In this podcast, the team dives deep into their latest paper on Dynamic TOA (dTAO), exploring governance mechanisms, emission strategies, and the ongoing debate over default dividend allocation methods.
Emission Strategy and Allocation Mechanisms
- "Dynamic TO's core premise is that we can solve the allocation problem by using market dynamics, letting a large group of people move their funds around the ecosystem and selectively pick the subnets that are actually performing well with some risk involved."
- dTAO aims to address apathy and inefficiencies in subnet validation by leveraging market-driven fund allocation.
- The emission vector is designed to reflect subnet performance without disturbing price stability.
- Current testnet designs use reserve ratios to determine TOA injection, ensuring price consistency and reducing manipulation risks.
- Future iterations may incorporate AI-driven functions to better assess subnet value and performance.
Default Dividend Allocation: Airdrop vs. Auto Sell
- "There are multiple consequences of either of those choices... selling the root dividends... creates downward pressure on the price as a consequence of having to be sold automatically."
- The team debates between passive airdrops and active selling of dividends for root stakers.
- Airdrops distribute subnet tokens directly, potentially leading to passive holding and market inefficiency.
- Auto sell ensures dividends are reinvested into the ecosystem, promoting active participation and market stability.
- Community feedback is mixed, with strong arguments supporting both methods for enhancing market efficiency and participant engagement.
Market Efficiency and Manipulation Resistance
- "By using a moving average taken over a long period of time, it's actually very difficult to manipulate the TOA."
- The emission strategy employs moving averages to mitigate short-term price manipulation.
- Root stakers receive dividends based on their proportionate stake, aligning incentives with long-term ecosystem health.
- The design ensures that achieving economic security is costly, deterring malicious actors from attacking the network.
- Different allocation methods are tested to balance liquidity injection and market stability, aiming for an antifragile system.
Incentives for Root Stakers and Subnet Participants
- "By Design, the dividends of people that are just purely holding TOA do decrease, but if they actually choose to allocate those dividends back into the subnets, they do fairly well."
- Root stakers are incentivized to actively allocate TOA into performing subnets to maximize returns.
- Automatic selling of dividends could lead to lower engagement, but active participants benefit from higher returns through strategic allocation.
- The transition from root to subnet-based rewards is designed to preserve consensus mechanisms and economic security.
- Over time, the system encourages sophisticated capital allocation, fostering a mature and efficient market.
Tokenomics and Staking Design
- "All of the subnet tokens have a 21 million cap, and they converge to the same cap as TOA, making the economics straightforward."
- Subnet tokens have a fixed supply, aligning their inflation rates with the root token, TOA.
- Staking and unstaking mechanisms are carefully crafted to balance network security and participant incentives.
- The root claiming mechanism allows flexibility in dividend management, supporting both reinvestment and liquidity.
- The overall tokenomics support sustainable growth and fair distribution, ensuring long-term ecosystem viability.
Key Takeaways:
- Emission Strategy is Crucial: The dTAO emission mechanism is meticulously designed to promote market efficiency and prevent manipulation, ensuring sustainable growth and stability.
- Dividend Allocation Impacts Market Dynamics: The choice between airdrops and auto sell has significant long-term implications for market maturity and participant engagement, with no clear one-size-fits-all solution.
- Incentive Alignment Drives Ecosystem Health: Active participation through strategic TOA allocation by root stakers fosters a mature, efficient, and resilient market, benefiting both investors and developers.
For further insights and discussions, watch the podcast: Link
