[Governance] Optional Optimizations

[SueNEO]

Six optional optimizations are listed as follows. We recommend to accept the third (Divisible NEO) and implement it.

1. Permanent Inflation of GAS

As it discussed on #326.

In this system GAS becomes a deflationary currency over time. This means it encourages the hoarding of GAS rather than the spending of GAS. We see this time and time again with crypto assets that try to be a “means of transfer.”

If something is meant to be used as good means of transfer (utility coin) as opposed to a store of value it SHOULD be inflationary. GAS will not be able to fulfill its main purpose of utility if it is a deflationary currency.

To make matters worse, the deflationary nature of GAS is accelerated by not only lost GAS, but also by NEO black holes which continually accumulate GAS, and remove it from the system entirely. We can combat black holes by making sure that the amount of GAS lost to it always remains below the inflation rate. This makes the GAS supply more stable, and disincentivizes users from hoarding GAS.

Encouraging users to spend GAS on network fees and system fees (as well as for purchases outside of the network) will, in the long run, be much more positive for the Neo ecosystem.

We are extremely lucky to be able to leverage the dual token model to have one asset be used as a store of value, and one asset to be used as a means of exchange. Deflation is good for a store of value, and inflation is good for a means of exchange.

Making GAS inflationary solidifies the use case and separation for NEO and GAS instead of blurring the lines.

So by making GAS inflationary we have achieved Goal 3 which is encouraging use and spending of GAS in the Neo ecosystem.

Also, permanent inflation of gas makes the incentive process works well in long term.

2. Dynamic Governance Cycle Length

For simplicity, fixed 180 days of cycle length is used in governance process. It may
be not the optimal choice so there is a better way to let NEO holders to decide
the cycle length in the governance process.

Actually this optimization will make NEO holders spend more time and energy
in Neo governance. Carefully to attach this optimization.

# 3. Divisible NEO

Currently the total supply of NEO is 100, 000, 000. The precision of NEO may be not enough in many scenarios such as payment and exchanges. The value of NEO had reached to more than $100 in history.

It is a no harm optimization to make NEO divisible or even infinite divisible although there may be a bit more complex in implementation. See more discussion on #285 issuecomment-403863134 as a reference.

4. Election Expenses

All who want to be a candidate of consensus node should lock some NEO from the time it becomes a candidate of consensus node to the end of current governance cycle as a election expenses.

Actually candidates don’t pay anything. They only lock their NEO but they cannot get GAS through the locked NEO. In other words, they only lose the opportunity cost of participating in governance process.

There are three main reasons for this optimization:

• increase the responsibility of candidate and consensus nodes because they lock token on Neo network

• prevent the spam of joining election to reduce the voting cost of voters

• increase the benefit for voters

5. Patch of Black Hole Account

Black hole accounts refers to accounts without the private key kept by anyone, which means the balance of such accounts will never be spent.
.
There would be several problems because of black hole accouts. Follow the issue #285 to see more discussions about the black hole accouts. It is not a big issue for GAS because there are inflations (or GAS release) on GAS and GAS supply will never stop especially if the optimization of Permanent Inflation of GAS is used. But for NEO, there is no inflation.

In short term, it is not a big issue because the balances in black hole accounts are low and they will never affect so much.

But in long term, if there are 1% NEO loss per year, more than 50% NEO will be lost in 70 years. It is a bad signal for the security and decentralization of Neo network. Also the voting rate of Neo network will be pretty low again. In addition, if someone do it in purpose and produce some look-liked black hole account but keep the private key for decades, the one may affect the market or affect the governance process of Neo.

TODO: Binding GAS & NEO

6. Matching GAS with the Supply and Demand of On-chain Resources

GAS is the utility token on Neo network. the supply and demand of GAS is very important to keep Neo network runing stably.

Actually the ideal scenario is the GAS supply is exactly the same as the demand as well as the network resources. But in real, it is almost impossible.

Ethereum has gas price to adjust the supply and demand and EOS also has their own way to adjust it.

Imagine two extreme cases:

• If the TPS of Neo network is 1, each transaction cost 1 GAS, and currently there are totally 100, 000, 000 GAS in circulation, GAS will be totally useless.

• If the TPS of Neo network is 100, 000, 000, each transaction cost 1 GAS, and currently there are totally 1 GAS in circulation, the high TPS will be totally useless.

Above all, the GAS and network resources will be never matched perfectly.

We recommend to introduce the gas price mechanism like Ethereum, which means, introduce a factor specified by user on transaction fee, to Neo network to adjust the GAS supply in market.

[vncoelho]

Coincidentally, we were talking about point 1. (@igormcoelho) yesterday.

I agree with the idea of making the purpose of NEO and GAS more clear as well as a redesign of it.
Great job you all are doing!

1 and 2. sounds good to me.

6. sounds good as well because it is also related to 1., however, I also see the possibility of CN to define the fees, which is a similar strategy but with the decision making arising from the CNs.

[JustinR1]

Not a dev, just a community member here.

I wholeheartedly agree with inflation model for GAS. As stated above, with gas being the utility token it will encourage users to ‘use’ gas rather than hoarding it. It will also be great with the black hole situation, although I can’t imagine that is such a large issue?

Either hardcode it as a set percentage per year or it changes dynamically based on use, or something of that nature; but I definitely agree it should be done. To me this just makes sense especially having a dual model where both are currently not inflationary.

[EdgeDLT]

Lots of good ideas here. It sounds like we are moving in the direction of a much more mature economic and governance model, and one that can potentially highlight advantages from the dual token model (e.g competition between token utility as noted in #1438).

However, I am still against 3, making Neo divisible. I don't think it makes sense at all to do this, it simply harms the applicability and value of GAS. It doesn't matter if its not suitable for payment/exchange scenarios; it is not the utility token, it is a governance token that represents the right to vote and participate in consensus.

[JustinR1]

Lots of good ideas here. It sounds like we are moving in the direction of a much more mature economic and governance model, and one that can potentially highlight advantages from the dual token model (e.g competition between token utility as noted in #1438).

However, I am still against 3, making Neo divisible. I don't think it makes sense at all to do this, it simply harms the applicability and value of GAS. It doesn't matter if its not suitable for payment/exchange scenarios; it is not the utility token, it is a governance token that represents the right to vote and participate in consensus.

Yes, I also don't see the point in making NEO divisible since GAS is the utility token and should be used for payments & all other utility purposes across the blockchain. Leaving NEO indivisible will also make voting more sensible if you have whole numbers. The only time I see where it's a pain to have indivisible is when trading. Other than that, I really don't see an actual point.

[diskooooo]

However, I am still against 3, making Neo divisible. I don't think it makes sense at all to do this, it simply harms the applicability and value of GAS. It doesn't matter if its not suitable for payment/exchange scenarios; it is not the utility token, it is a governance token that represents the right to vote and participate in consensus.

Totally agree, NEO should not be divisible. GAS should be/remain the divisible utility token/currency. Also, once all these decisions are final, I would like to encourage NGD to write a lengthy and detailed blog post about the changes to the economic model and possible consequences (may they be positive or negative) for token holders/investors, dApp projects, developers et cetera, as I have noticed there currently are still loads of questions and uncertainties on this topic within the community.

[shargon]

We recommend to introduce the gas price mechanism like Ethereum, which means, introduce a factor specified by user on transaction fee, to Neo network to adjust the GAS supply in market.

Agree, we should be able to use a factor, in order to recalculate the fee if the price go up or down