REP-16: Staking Rewards Taxation Adjustment (#16)

REP: REP-16 Title: Staking Rewards Taxation Adjustment Status: Draft Type: Core Created: 21 Mar 2024 Author(s): Albert <iavl@proton.me>, HenryQW <hi@henry.wang> Description: This REP describes the adjustment of Staking Rewards taxation formula. Discussions: <https://forum.rss3.io/t/rep-pending-adjusting-staking-rewards-taxation/128>
RSS3-Network · Mar 22, 2024 · 0fdbb9d · 0fdbb9d
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diff --git a/README.md b/README.md
@@ -6,10 +6,11 @@ REP stands for RSS3 Evolution Proposal, a detailed documentation proposed by the
 
 This repository tracks all REPs proposed by the RSS3 Community.
 
-| REP Number                 | Title                  | Proposer(s)                                                                                                                                                                                                                                                                                             | Type     | Status |
-| -------------------------- | ---------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | ------ |
-| [REP-1](./REPs/REP-1.md)   | Purpose and Guidelines | <henry@rss3.io>                                                                                                                                                                                                                                                                                         | Process  | Living |
+| REP Number                 | Title                  | Proposer(s)                                                                                                                                                                                                                                                                                             | Type     | Status    |
+| -------------------------- | ---------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | --------- |
+| [REP-1](./REPs/REP-1.md)   | Purpose and Guidelines | <henry@rss3.io>                                                                                                                                                                                                                                                                                         | Process  | Living    |
 | [REP-11](./REPs/REP-11.md) | Protocol Upgrade       | [BruceXC](mailto:xichang1510@gmail.com), [HenryQW](mailto:hi@henry.wang), [KallyDev](mailto:kallydev@gmail.com), [Nya Candy](mailto:github@candinya.com), [polebug](mailto:polebugfly@gmail.com), [pseudoyu](mailto:pseudoyu@connect.hku.hk), [Thomas](mailto:73341653+naaive@users.noreply.github.com) | Protocol | Candidate |
+| [REP-16](./REPs/REP-16.md) | Purpose and Guidelines | [Albert](mailto:iavl@proton.me), [HenryQW](mailto:hi@henry.wang)                                                                                                                                                                                                                                        | Core     | Draft     |
 
 ## License
 

diff --git a/REPs/REP-16.md b/REPs/REP-16.md
@@ -0,0 +1,80 @@
+```
+REP: REP-16
+Title: Staking Rewards Taxation Adjustment
+Status: Draft
+Type: Core
+Created: 21 Mar 2024
+Author(s): Albert <iavl@proton.me>, HenryQW <hi@henry.wang>
+Description: This REP describes the adjustment of Staking Rewards taxation formula.
+Discussions: <https://forum.rss3.io/t/rep-pending-adjusting-staking-rewards-taxation/128>
+```
+
+# REP-16: Staking Rewards Taxation Adjustment
+
+## Table of Contents
+
+- [Abstract](#abstract)
+- [Motivation](#motivation)
+- [Specification](#specification)
+- [Rationale](#rationale)
+
+## Abstract
+
+This REP proposes to adjust the taxation of Staking Rewards.
+The REP will update the Whitepaper first, and then the taxation will be adjusted on the VSL accordingly.
+
+## Motivation
+
+The proposed adjustment will simplify the taxation formula, making the computation more efficient and less error-prone.
+
+## Specification
+
+Current formula as [stated in the Whitepaper](https://github.com/RSS3-Network/Whitepaper/blob/d8a86712cad0c88846c659577e0848b422b90f14/current/sections/tokenomics/network_rewards.tex#L77-L83):
+
+$$
+T_{N,\epsilon} = \min(D_{N,\epsilon} * c_{\epsilon}, (R_{S|N,\epsilon} + R_{O|N,\epsilon}) * T_{N,\epsilon})
+$$
+
+Current [description of the formula](https://github.com/RSS3-Network/Whitepaper/blob/d8a86712cad0c88846c659577e0848b422b90f14/current/sections/tokenomics/network_rewards.tex#L75):
+
+The amount of tax collectible is capped at a maximum of $c$
+times the amount of the current deposit, where $c$ is set by the
+Network.
+
+Proposed new taxation formula:
+
+$$
+T_{N,\epsilon} = \min(P_{O|N,\epsilon} * c_{\epsilon}, (R_{S|N,\epsilon} + R_{O|N,\epsilon}) * T_{N,\epsilon})
+$$
+
+Proposed new description of the formula:
+
+The amount of tax collectible is capped at a maximum of $c$
+times the amount of the current $P_o$, where $c$ is set by the
+Network.
+
+Reflecting the changes in the Whitepaper, the VSL will be updated accordingly.
+The tokenomics will then be adjusted to reflect the new formula:
+
+Current tokenomics intepretation:
+
+$$
+D_{N} * 25 \geq T_{N,\epsilon} \quad \text{where} \quad D_{N} \geq 10,000
+$$
+
+Proposed new tokenomics intepretation:
+
+$$
+P_{o} * 25 \geq T_{N,\epsilon} \quad \text{where} \quad D_{N} \geq 10,000
+$$
+
+## Rationale
+
+The Core Developers have derived fresh insights from the Mainnet Alpha, revealing that the existing formula is overly complex and inefficient for computation.
+This complexity not only elevates the risk of implementation errors but also confuses Network participants.
+
+The proposed adjustment will simplify the formula, without compromising the original design principles and the economic incentives of the Network.
+
+The proposed adjustment also slightly lowers the entry barrier for new Node Operators and simplifies the management of the Node.
+
+The proposed adjustment does not introduce any new development requirements, and the implementation is expected to be straightforward.
diff --git a/package.json b/package.json
@@ -23,6 +23,7 @@
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diff --git a/pnpm-lock.yaml b/pnpm-lock.yaml