INITIAL PROPOSAL: Introducing burning mechanisms to the Crypto.org chain

[lezzokafka]

Status

DRAFT

Summary

We propose introducing a mechanism to gradually burn a portion of the CRO supply emitted by the network. The overall goal is to reduce the inflation of the circulating token supply and bring long-term benefits to the token economy. Once this proposal is passed, a periodic burning process will be introduced, and approximately 100 Million tokens could be burned in the first year.

Background

The total supply of CRO currently in circulation is 26 Billion, and it is growing at a rate of approximately 2.5% per year, which implies an annual emission of around 646 Million CRO through inflation.

In response to the growing attention from the community regarding the token supply, we propose a mechanism to gradually burn a portion of the CRO supply emitted by the network. This mechanism involves allocating a portion of the tokens generated through future inflation to the community pool and periodically burning the accumulated tokens. The expected outcome is a reduction in token supply and the effective inflation rate, which could help improve the CRO token economy.

After studying all feasible technical options, we have determined that the proposed mechanism is the most straightforward (thus, least risky), fairest, and most decentralized option:

• Most straightforward: no code change needed, only parameter updates;
• Fairest: it affects all validators in proportion to their future rewards after the vote, does not affect past rewards already earned that they may have chosen to collect or not. Validators who have chosen to invest in the ecosystem and leave their earnings uncollected, should ideally not be penalized;
• Most decentralized: once the tokens have been transferred to the community pool, they are controlled by governance and any token holder can propose to burn them. No single entity is in charge of the burning.

While the proposed mechanism will slightly reduce the staking yield of Crypto.org Chain when measured in CRO terms, it aims to acknowledge that the CRO inflation rate has been above target, a technical byproduct of Crypto.org Chain block times having sped up in recent months. By contrast, other established blockchains (such as Bitcoin, Ethereum) have been on a less inflationary, or deflationary, trend.

This proposed governance proposal is the first step in addressing the community's concerns and suggestions. Depending on the outcomes of this proposal, future emission reductions may be considered.

Technical details

From a technical standpoint, we propose implementing a token-burning mechanism by updating the network parameter of community_tax by 0.15.

After updating the community_tax parameter, a portion of the tokens generated through inflation will be allocated to the "community pool", which is a wallet owned at protocol level that would require a governance proposal to take any action on it.

Once a certain amount has been accumulated in the community pool, for example, 20 million CRO, the funds can then be transferred to a dead address (i.e. cro1qqqqqqqqqqqqqqqqqqqqqqqqqqqqqqqqtcgxmv or any equivalent dead address - See Remark 1) through a "community pool spend" governance proposal that can be raised by any CRO holder, effectively reducing the available token supply and completing a single burning cycle.

This burning process will be executed periodically whenever a specific amount has been accumulated in the community pool. It will be controlled by chain governance.

Projected burning amount and reduction on the inflation rate

Based on the current annual provisions of 646 Million CRO and the proposed parameter change, it is estimated that approximately 100 Million of CRO will be transferred to the community pool for burning in the first year, and more in consecutive years, depending on the block production rate.

As any assets owned by the dead address are considered unrecoverable and permanently removed from the circulating supply, the proposed burning mechanism will reduce the effective inflation rate from its current rate of 2.49% to approximately 2.1%.

Changes on the staking rewards

The proposed burn mechanism involves allocating a portion of the tokens generated through inflation to the community pool. As a result, staking rewards are expected to decrease by approximately 15% (from about 13.6% currently to 11.5% - See Remark 2), with the diverted portion of rewards contributing to the burning mechanism.

Nevertheless, this burning mechanism will reduce the effective inflation rate and the token supply, which we believe will bring long-term benefits to the token economy.

Proposed changes

{
	"label": "Changes",
	"value": [{
		"subspace": "distribution",
		"key": "communitytax",
		"value": "\"0.15000000000000000\""
	}]
}

If the proposal passes, the parameter will be automatically updated at the end of the voting period.

Testing

The proposed change will be tested on the Croeseid testnet testnet-croeseid-4 to ensure that the expected outcome of the burn mechanism is achieved.

Governance Votes

The following items summarize the voting options and what it means for this proposal.

YES: You approve of the proposal on introducing a mechanism to gradually burn a portion of the CRO supply emitted by the Crypto.org network.

NO: You disapprove of the proposal in its current form. Feel free to give feedback and suggestions on how to improve the proposal.

NO (VETO): You veto the entire motivation for the proposal, and are strongly opposed to its implementation.

ABSTAIN: You are impartial to the outcome of the proposal.

If the quorum is not met or less than 1/3 of participating voting power has voted No, the proposal fails and is considered to be vetoed. In this case, the proposal deposit is burned rather than being returned to respective depositors.

Remarks

1. The dead address or zero address is considered as the burning address in many blockchains such as Ethereum and Cosmos community; any assets owned by the dead address are considered locked and removed from the circulating supply permanently;
2. https://docs.cosmos.network/main/modules/distribution#rewards-to-delegators

[marco-novelli]

I support EIP-1559 for portion of gas to be burned. Burning staking rewards is odd

[marco-novelli]

There is no engagement both on GitHub and Discord about this CRO burning topic. I think it's a CdC move to solve the problem of highest inflation than expected to the detriment of CRO holders on Crypto.org

[lezzokafka]

Hello @marco-novelli and thanks for your comments!

This proposal aims to strengthen the CRO token economy by reducing the available token supply and the effective inflation rate. Among the different options available, we consider the proposed mechanism, which primarily focuses on the staking rewards, as one of the most straightforward and fairest ways to achieve the desired outcome.

We plan to take this first step towards refining the token economics of CRO tokens. Moving on, we agree that additional measures should be implemented with the community, such as EIP-1559, as suggested, which is being implemented on Cronos chain.

An extra remark: the burning of staking rewards will affect 0.4% of the total CRO supply annually, while no other measure proposed in the community discussions can affect more than 0.05% of CRO supply annually.

[benhkkk]

I support

[xBlack1Ex]

I support something similar to EPI-1559 as burning reward dose not make sense.

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[MakeCROGreatAgain]

This is already better than nothing, but it is not clear how effective it will be, especially judging by the reviews, some do not like that they sacrifice their APY for the sake of burning.

Now, on paper, with the help of this mechanism, about 3.3% of the total supply of $CRO will be burned in 10 years. Will this be enough?

It would be nice to add something else to this: for example, a mechanism for burning transaction fees similar to EIP-1559. There is another application - Buy-Back & Burn. According to my observation, this works very well for OK Blockchain ($OKB), it also does not require much work to implement.

[lezzokafka]

Hello @MakeCROGreatAgain, thanks for your feedback 👍

Understood, and we acknowledge that the staking APR in CRO terms could be impacted, while the proposal is aiming to bring a positive effect on the value of staked amount and the upcoming staking rewards to be collected ultimately.

Moving forward, we envision a series of iterative adjustments. This governance proposal would be the first step and, as we learn from its impact, further emission reductions, as suggested, could be considered down the road, which also includes the EIP-1559, that is being implemented on Cronos.

[marco-novelli]

I add that APY sacrifice will not be on the shoulders of CdC: they are exiting with all their Validator from Crypto.org
I think fee burning is more fair for everybody

[lezzokafka]

Thanks for the feedback!
The proposed community tax will be applied to all delegators and validators of the network. As one of the largest validator hosts of the Crypto.org Chain, the organization participates in the entire burning operation and hence, shares one of the largest burdens with respect to the burning.
We believe that this proposal is a crucial step toward creating a sustainable token economy for the Crypto.org Chain, and we are proud to be part of this initiative.

[mr-kenikh]

I can say that the proposal seems to be a reasonable step to address concerns related to the inflation of the circulating token supply and improve the token economy of Crypto.org Chain. The proposed mechanism of gradually burning a portion of the CRO supply emitted by the network appears to be a straightforward, fair, and decentralized option that can potentially reduce the effective inflation rate and bring long-term benefits to the token economy.

BUT: It’s important to note that the implementation of this proposal will lead to a decrease staking rewards, and it may be helpful to communicate this to the community to manage their expectations and avoid the panic sales (that we have already seen) after potential impact of this proposal on the network users.

I have a feeling that the end-users will only become aware of this proposal if it is implemented, similar to how it was with the increase of the minimum commission to 5%. There's a lot to think about here...

[Galadrin]

the staking reward reduction will be 15%
from 13.6% to 11.5%

[mr-kenikh]

I understand this perfectly, but some users, for example, believe that the 5% validator commission affects the APR like this: 13.6% - 5% = 8.6%

[carigis]

not sure where this 13.6% keeps coming from rewards are currently 10.98% ish and have not been 13% in ages. and the medium post says some validators dont charge commission. there is a 5% min commission charged.

so. 9.33% assuming noone removes thier stake and panic sells

this seems to me have already been planned for a long time.

as for decentralized. lets not pretend crypto who owns 5 of the top 10 validators is not the only vote that counts. they will instruct thier validators at the last minute and sway any vote as they see fit.

[Galadrin]

This is the formula:
APR = infla% x (1-15%) / bonded_ratio

APR = (0,0249×(1−0,15))÷(4,76B÷26B)
APR = 0.1156 => 11.56%

after this, you have to add the validator commissions (5% for the example):
APR_deleg = APR * (1-commission)
APR_deleg = APR * (1 - 5%)
APR_deleg = 11.56 * (1-5%) = 10.982

we can adjust more with block-time in mind :
theoric block time is 5s / block
real block time is ~5.08s/block (mean of block time over last 30 days)

this represent a change of 1.8%

APR_real = APR_deleg * (5 / 5.08) = 10.982 * 0.9842
APR_real = 10.809 %

sources : https://chain-monitor.cros-nest.com/d/Cros-nest/block-chains?orgId=1&var-chain_id=crypto-org-chain-mainnet-1&var-chain_name=cryptoorgchain&from=now-30d&to=now

[G-10-RG-10]

Implementare un sistema di burn è giusto e doveroso anche dopo tutti i tagli bruschi che sono stati fatti senza preavviso durante questo bera market. Però a mio parere sarebbe molto più interessante ed utile implementare un burn delle fees come EIP-1559. Questo darebbe più valore al progetto in quanto le monete verrebbero bruciate solo in caso di utilizzo della chain quindi più burn=più utilizzo. Poi tenere delle APY così alta sarebbe solo un incentivo all'utilizzo ma anche una sua riduzione per diminuire l'inflazione annuale non mi sembra male come idea.
DETTO QUESTO SICURAMENTE BISOGNA IMPLEMENTARE UN SISTEMA DI BURN (se è delle fees per me è meglio)!

[ghost]

I think this update is warranted because the emission is faster than originally scheduled, should be good until emission complete; before that the community can vote again to set it back to 0, that would probably be 7-8 years later.

Separately I think it would be nice to explore other burn mechanisms down the road, for example:

1. Buyback and burn (e.g. BNB Quarterly Auto-Burn).
2. Burn transaction fees on Cronos (EIP-1559).
3. Something like BNB Pioneer Burn Program.
4. Burn CRO fees collected from Exchange's various CRO trading pairs (if it is not already used for awarding rewards).
5. Something like https://www.bnbburn.info would be super cool.

[MakeCROGreatAgain]

Absolutely exactly what we want to see!
Burning mechanisms of $BNB and $OKB should be role models.

[Huttu-CRO]

Emissions bug

Proposal is based on false information and it shouldn't move forward like this.

Problem it is trying to fix is too high inflation, but it is well established that it isn't caused by reason stated here:
"Daily emissions have increased a great deal from 1 M CRO in March 2021 to 1.74 M CRO currently, primarily as a result of technical improvements that have led to Crypto.org blocks being validated faster (from every ~6.5 seconds then to around 5.1 seconds now)."

Faster block times are caused by undocumented change / bug in an update on July of 2021, 19 months ago. It was reported to CDC, but it was never commented or fixed by them.

This update changed "timeout_commit = "5s"" to "timeout_commit = "3s"" and most of the validators are currently using the 3s setting. Effect you see from this is that the next block after the proposer with "3s" will take 4s instead of 6s. It is easy to see the effect from here:
https://explorer.yummy.capital/blocks

As CDC has confirmed that emissions are too high, it is now clear that change to "timeout_commit = "3s" was a bug.

It can be quickly fixed by all validators and results will be instant:

• Block times will go to 6+ seconds again.
• Emissions will drop to 500M per year.
• Rewards will last for 10 years like originally planned.
• No rewards need to be burned.

Burn anyway? - Reducing emissions isn't the main point, but you want burn?

• 100M CRO per year is just too small amount. It won't have any effect to the price.
• It will have an effect on delegators though who will lose instantly 15% of their upcoming rewards. It is very hard to explain this to delegators. "We will vote YES to burning 15% of your rewards and we don't really expect any real benefits to come".

I don't see any community validator voting yes for this.

Burn has to come, no matter what?

• As mentioned, 100M per year is too small amount.

• Cronos will burn also... but that will be only few million CRO per year. Cronos volume is low.
  I checked today some of the most recent validators and seems total fees collected currently is about 20M-25M CRO per year. Even if 20% of the fees are burned, it would be still only 4-5M CRO per year.

Solution

CDC burns their CRO. Add "If the proposal passes, Crypto.com promises to burn X CRO in the next 30 days".

If CDC will burn their 1-3B of their CRO to launch the burn campaign that certainly would make an effect and get support.

[Galadrin]

this is the documentation about the mint module

https://docs.cosmos.network/v0.46/modules/mint/01_concepts.html

this explain much better than me

[ghost]

Thanks for the link.

bondedRatio --> I'm not sure if it is calculated by max or current supply.
By max supply: 4.76Bil / 30Bil * 100 = 15.86%
By current supply: 4.76Bil / 26Bil * 100 = 18.30%

Either way, considering that the bondedRatio is still a distance from the GoalBonded of 0.300000000000000000 (30%), inflation will be close to the max of 2.5%.

In view of the above, wouldn't it be better to set the mint parameter "InflationMax" from current of 0.025000000000000000 (2.5%) to something like 0.020000000000000000 (2.0%)? This would cap the yearly emissions between 520M to 609M towards the end of emission.

This way there is no need to change the communitytax, leave it as 0.000000000000000000 (0%), and we are still keeping inflation in check.

[Galadrin]

bondedRatio is always from based on current_supply.

we will release an article later today with a full review

[scopolamin]

Faster block times are caused by undocumented change / bug in an update on July of 2021, 19 months ago. It was reported to CDC, but it was never commented or fixed by them.

This update changed "timeout_commit = "5s"" to "timeout_commit = "3s"" and most of the validators are currently using the 3s setting. Effect you see from this is that the next block after the proposer with "3s" will take 4s instead of 6s. It is easy to see the effect from here: https://explorer.yummy.capital/blocks

As CDC has confirmed that emissions are too high, it is now clear that change to "timeout_commit = "3s" was a bug.

There was a proposal to change "timeout_commit" to "3s" - it was rejected!
https://www.mintscan.io/crypto-org/proposals/3
"This proposal fixes a bug that results in validators unnecessarily waiting idle for 5 seconds in between blocks due to timeout_commit being defaulted to 5 seconds."
Final Status: Rejected

[Galadrin]

The proposal was mostly rejected by 2 votes from Crypto.org
the justification is here : #522 (comment)

rejected because not proof-tested on croeseid

[Cryptowizard99]

This is a good idea but i will be more in favor to support an EIP 1559 burn on Cronos chain instead of only reducing inflation on the crypto.org chain.
The fee burn in my opinion would be better because it will decrease the supply while the proposed burn will only reduce emission.
I am also seeing that the vast majority of the community wants mainly the EIP 1559 burn so in that case there will be even more support from the community and a better agreement

[KevinFarani]

My thought is that this burn mechanism will greatly harm delegators on the short term, for a long term effect that may not even be very significant on the token price...

Others burn mechanisms such as EIP-1559, buyback are solutions that are also criticized. The burn subject is at an early stage in the crypto world and maybe we should just create our own solution.

So why not taking example on the real world and the big changes taking place today. Instead of "burning" things, we now tend to reuse and bring more value to it.

For example, we could Indeed put 15% of delegators rewards into a community pool. But instead of burning it, this pool could be used to finance new projects on the network, make a Cronos Lottery, donation to charities... A lots of other things ! And that would be submitted to a vote by the community.

This would be the first "composting" mechanism in the crypto world 🌱

[Galadrin]

the community pool is already used like this on other cosmos based chains.
to finance events,
to distribute grants,
...

[KevinFarani]

Oh ok I didn't know that ! Well this would be a better start for me instead of a burn...

[giuseppecapasso]

In my opinion, going to implement a burn mechanism like the EIP-1559 is not enough, as it inevitably increases the fees on every single transaction and the effects will only be seen in the long term.
The ideal would be to use different instruments without burdening any actor, with the aim of establishing a more restrictive monetary policy and reducing the circulation of CRO.
It could be interesting to establish a regulatory body such as a smart contract, which as a percentage of the accumulated CRO (intended for burns) issues NFTs as bonds, which can be airdropped between those who burn the most CRO, or purchased and can have different functions, such as increasing revenues for those who participate in the network, in short, to incentivize users and strengthen the chain.
Unfortunately it is not possible to distribute wealth by financing projects with the accumulated CRO, otherwise inflation is not reduced, but in addition to burning them, it is possible to generate other value.

[samuel-tay]

While I understand the intention of this proposal, let's name it properly and clearly. There is no doubt that the intention is simply to reduce the emissions and not a burn.

It would be irresponsible to vote yes with the current proposal. There are many other ways that the emissions can be lowered.

[darkerthings]

This proposal seems to be the approach that makes the most sense.

Looking at the current flows of CRO at the protocol level, Crypto.org is emitting about 650 M CRO in inflation per year, and using less than 100,000 CRO per year in transaction fees according to this explainer (https://medium.com/crypto-org-chain/a-straightforward-proposal-to-slow-down-cro-inflation-and-bring-it-closer-to-historical-levels-a607bd9fec09).

This means that on Crypto.org chain, validator/delegators are rewarded at 99.9% by emissions (inflation), and less than 0.1% by transaction fees. These economics do not seem sustainable, or economically sound when compared with BNB Chain, Ethereum, Bitcoin, as they create a system where validators/delegators are not incentivized by core chain activity.

On the Cronos chain side, the annualized transaction fees are less than 30 M CRO. Cronos chain has already started to implement Ethereum's EIP 1559, so we can expect that a share of this amount will be burned, but even it's 20%, say, 6 M CRO per year, the resulting burn amount will be not be able to offset the selling pressure crated by the massive inflation of 650 M CRO per year happening on Crypto.org chain, unless that inflation is corrected.

By comparison, on Ethereum, in recent months, the monthly transaction fees were 3x bigger than the monthly inflation/emissions, which is why Ethereum is able to reduce Ethereum supply simply by burning a portion of the fees.

This proposal makes sense to address without delay a situation where annual inflation of supply (650 M CRO) is so much bigger than demand for CRO (30 M CRO in transaction fees annually across both chains). Hopefully, if the community is able to mobilize to get it done, it's just the beginning of a journey where the economics of CRO, which were designed years ago, can be further optimized and made more sustainable, and more tied to core chain activity, through governance proposals.

[Dewypornstar69]

Since Crytpo.com has en onboarding new countries and users to the space, keeping the coin lower in price is more attractive. I've seen the burns and it's not helping other than the wealthy who have already invested. Is this Burn for the growth of Crytpo.com or for the short-term gains?

Remember alot of countries are hurting from far more inflation than US! Don't make walls. Don't be greedy. Think longer term than this year.

[fgatin]

Hi everyone,

We (Crosnest) have written an extensive article to address the proposal and the inaccurate information that has been circulating around. Please read through it and feel free to comment and give feedback.

[darkerthings]

Thanks for sharing ! Based on your post, it looks like the current proposal is a reasonably good option. The other option that you propose, to create a modified mint module, seems like overkill when almost the same result can be achieved by changing a couple of parameters. I could not find a security audit for the mint module that you reference, do you know if there is one ?

[Galadrin]

Hi, there is no security audit about the custom module, but the their is a very very low risk with this since no messages exist to interact with it.

seems like overkill when almost the same result can be achieved by changing a couple of parameters.

I don't understand your point, create a gov proposal to modify the inflation every year is not (in my opinion) a good method.

[ghost]

One point worth reiterating from the article, as quote:

The 30 billion max supply is not written in the code

It appears that currently the Cosmos SDK's mint module does not provide a way to set a max supply, nor to handle the scenario of current supply reaching max supply. There is an open issue for this: cosmos/cosmos-sdk#13308 --> Something worth considering if not already considered.

Since the topic of max supply came up, it is hard not to imagine what happens when emissions end several years down the road, but I guess that's a topic for another time.

[jobygeorge162]

Need to burn supply plus transaction burn otherwise will be left behind never gonna see $1

[zillda]

In my opinion, a system similar to Ethereum's EIP-1559 should be implemented.

[Galadrin]

Checkout our article
I'm not convinced that a fee burn will be enough, even if we increas the fees by lot.

[F282726]

I am convinced that a system similar to EIP-1559 should be implemented, yes true for now burned commissions would not go to influence commissions but with time and increased use of Chain this will definitely go to influence

[Huttu-CRO]

There has been quite a lot of confusion related to this proposal and there hasn't been a single post yet explaining what it actually means. Facts first, opinions later.

Facts:

If we have too high emissions, the total amount of CRO can go over the intended 30B.

There is nothing that would stop emissions in Crypto.org after 5B CRO is out and with the current speed we would end up with close to 32B CRO supply.

If the emissions are over 500M per year and last for 10 years, we will have over 30B CRO in the end.

Original plan was:

• Emissions of 500M CRO per year.
• Emissions will last for 10 years, if we have 5 second blocks.
• There will be a total of 30B CRO after emissions end.

If this proposal goes through:

• We will still have over 500M CRO emissions per year.
• We have 5s blocks so emissions will last 10 years as planned.
• There will be at least 30B CRO in total.

So the proposal doesn't actually break the original plan / promise, but puts CRO on the rails it was intended.

Opinions

Then it's just a matter of opinion should delegators more than was promised or should the extra CRO be burned.

Suggestion for the the proposal:

Change:
"The total supply of CRO currently in circulation is 26 Billion, and it is growing at a rate of approximately 2.5% per year, which implies an annual emission of around 646 Million CRO through inflation."
=>
"The total supply of CRO currently in circulation is 26 Billion, and it is growing at a rate of approximately 2.5% per year, which implies an annual emission of around 646 Million CRO through inflation. This is much higher than the planned annual emission of 500 Million CRO and with this rate the total supply would go over 30 Billion during the 10 years.

[marco-novelli]

Good point. I and my colleagues in Medusanode Validator we also got shocked that there is no hard cap on 30billion CRO. From where are “created” the additional CRO over 30billion? I’m not enough technical on this.

[nick-upcyber]

What about Cronos tokens in https://etherscan.io/token/0xa0b73e1ff0b80914ab6fe0444e65848c4c34450b?a=0x000000000000000000000000000000000000dead#tokenAnalytics why they're not being calculated towards the burned tokens quota?

[fgatin]

Because those tokens are minted on other chains (like Crypto.org) when they're burned on Cronos. It's IBC transactions.

[marco-novelli]

So, this pure farce vote has started. Shame on you CdC for, once again, a giant swing and a miss

[Bigbean444]

Sorry what’s this about ?

…

On Tue 2 May 2023 at 13:24, Marco Novelli ***@***.***> wrote: So, this pure farce vote has started. Shame on you CdC for, once again, a giant swing and a miss — Reply to this email directly, view it on GitHub <#941 (comment)>, or unsubscribe <https://github.com/notifications/unsubscribe-auth/A6VVOUY4NJWIZU6AE4TSOYDXED4GBANCNFSM6AAAAAAXCIP5NA> . You are receiving this because you are subscribed to this thread.Message ID: <crypto-org-chain/chain-main/repo-discussions/941/comments/5780333@ github.com>

[marco-novelli]

I agree with Finland CRO
https://twitter.com/FinlandCro/status/1653346718509932545

[Bigbean444]

Are you part of the crypto team? Cause you have me confused?

…

On Tue 2 May 2023 at 14:01, Marco Novelli ***@***.***> wrote: I agree with Finland CRO https://twitter.com/FinlandCro/status/1653346718509932545 — Reply to this email directly, view it on GitHub <#941 (reply in thread)>, or unsubscribe <https://github.com/notifications/unsubscribe-auth/A6VVOU57FRJAH2UH4ONZGCDXEEATTANCNFSM6AAAAAAXCIP5NA> . You are receiving this because you are subscribed to this thread.Message ID: <crypto-org-chain/chain-main/repo-discussions/941/comments/5780713@ github.com>

[marco-novelli]

I got bored to talk with you. You are in wrong thread

[Bigbean444]

Lol. What do you mean ? I’m confused

…

On Tue 2 May 2023 at 17:13, Marco Novelli ***@***.***> wrote: I got bored to talk with you. You are in wrong thread — Reply to this email directly, view it on GitHub <#941 (reply in thread)>, or unsubscribe <https://github.com/notifications/unsubscribe-auth/A6VVOU74AMKIYSG6W3CIEIDXEEXBFANCNFSM6AAAAAAXCIP5NA> . You are receiving this because you are subscribed to this thread.Message ID: <crypto-org-chain/chain-main/repo-discussions/941/comments/5782895@ github.com>

[lezzokafka]

Hello everyone - we would like to express our gratitude for all the feedback and suggestions provided by the community. While we understand that there may be differing viewpoints on this proposal, we believe that the proposed burning mechanism is, among all options considered, the optimal one from a risks and benefits perspective.

Most straightforward option:

• On the Crypto.org Chain, annual inflation is currently around 650 million CRO, whereas the demand for CRO is less than 30 million CRO on Crypto.org Chain and Cronos chain combined, due to the small transaction costs. The issue at stake is an imbalance between supply and demand, which can only be addressed by reducing the annual emissions of CRO tokens on Crypto.org.
• As many community members have pointed out, no one knows how this proposal is going to impact token prices. However, the structural imbalance between supply and demand is hard to ignore in a context where Bitcoin, Ethereum and a few other well-established chains are slowing down inflation.
• At the protocol level, the proposed burning mechanism can be executed directly with the existing governance proposal structure, starting with simple parameter updates and community pool spend proposals. This provides an additional layer of confidence as it is relatively low risk at the operational level for Crypto.org Chain. Furthermore, the proposal can easily be adjusted up or down by governance as we learn empirically about its impact.

Fairest:

• The proposed community tax will be applied to all delegators and validators of the network.
• The largest validator hosts of the Crypto.org Chain will participate in the entire burning operation and hence, share one of the largest burdens with respect to the burning. We believe that this proposal is a crucial step toward creating a sustainable token economy for the Crypto.org Chain, and we are proud to be part of this initiative.

Most decentralized:

• The Crypto.org chain has been actively promoting decentralization by shifting more than 20% of the total voting power to community host validators since the beginning of this year. We have also introduced a minimum commission rate to the validators to provide a sustainable environment to the infrastructure hosts who have been keeping the network robust and secure.
• In the proposed burning mechanism, no single entity is in charge of the burning, and any token holder can propose a burn. The community will have complete control over the burning process through their votes.

We have heard questions and alternative ideas from the community and some of the top validators, and have summarized below the feedback of the protocol engineering team regarding these concerns:

Concern 1: “The proposal will decrease staking rewards”:

• The proposed burning mechanism aims to reduce the massive inflation rate relative to demand, which could improve the fundamental health of the CRO token economy. We acknowledge that the staking APR in CRO terms will be impacted, but the imbalance between CRO inflation and CRO demand must be addressed sooner or later.
• As many community members have pointed out, no one knows how this proposal is going to impact token prices. However, the structural imbalance between supply and demand is hard to ignore in a context where Bitcoin, Ethereum and a few other well-established chains are slowing down inflation.

Concern 2: “The funds should be allocated to Cronos chain ecosystem development instead of being burned”

• The Cronos chain already has an ecosystem development effort including grant programs and accelerator programs. Funds are deployed when there is a positive and lasting expected return on investment.
• Besides, considering that ecosystem grants are typically used by projects to pay for operational costs and user acquisition costs, these amounts are often swapped into fiat currencies shortly after distribution. This means that an increase in grants would increase the overhang of CRO supply relative to demand.
• In conclusion, while the idea of allocating some CRO emissions to ecosystem development is a good one, it can only be considered in the future once the current issue of supply/demand imbalance has been addressed.

Concern 3: “We should burn transaction fees instead of burning emissions”

• Transaction fees are cheap on the Crypto.org chain, which means that Crypto.org Chain generates less than 100,000 CRO in transaction fees annually. Burning transaction fees would have an insignificant impact on the emission rate compared to the proposed burning scheme and its scale of 100M of CRO annually.
• Even taking into account Cronos chain, which consumes less than 30 M of CRO in transaction fees annually, the burning of transaction fees cannot offset the current scale of inflation.

Concern 4: “The largest CRO holders should just burn the CRO that they already control”

• Some community members have proposed that the proposal should burn billions of CRO already in circulation instead of burning future inflation.
• However, Crypto.org does not have an idle treasury available for such a burning operation. All the “extra” CRO has already been included in the 70 billion CRO burn program initiated in February 2021. The remaining CRO in circulation is held, either in self-custody or via a custodian, by token holders who have purchased or earned these tokens by incurring costs in the real world.

Concern 5: “With this proposal, the largest validators can take control of the funds captured by the community tax before they are burned”

• Once the funds are locked in the distribution module, they can only be burned or transferred via a governance proposal.

Concern 6: “This proposal is insufficient”

• Moving forward, we envision a series of iterative adjustments. This governance proposal would be the first step and, as we learn from its impact, further emission reductions as suggested could be considered down the road.
• Additional measures could be decided and implemented by Cronos chain governance, such as EIP-1559 and the burning of transaction fees.

Together, we can create a more vibrant and sustainable token economy that benefits all CRO holders and the broader ecosystem.

[marco-novelli]

"However, Crypto.org does not have an idle treasury available for such a burning operation. All the “extra” CRO has already been included in the 70 billion CRO burn program initiated in February 2021. The remaining CRO in circulation is held, either in self-custody or via a custodian, by token holders who have purchased or earned these tokens by incurring costs in the real world."

In Italy we call this supercazzola

Crypto.org does not have an idle treasury, but CRYPTO.COM??? Some BILLIONS I suppose!

[Easykiel11]

Please who can help me with some BNB testnet token, i cant get it from the url.

I really need your help every one

wallet:

0x1c16e96f49fB4453Ca72cA305d6B820638aB41aa

[cronos96]

When the next burn?

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