[Proposal] Distribute 50% Transaction Fees to the Community Pool + Increase Proposer/Validator Rewards

Summary
The proposal aims to create a fair distribution model by allocating 50% transaction fees to the community pool and increasing proposer/validator rewards.

If voted yes, the following changes will be made:

  • The ‘Community Tax’ will be increased from 0 to 0.5 (50%), which will ensure 50% transaction fees is distributed to the community pool
  • The ‘Base Proposer’ and ‘Bonus Proposer’ reward will be increased from 0.01 and 0.04 —> 0.03 and 0.12 respectively, to increase the validator share of rewards

Challenges with the current distribution model
Staking is currently disabled on Terra Classic and may not get re-enabled until it can be verified that the chain will remain Byzantine Fault Tolerant (a single entity does not hold 2/3 supply). This may take a while to verify.

With staking disabled, the current distribution of transaction fees is as follows:

  • 5% to validators/proposers
  • 95% to delegators
  • 0% to the community pool

Considering, less than 0.01% LUNC is staked, this is creating an unfair distribution of rewards which is not aligning the interests of the broader community.

Proposed changes to the current distribution model
In order to incentivise the broader interest, I am proposing 50% of the transaction fees to go to the community pool. The new distribution of transaction fees will look like this:

50% transaction fees to go to validators and delegators in the following ratio:

  • 15% to validators/proposers of the block
  • 35% to the existing delegators

The remaining 50% transaction fees to go to the community pool to be utilised as follows:

  • 35% to be burned on a monthly basis via a Community Pool proposal
  • 10% earmarked for Terra Classic ecosystem developers - airdropped on a monthly basis according to their TVL
  • 5% to be retained in the Community Pool for core Terra Classic development

How this creates a more incentivised system for the community

Holders/Non-stakers: 99.9% of LUNC holders currently are non-stakers. Burning 35% transaction fees will not only help the LUNC & USTC supply issue, but will also create a deflationary economy, rendering LUNC & USTC a better store of value. Needless to say, this will attract new buyers to the ecosystem.

Validators: The current Base Proposer and Bonus Proposer Reward is 5%. The proposal will increase this to 15%. Given that 50% of this will go to the community pool, the net rewards to validators will increase to 7.5% (50% up from current levels).

Delgators/Stakers: The current return on staking for existing delegators is 4,340,031% per year. This proposal will see this reduce by a factor of ~2.71. However, despite this, the return on their staked LUNC for existing delegators will be 1,601,487% per year.

This is a super high return for a zero inflation chain which will dis-incentivise any existing delegator from unstaking/un-bonding their LUNC. As part of the original believers and security contributors of the chain, who lost a lot in the Luna crash, I feel such a high staking yield to the ~0.01% is justified until staking is re-enabled and security risks can be ruled out.

Developers: The 15% allocation to devs will ensure incentives to keep building on the Terra Classic chain, thereby growing transaction volumes and overall transaction fees that accrues to the network.

Implementation:
The proposal will be a parameter change proposal which will make the following changes:

[{
“subspace”: “distribution”,
“key”: “communitytax”,
“value”: “0.500000000000000000”
},
{
“subspace”: “distribution”,
“key”: “baseproposerreward”,
“value”: “0.030000000000000000”
},
{
“subspace”: “distribution”,
“key”: “bonusproposerreward”,
“value”: “0.120000000000000000”
}]

This is a parameter change proposal and will be implemented automatically if passed.

Note: Since editing is disabled, please follow the comments for any updates.

30 Likes

Right now you are the only person in this forum that is actually making decent proposals. I really like this. You can count with my vote.

25 Likes

Link to the proposal on Terra Station: Prop #4080

10 Likes

Voted

4 Likes

Much better than 1.2 % killing proposals!

4 Likes

voted

4 Likes

to much for validators and not enough for devs/dapps
also it won’t change anything that nobody wants to run a dapp on this blockchain because of a high fee

1 Like

I agree with the issues and that was what I covered in my plan. My issue is that all these “part” plans (Plans that tackle one issue) are just going to further cause harm as non are complete and offer to fix one issue but cause a different one.

Would love to discuss with you more details about my plan as I have read some of your posts and you have a certain logical approach from what I have seen. So far I have an alocated fund for Dapps & Devs to help offset their cost difference, but would look to a perminent coding change to it automatically. Perhaps a minimum tax free amount. For exame, up to x LUNC no tax, then after that (x+1) Tax starts?

Also I love how this plan was posted right before his last plan increased the cost of posting future plans now set to 345k LUNC.

5 Likes

This plan was posted AFTER his previous proposal increased the cost. So go fud somewhere else

3 Likes

Created a pull request to whitelist this proposal (Prop #4080) here:

@alagiz can you help with the merge?

3 Likes

@rosanne89 @AtoZ any update on the whitelist?

2 Likes

Burn lunc for the good goodness of everybody and the realm of crypto, give crypto back its reputation

4 Likes

So are you trying to create a NEW fee OR trying to take 0,6% of the original proposal 3568.
Because im about to share across all social media that you are trying to commit theft on the community.
what say you?
stake.systems and nitawa about to get spammed with community feelings.

2 Likes

I like this proporsal but you have find a way to adapt to the one which is going to be approved. That means distribute 1,2% instead 0,5%. However, i think that’s the way to burn LUNC and incentive devs, validators and community to have a real revival.

4 Likes

This proposal has nothing to do with 3568. 3568 is just text proposal that will do nothing even if it passes. Devs would need to implement the proposed changes which I don’t think will ever happen.

On the other hand this proposal is “parameter change” so if it passes it will be applied immediately.
And great thing about this proposal is that it will not introduce any new fees. It will just change the redistribution mechanism of the current fees. Simple and effective

11 Likes

the 1,3% burn fee was accepted and requested by the community,exchanges and validators.
when implemented 3568 then has to bypass these 3 parameters so it works on its own and have 0 dependencies.
Nevertheless im repassing to the news/media/youtubers/reddit/discords what its going on here.

2 Likes

PR is merged. Prop #4080 is whitelisted now.

7 Likes

Hi, how does this proposal work with 3568 being implemented as well?

Will the tax collection (1.2%) be used for this distribution?

4 Likes

The 1.2% tax for Prop 3568 is for exchanges. This Proposal (Prop 4080) will implement on-chain changes. Both are serving different purpose.

Also note that this proposal will create a burn mechanism without any code changes, in addition to the burn from Prop 3568.

12 Likes

Got it, appreciate the clarification.

4 Likes