SIP-276: Turn off the money printer

Simple Summary

This SIP ends inflation with the total supply of SNX tokens capped at 300m.

Abstract

This SIP caps the supply of SNX at 300m tokens and elevates the token supply to metagovernance status, meaning that any future changes to the token supply will require a unanimous vote by the Spartan Council. The inflation for the current fee period has been minted raising the total supply to 293,251,260.7987736034469344 SNX. After the current inflation is distributed this period, inflation will run for a further ten fee periods with 674873.920122639655307 SNX minted each week until the total supply reaches 300,000,000.

Motivation

Inflation was intended to bootstrap the network, it has done this extremely effectively. Now that fee yield from atomic swaps and perps is meaningful and growing it is time to wind down inflation, the fact that we are only a few weeks away from the very memeable 300 million mark is cause enough to make this change now.

Specification

  1. The total supply will be fixed at 300m.
  2. The inflationary rewards in the current period will be distributed (~2m SNX)
  3. A further 6,748,739.201226396553066 tokens will be minted over the following ten weeks.
  4. The total supply of SNX will be controlled by metagovernance, requiring a unanimous vote to modify it further.

Overview

Inflation was introduced in march 2019 in order to help bootstrap the network, following the pivot from Havven to Synthetix. It is fair to say this was a far more successful change than anyone anticipated. But even when inflation was introduced it was only specified to run for four years terminating in march 2023 with a fixed supply of ~250m SNX. There were several SIPs introduced subsequently to modify the inflation schedule including introducing a terminal inflation rate of 2%. Recently several inflation SIPs were introduced resulting in a significatnly higher rate of inflation, unfortunately higher inflation did not meaningfully impact the percentage of SNX staked in the network so a decision was made to reduce inflation. This SIP continues this process eliminating inflation entirely.

Rationale

The community has attempted to tweak inflationary incentives a number of times over the years and while these changes have been successful in bootstrapping the network, inflation fundamentally distorts the incentives within the network. On one hand inflation redistributes ownership of the network to those who stake, but it simultaneously decreases the dollar denominated fee yield (paid in sUSD) per SNX over time. The problem with this is that it creates constant downward pressure on the price of the SNX token. This is particularly true today, because even though inflationary rewards are locked for a year it is trivially easy to hedge this exposure by continuously selling unlocked SNX each week. By fixing the supply at 300m we ensure the sUSD fee yield per SNX will grow as protocol revenue grows, this should assist with attempts to analyse the value of the SNX token using cash flow and revenue models.

Also the 300 meme is too good to pass up, there are no coincidences.

Technical Specification

TBC

Test Cases

TBC

Configurable Values (Via SCCP)

N/A

Copyright

Copyright and related rights waived via CC0.