Inflation mechanism

benjaminthedonkey

Sorry but I think it's a mistake to kill the inflation mechanism. People don't use it as it was intended to, because they don't have a tools to do so... yet. All we need it's an inflation pool web-app that allow people to pledge a percentage of they share to different projects / institutions / individuals that are looking for founding. The remaining percentage that it's not pledge (if any) will be returned back to the user as usual. The community needs a self funding mechanism other than SDF, that reflects the views of the individuals.

bkolobara

benjaminthedonkey
Nowadays we have many different ways of rewarding projects (SCF for community votes, Research Grants, Partnership Grants, ...) that the idea of inflation as project financing mechanism is not that interesting anymore.

Use this opportunity to vote for different new projects in the SCF and help support your favorite ones.

There is still a lot of undistributed Lumens that need to enter the market. I believe, it's better to use them to finance projects than inflation. Most of the inflation is either way controlled by the SDF and doesn't end up in users hands.

Inflation carries also some technical debt with it, so disabling it would allow for better scaling in the future.

brettcannon

The risk with this idea is it would require providing your private key to the web app which is a security risk some folks won't feel comfortable with just for better inflation pool disbursement. You would probably need wallets to add this sort of support (or a future with smart contracts that are flexible enough to support this use).

Maybe I'm just missing the link, but a first step might be to simply have a page that listed all of the known inflation pools and what they use their funds for. After that you start to look at providing an API for wallets to use to make it easier for them to list more than just their own pool + Lumenauts + SDF.

benjaminthedonkey

Why would it require providing your private key? The inflation pool account receives the funds and distributes them to projects, users, etc. Of course, you would have the trust the pool owners to do that... but this is not how it works now with pool.lumenaut.net for example? It's like Kickstarter but with inflation money only. And if we think that this does not amount to much, it does. Right now pool.lumenaut.net is distributing almost teen grand a week, half a million dollars per year, enough to finance quite a few projects out there.

brettcannon

benjaminthedonkey the private key comment was assuming you will need to help people change their inflation pool to this new disbursement pool and you were going to have the disbursements be made from one's own account. But I realize now that if you trust the pool it can do the disbursements itself and all you have to do is sign up for the pool and specify how much does where. And I believe Stellar has a data field for accounts, so it should all be auditable. So as long as people have an easy way to sign up for the pool then private keys are not necessary! Sorry for the confusion.

benjaminthedonkey

With all due respect, I don't think one mechanism replaces the other. SDF provides one time grants, for ( mostly technical ) projects in the Stellar ecosystem and it should continue doing so by all means. But I hope we all agree this is for a niche audience.

Inflation, on the other hand, provides a reliable, weekly, most importantly inexhaustible source of funding, that could reach far beyond the Stellar ecosystem. Subscriptions based Websites charge a whopping 8% to 12% in fees. Stellar could do it for free. Moreover, Stellar could do it with people's inflation stake, a very interesting concept if you ask me.

DrewPalmer

Please bear with me for a moment while I go Econ 101, but there is an important reason for inflation to exist in any ecosystem -- it provides an incentive to actually use a currency instead of HODLing it, because the value goes down over time as long as the inflation rate is greater than the growth rate of the underlying economy. We are many years from when that is an issue for XLM, but it will happen that it will be important that the supply of lumens has to grow faster than the use of applications, or it will be financially better to hold on to lumens than use them, and that would be a problem, perhaps the death-knell, of Stellar. Pools and sharing will keep developing over time, so the worry about inflation only benefiting whales and SDF will be less of a concern. From my perspective looking out for Stellar's future over decades, the real problem is that the inflation rate should have been 3% (1% over the global target of most developed economies for 2%) to anticipate Stellar becoming more important over time. Setting it at 1% means that Stellar is anticipated to become less important in the global economy over time, which was a curious decision, but when it comes to money, change is bad, so I favor leaving inflation of XLM exactly as it is now.

bkolobara

DrewPalmer That's true, but with the current distribution model inflation is way above 1%. And I suspect it will take decades before all the XLM are distributed.

For now the inflation operation is turned into a "do nothing" operation, but it's still there. Later down the road it could be re-enabled with a different value (e.g. 2%-3%).

DrewPalmer

I strongly disagree with that approach. Again, anything regarding money should shy away from change because if something might be updated "later down the road" it could be re-enabled with a 100% inflation rate per year, per day, per minute, and then we are back to virtual wheelbarrows of currency.

Stellar is still new enough that a one time change to the inflation protocol this year, next year, or even 2021, would probably be acceptable and just viewed as a growing pain. But the idea that the fundamental value of XLM could be changed at any time by changing the inflation rate to plaid - even if unlikely - is problematic.

I recognize and have planned for SDF having billions of undistributed lumens, and am expecting and trusting that they will be distributed in a way that advances the Stellar ecosystem. Institutions have a way of lasting far longer than expected if they serve a purpose, and collapsing fast if they don't. I would prefer that Stellar lasts a long time, and chooses fundamental parameters such as inflation rate and distribution mechanism now.