The Tokenomics Working Group is proposing an initial set of upgrades to Regen Ledger that would enable token burning as a result of economic activities. Token burning reduces the total supply of the REGEN token, acting as a counter-balance to minting tokens (which the network does automatically to reward actors in a proof-of-stake system). Economic activities include both on-chain and off-chain marketplace transactions whereby token burning from off-chain transactions is fulfilled manually through contractual or social obligations.
The proposed upgrades to Regen Ledger include the following:
Ecocredit Marketplace Fees - New marketplace fees managed via governance. This would enable token burning as a result of on-chain marketplace activity. The buyer and/or seller would pay a fee included with each successful marketplace transaction. The fee would be a percentage deducted from the sale. If the sale is not in REGEN, the fee would be sent to a pool (an account managed via governance) to later be converted to REGEN and manually burned via governance. Ideally the fee would be automatically converted and burned at the time of sale, which could be solved with price oracles or liquidity pools on Regen, but doing so would come with additional challenges.
Regen Token Burning Message - A message that burns REGEN tokens. This would enable manual token burning as a result of off-chain marketplace activity. Not all credits are expected to be purchased directly from Regen Marketplace. The largest volumes purchased to date have been purchased OTC. A simple burn message would enable manual token burning as a result of contract or social obligations associated with off-chain marketplace activity. It is not expected that token holders would use this message for any reason other than fulfilling a contract or social obligation but any account could execute the message. In addition to the amount of REGEN tokens t
Very much in favor of this. Aligns token supply and fees as incentives for credit sales. Want to pump your $REGEN bags? Help the world go green and sell some credits. Have I got that right?
**(1) Marketplace Fees: **“The fee would be a percentage deducted from the sale.” Question: Why would the fee be a deduction from the sale instead of just an additional transaction-style fee?
**Consideration: **These fees have to come from an existing stakeholder’s income on the marketplace if it structured as a “deduction from the sale”. How do we universally get agreement from marketplace stakeholders that they will forfeit part of their income to the community? This seems unlikely, so I think we should structure this as a new fee to the community, on top of existing marketplace fees.
**(2) I support manual burn functionality. **Who from RND would be committing to entering these burns, and what would the cadence be (monthly)? How will this fee be structured (see question #1, and the answer needs to be consistent among offchain and crosschain transactions).
(3) This sounds complicated, and like the “choice” to burn upon send will be a UI/UX nightmare. Does it really need to be this complicated? I think we need “always true” scenarios around burns.
Other Considerations:
why is the marketplace the only place we are considering burning REGEN?
why aren’t we burning upon claiming rewards?
why aren’t we burning upon delegation/redelegation?
why aren’t we burning upon credit class creation?
why aren’t we burning upon registering a project?
why aren’t we burning upon issuing a credit batch?
At a recent community gathering, Michael Zargham (founder of Blockscience) was sketching out the ways that, if you want a stable currency, your monetary emissions need to match your money destruction cycle. In other words, for every token you mint, you should also be burning a token. In crypto parlance, this threshold—moving from net mint to net burn—is referred to as moving from inflationary to deflationary.
At the moment, Regen Network’s emissions are substantial and our token destruction cycle doesn’t yet exist. This proposal is aimed at addressing this imbalance.
Does the Regen Token Burning Message implementation allow us to then later link token burning into different message or transaction types easily?
Remind me the reasoning to not have the token burning be linked to the primary asset CREATION instead of linking it to the market transaction?
One thing that is important to understand about the intention of this proposal is to give RND as one of the core eco credit creators in the regen network community, tools to ensure we have alignment with the community through our current strategic focus, which is specifically using regen registry to mint eco credits and sell them in the marketplace.
Recalling the context of the conversation that is not covered in the summary above:
One of the reasons why this proposal relies on voluntary burning is that RND will follow those rules, and it is easier from an engineering perspective (and hard from a game theory perspective) to follow those rules.
In addition, reasons to keep it voluntary are that friction, in a phase of boot strapping network might be counter productive to drive adoption. Again, in the case of RND, we are committed to aligning our business model (originating ecological assets) with utility and health of the network, so this provides a clear way to do that in an incremental way, and learn with an easy proposal with low engineering budget to ensure learning, alignment and start balancing our token minting and burning.
Also the complexity of internalizing fees on chain when at the moment much happens off chain.
I think the outlines of a more holistic design is stating to emerge through the token economics working group meetings that addresses some of the great questions of @Sarah Bax below
@ryanchristo | Chora —could you put forward specific numbers to move this discussion in the direction of an on-chain proposal? Maybe we could pull some comps from Stargaze?
I am supportive of adding burn functionality in general. My instinct is that the ideal approach would add a very small burn to any network transaction. I think it would make sense to simply make the burn amount a percentage of the network fee confirmed by the user. The more programmatic and automatic the better. Keeping the burn amount tied to gas fees creates a network incentive to REGEN holders: promote and improve network activity to decrease the supply of the token.
I also believe this aligns the token more closely with the currency-backed-by-ecological-health narrative. The more network activity, the more valuable the token, which spurs more network activity.
As an aside, I think a programmatic microburn (retire) of ecocredits would also be something to consider in the future.
I am in favor of the proposed upgrades here, but I don’t love the “fulfilled manually through contractual or social obligations” part. An offchain purchase that is eventually recorded onchain should not require any manual MsgBurn. It sounds like that is the purpose of #3, assuming that MsgSend with automatic retirement is the typical way an OTC transaction is added to the ledger? In that case, it would be better if the burn happens automatically.
If there is a sentiment that a large OTC purchase should correspond with a large burn, then I understand the reason for making it manual. However I still believe this would ideally be achieved programmatically.
For example in pseudocode: if MsgSend with retire, then burn x REGEN per retired ecocredit. Calculate this fee as part of the gas requested sent to the client.
Perhaps this is more difficult to implement than the proposed solutions? If this is true, then I am in favor of implementing the proposed solutions first with an eye towards improving the burn mechanism in the future.