Thanks for your comment.
I don’t think that talking about transaction fees is premature optimization.
This answer about the failure to consider or even think about transaction fees seriously makes me wonder whether the economics at the core protocol level have been well thought out.
Right now, Incognito is having some success because it’s still early in the protocol’s lifetime. Growth is to be expected, so no surprise the protocol is gaining traction.
But, like I said in the other post, the protocol’s success (economically) is due to the low supply and the fact that everyone is still staking.
Once the price of the PRV token reaches a certain point, you’ll see the staking level drop from 86% where it is currently because people are holding the token for price gains, to much lower, perhaps 35% or so, or less because:
-People want to take profit (naturally)
-Transaction fees are so low that it does not make economic sense to secure the network to make crypto due to transactions over the long term.
So, the price of the PRV token will drop, more stakers will leave to take profits and the network is under-secured. It’s a vicious cycle.
There are no:
-Lockup periods for bonds so that the network does not collapse due to speculators taking profits
-Economic incentives to keep stakers in the game for longer time periods to earn on their investment
So, it’s not premature to be worried about the role transaction fees can play in making sure the network remains strong over a 3-5 year period.
So, you want to optimize the cryptoeconomics early to make sure the network lasts over time.
Even Satoshi didn’t know whether Bitcoin would be around after 10 years, but what he did was think about the economics at the beginning by:
- Creating transaction fees so that miners could benefit from greater utilization
- Forced a shift toward network utilization being the main economic driver by reducing issuance over time
- Used scarcity as a means of using human psychology (greed) to lock in the value for the token and ensure that people know that there will always be 21 million Bitcoin.
As for Incognito:
- The reducing issuance and fixed supply align with Bitcoin
- The tokeneconomics are weak because they don’t discourage or take advantage of spammers and don’t align network use with miner compensation.
Right now the team is winging it from an economic perspective (with the recent 0 trading fees, which raised questions about how liquidity providers would get paid, again in PRV, whose value is based on speculation, rather than in cryptos used in transactions.)
It’s worrying tbf.
Thanks for engaging.