The Future of Block Producer Reserves

Owned by Luke Stokes
Dec 15, 2020
3 min read

As described in the knowledge base, the genesis of the FIO chain included 10M tokens set aside for Block Producer Reserves, to be minted each day as needed if the normal fee distribution falls below 50k FIO tokens:

Until Block Producer Reserves are exhausted, if in any 24-hour period tokens payable to Block Producers from collected fees are less than 50,000, the difference will be minted so that the minimum pool of tokens payable to Block Producers is 50,000 every day.

In December 2020, these reserves were exhausted. As discussed in a recent Block Producer call, the pay from organic on-chain activities is about 10% of what it was with the BP reserves, which is still quite impressive for a network that isn’t even a year old, but it’s also clear we still have adoption work to do for a fully sustainable tokenomics model based purely on fees and no inflation to block producers. As mentioned on the call, the Bitcoin model, for example, takes many decades and 4-year halvenings to reach a fee-only sustainable model.

If you weren’t on the BP call, I suggest listening to the second half of it here:

The Foundation wants to work with the Block Producers and FIO community to come to a decision about a short term solution as well as a medium term and long term solution regarding FIO tokenomics, block producer incentives, and long-term sustainability for the FIO decentralized business model. Though we never intend to have more than 1B tokens, we also have 38,506,000 tokens that are locked on chain forever (effectively burned) from FIO Members who did not complete their integration by the chain-defined October 20th date. For a deeper discussion on lock type 2 tokens see: https://fioprotocol.atlassian.net/wiki/spaces/SUP/pages/10616911

This is the code where the treasury mints Block Producer Reserve tokens: https://github.com/fioprotocol/fio.contracts/blob/cd048d6d7b10dbd0e0d46fe8b5fd063f4bc4c8a4/contracts/fio.treasury/fio.treasury.cpp#L196

One of the simplest solutions is to change BPMAXRESERVE to be something greater than 10M and burning some of the Foundation owned tokens or the 38M tokens that are already locked forever. Other solutions include more complex approaches like allowing the BPs to vote for these values or have the BP reserve threshold decrease over time. The key points to consider are ensuring the BPs are well incentivized to secure the network and greater FIO Token community is not over-paying for that service of securing the chain and adding additional value to the FIO community as Block Producers do. Just as an example, here are some of the many, many benefits BPs provide:

  • Security audits and code reviews of new features to be deployed on the chain.

  • Immediate response for any security issues on chain.

  • Reliable uptime for block producer nodes, backup nodes, p2p nodes, and API nodes on both testnet and mainet.

  • Additional technical services like snapshots, reporting, alerting, and monitoring.

  • Marketing services promoting FIO to their community.

  • Tech support to the FIO developer community.

  • Application development of FIO enabled products and services.

  • World-class consulting and expert advice specific to the EOSIO technology stack and the DPOS consensus mechanism.

  • and much more…

It’s important for us to refine our tokenomics over time to keep the chain secure while also accurately reflecting the current and future value of the FIO Protocol. Let’s start that discussion in Discord in either the block producer channel, the governance channel and/or the tokenomics channel: https://fioprotocol.io/chat

Let’s give ourselves no later than two weeks (by the end of the year) to finalize a short term solution. As quickly as possible, a FIP (or multiple FIPs) should be drafted and proposed so they can be discussed as a community and within the steering committee. The FIP process can be found here: https://github.com/fioprotocol/fips

After that, we can have a longer discussion about the mid to long range solutions that are scalable and promote a healthy FIO ecosystem.

Please feel free to edit this page directly with your ideas or leave comments below.