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:
15% Dev reward
My proposal would be perhaps to change it as follows:
15% Dev reward
15% Community Matching Fund
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.