the matching rewards can be linked to sufficiently aged Firo forum identities especially those who have posted in the relevant improvement proposal thread. This balances the need of privacy by retaining pseudonymity of contributors while encouraging active forum discussions and campaigning for funds and preventing people from inflating numbers with small individual donations to fake community interest.

My belief this new proposal solves several issues:

  • Deprioritizes distribution of supply to miners and overpaying of security to focus more on productive uses of Firo’s new supply that will be used to improve the project.
  • Creates more active community participation and responsibility of things they want to see in the project rather than having the core team be the initiator and primary mover of things
  • Trains the community to evaluate and discuss proposals leading to a healthier project and puts it in a better space for weaning off the Development Fund gradually.
  • Rewards long term holders of the project and reduces selling pressure from mercenary miners.

I think this is a much more preferred way of doing things and more ‘true’ to the ideals of cryptocurrency as a community project rather than trying to find a VC and placing all their bets on them. It also creates much more sustainable funding without surrendering control to the core team and creates a more smooth pathway to being completely community run.

I would really want to hear the community’s opinion on this, especially from miners!

Also did a short video stream with me explaining this. Apologies for the poor quality.

23 Likes

Decred is doing this now. Let us watch what happens.

Old Split
PoW: 60%
PoS 30%
Treasury 10%

Changing to →

New Split
PoW: 10%
PoS: 80%
Treasury: 10%

8 Likes

I am in favor of increasing the reward for masternodes.
More reward to masternodes = more FIRO staked for new masternodes , more loyal masternode owners.
This positively affect the price and network security of FIRO.

11 Likes

I agree to that but I am very biased since I own masternode

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I am all for increasing the percentages to master nodes and the dev team. Miners have no loyalty, they just mine what’s profitable. Master node owners are much more committed to the project.

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Note that under this proposal, the dev team doesn’t get any additional money. The new fund is used for matching/funding community proposals.

9 Likes

If we consider PoW helps distribution then both coins are pretty much already well distributed now and the increase on PoS means stakeholder views more aligned with the project than miners.
To have changed this split earlier in the coin’s history would have been wrong and only allowed some early masternode investors (such as Tim :wink: to gain a disproportionate amount of the rewards.

4 Likes

As someone that is with Firo, from almost day one, here are my 4 cents.

Miners have zero loyalty. they give zero damn. They follow the hash, the rates and the cost effective mechanism.

Are there loyal miners out there? yes. but they are a minority.

So, keeping a smaller % to miners will cover that part of loyal miners, if such still exists.

The approach of rewarding MN’s with a higher sum is smart for 2 reasons:
Reward loyalty
Increase in community members, token distribution, higher security, etc

But what I agree with the most is, to increase the dev fund.
This is one of the very few projects on the planet with top-notch exchanges and development.
Yet only coins with billions in market cap have the “Ability” to get listed on such exchanges.

The least we can do is increase the dev fund to allow them to continue their work.

My suggestion:
60% Masternodes
20% (or 15%) Dev reward
10% (or 15%) Community Matching Fund
10% Miners

The difference?
Right now, 50% goes to miners. and that means at least 50% getting dumped, daily.

My suggestion is to give the “loyal” ones a higher %, around 90% will be allocated to Masternodes, Devs and CMF.

10% is more than enough for miners. why? Organically, some miners would go to hunt for other coins to mine & dump. but still a couple of miners will remain. who? the very few loyal miners.

The vast majority simply won’t be dumped, on a daily basis.
Masternode owners are known to simply keep rewards in order to allocate enough for an additional MN.
Devs usually use it for a living but also save much of it as Devs are the first to believe in their projects and ideas.

The new structure would reduce daily dumping, dramatically.
This would increase community engagement and security
Getting new exchanges would be easier (if required listing fee)
Developing and going on new roadmap adventures (like smart contracts) would be easier

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Welcome, glad to see your feedback here and thanks for posting it (originally on Discord) here so that it won’t be lost!

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Yeah I do feel that Firo is no longer in ‘bootstrap’ users mode. We have solid exchange listings.

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Some mentioned that posting in the Forum might be a baby-boomer move.

But I think it’s that for Millennials, it’s quite natural.

Might be easier to open the option to login quickly to the forum via Discord/Google/Other options. :sweat_smile:

3 Likes

Great suggestion, on it! We previously disabled it for privacy reasons but makes sense.

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firo should not be a game, firo should not be a project or a charity
firo should be money
mining is fair, staking is not
mining is perfect for privacy focused money

I hope when the voting is live the people will reject this proposal

3 Likes

20% for miners seems high.

  • No longer providing security
  • No longer supporting distribution
  • Conspicuous negative pull on price, to the point where FIRO skipped a bull market and risks sliding into permanent obscurity

Anything higher than 1% or 2% needs a compelling justification. 20% is a diplomatic plea, but anyone who is making revenue by selling mined FIRO every month is going to be upset with any decrease.

Because of difficulty adjustments, miners can keep a business going on top of crypto even at extremely disappointing price peformance (see BCH) – but investors and long term supporters will be holding the bag.

I’m not sure the community fully appreciates the stakes here. Firo is close to disappearing from crypto relevance.

Investors who held Firo over the last year (instead of ETH or polkadot or even ARR…or almost any other crypto) experienced extreme losses. Barring a bold change, there’s no reason to expect anything in the future from holding Firo except more of the same.

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Google, Github, Twitter and Discord logins are now enabled. I have chosen not to enable Facebook for the moment. Not a fan of Google logins but Facebook is worse imo.

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There’s still some backup security that they provide. For e.g. sometimes too many masternode holders use Allnodes and if Allnodes had a error (which happened once before) it can bring down a significant proportion of masternodes and leave the network open to attack. A good reason to diversify masternode hosting even though Allnodes is pretty awesome.

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Sure – and it’s the more crypto savvy users who are running their own nodes who will see the writing on the wall and bail. Ending up with disappointed miners and lackluster node maintenance is the worst of both worlds, and imo the most likely result of an attempted compromise split.

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It sounds good, in fact mining pool as Allnode in POW

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While I agree on the sentiment that Firo should be money, Firo is money only if enough people recognize it as such which starts first with the community not just using it a speculative investment but integrating it into their businesses and using it.

The side projects that we do such as games do not take up core team time and are more community building and engagement exercises to get people using their Firo and hopefully spurring on more development and usage of Firo.

Also unlike fiat money, Firo needs development work and therefore there is a ‘project’ element due to code.

I agree that mining with it being permissionless is great for privacy focused money but pure PoW does not provide adequate security for smaller coins. Heck, even Monero very recently faced a risk of 51% attack from an unknown actor but the community stepped up. Some other projects use a few notary nodes which rely on infrastructure outside the project (for e.g. ARRR) which has its own risks. Others put a maximum block reorg limit which can mess things up during serious network partitions.

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I agree with masternodes getting 50% of the block reward, maybe even 60%. Masternode owners have more loyalty to the network due to the collateral they need to hold. And to move forward in this blockchain space we need more people invested in the project, the increase in masternode rewards will bring more people to the project due to the block incentive but also require them to put skin in the game.

6 Likes