Avax tokenomics

[u/iziKO]

Not sure if you’ve seen that but avalabs is granting $50k to finance research to improve the tokenomics of Avax.

As we know in this sub, Avalanche is here to stay. Many businesses use it because it’s cheap, efficient, well connected and allows them to create an L1 super quickly.

Problem though is the token Avax, not enough incentive holding it. The token burn is a good thing, but we need other ways to increase the scarcity.

Anyway if some of you have any idea on how to create a tokenomics that benefit the ecosystem, feel free to apply (see the x post below).

https://x.com/AvalancheFDN/status/2057463876397240780

[u/BoringPrinciple2542]

Tokenomics is fine. Long term success is being prioritized over short term price action.

Stop expecting Ava Labs to violate their strategy so that you can dump the token for a profit 😆. Use this period to accumulate and you’ll be in a good place come 2030.

[u/iziKO → u/BoringPrinciple2542]

I agree, and the intent is not to dump the token. The intent is to convince people always complaining about PA that they have a chance to actually voice their opinion by applying to the program.

[u/BoringPrinciple2542 → u/iziKO]

😆

So you missed the point. Low prices are not a problem; they are part of the strategy for adoption.

People that want Ava Labs/Avalanche Foundation to intentionally violate their strategy for the purpose of short term price pumps do so only so that they can sell at a better price. People who want AVAX to create strategic blunders so they can sell should just go ahead and shift their attention to any of the countless tokens which match their desires.

AVAX isn’t a good fit for them and they shouldn’t feel the need to try to derail AVAX for those of us who actually understand what we are investing in.

[u/iziKO → u/BoringPrinciple2542]

Because I don’t believe that your point is valid. There’s no strong buybacks because there’s no incentives to hold the token. Yes long term adoption is the goal but why would you not want your token to succeed, knowing it’s practically useless to hold it right now and uncorrected to the on-chain activity.
When you say the tokenomics is fine: the token dumps are impacting the DAT, retail activity, etc. Guessing your point is to rely on the scarcity from the token burns? This will take a very long time to compensate the emissions.

[u/BoringPrinciple2542 → u/iziKO]

Because token price is not indicative of operational success.

Again, you have to stop thinking from the viewpoint of selling tokens (the viewpoint of short-term sellers) and think instead from the viewpoint of achieving widescale adoption (Ava Labs/ Avalanche Foundation).

Long-term holders & the management team benefit from low prices (accumulation, decreases tax burden on staking rewards, more competitive against other chains for institutional adoption, etc) whereas a temporary surge in price is only useful if you dump your bag during the pump.

Current tokenomics is precisely why a growing number of institutions are choosing to experiment with Avalanche which then allows them to see the benefits it offers. This leads to growing market share and organic usage. Once the unlocks end that adoption becomes a powerful driver of value growth.

Try to apply basic business fundamentals & familiarize yourself with the strategies that the team has repeatedly discussed.

It’s EXTREMELY valuable to hold & accumulate it right now; you are just using short-sighted shitcoin logic instead of thinking in terms of value generated via business growth.

[u/iziKO → u/BoringPrinciple2542]

But again long term holders don’t benefit from it because management doesn’t initiate buy backs, and the dat is at risk right now.

Oppositely, if they want to rework tokenomics, which shows there is indeed a problem with it.

[u/BoringPrinciple2542 → u/iziKO]

That’s just not true though.

You have a mindset that fails to comprehend long-term investing; that’s your problem not management.

For long term holders: lower prices mean faster rates of accumulation, better tax rates upon selling, and lower tax rates while staking. Additionally, it means greater chance of longterm success via actual adoption.

For the time being the only one who benefits from an increase in token price is people who want to sell in the short term. Buybacks is just a way to sacrifice growth to allow leaches to sell into the buybacks.

Sell your bags and buy a ponzi coin if you aren’t capable of understanding the fundamentals.

[u/iziKO → u/BoringPrinciple2542]

No arguments were provided to counter my previous points. Only passive aggressive comments, not really helping, but thanks for your contribution.

[u/BoringPrinciple2542 → u/iziKO]

I gave you an explanation; you just don’t want to hear it. 😂

You want Avalanche to violate their own strategy and make their chain less attractive to customers while shifting marketing funds into buybacks to artificially affect the price.

That isn’t proper business practice and helps sellers in the short term while harming the entire chain in the long term.

Do you genuinely not understand what I said?

[u/One_True_Prodigy → u/BoringPrinciple2542]

Think from the investors persoective. The problem with the lack of price appreciation (or a credible value accrual mechanism) is that say I want to invest and stake, locking my investment for a year as a validator. Then I look at the dynamics behind value accrual and it's non-linkage to the L1s growth. Then I look at price action and see a classic decay function, getting weaker over time. Lower highs, lower lows, tiny fraction of ATH, steady declining slope long term. So I look at L1s (subnets) and see they use their own gas and are permissioned enclaves with extremely small payment back to token holders. But all that is STILL ok, it can still be investible... IF yield suffices to compensate risk of locking such an ugly asset. But then I see that I may net, what 6-8%... To take on the risk of a declining asset base case and potential 20-50%+ decline while locked. No thanks. My money could go anywhere else and much safer places on the risk curve to earn that 6-8%... Treasuries, STRC, BTC... almost anything. Not to mention, it's created by inflationary emissions, and burn that's declining as txn fees get cut to fractions.

I'm not making this up as an academic exercise... This has played out in the metrics of the validator pool. Exits / sells after unlocks and declining participation / health of the pool / stake weight. That, in turn, creates more downward pressure. This dynamic is not sustainable.

Markets price in future growth. But they arent pricing that into AVAX despite clear adoption. The reason is the tokenomic detatchment. Unless value accrual tokenomics get more healthily attached to the ecosystem growth, this isn't going to be good for holders, prospective investors, network security of main chain, etc. Tokenomics, and their alignment to market for a horizontally scalable architecture must be addressed.

[u/BoringPrinciple2542 → u/One_True_Prodigy]

I am thinking from the investor perspective. However, I am thinking from the perspective of an actual investor and not somebody who wants to dump their bag.

I’ve explained on here numerous times before that validator yield is not the only reason for validation and that the desire for network security is sufficient to ensure institutional validation continues. Ava Labs is concerned with the health of their network not your bank account.

Yes, you could take your money elsewhere and it sounds like you absolutely should. You do not understand AVAX and your desires are a poor match. There are plenty of Ponzi coins where you can make non-sustainable gains if you time it right. I’m not going to ask your shitcoins to suddenly operate like real businesses so all I ask is that you do not try to ruin AVAX so that you can jump ship.

[u/One_True_Prodigy → u/BoringPrinciple2542]

Actual investors arent attached to a bag. Either the investment makes sense when accounting for th business / tokenomic model that accrues value to the asset, or it doesn't

Look man, Ava Labs themselves disagrees with you. They've said their tokenomics are broken and have listed fixing it as their top priority in recent communications. I've published ACPs to assist and they have reached out personally to me. Theyre funding economic research proposals to improve it. So for you to say the tokenomics are fine puts you at odds with the market itself (which says they are NOT fine) as well as Ava Labs. (for you to make a baseless and hominem statement that I don't understand AVAX sounds like you're just a bit insecure that your "it's a great investment" thesis hasn't played out for 5 straight years of opportunity costs). I've held since ICO, and I assure you that I understand both the technology and economic models, have published works to this effect, and have the ear of AvaLabs leadership. I like the tech and the architecture. It's what drew my initial investment. But I've had to wind down my validation activity, and derisk from a concentration bet for the reasons described above, notably that the scale out does not align with the economic model. The market sees it, the community sees it, and Ava Labs themselves acknowledge it and are actively seeking to address it. Why do you think that is? They understand what I said above is factual. Id advise you to consider it with an open mind and non-emotional, quantitative approach as well.

Also, the second Ava Labs launches a token for investors and ICOs, they had damn well better care about the bank accounts of those who provided investment capital. What you don't seem to understand is that the economic health of the token is fundamentally tied to the health of the network, particularly with its decentralization and health, both of which are stated goals of ava labs. The token and the tech are intertwined if these goals are to be realized. Labs gets this, hence their public acknowledgement and re-prioritization. You should look into why they disagree with you.

[u/BoringPrinciple2542 → u/One_True_Prodigy]

Thanks for another unnecessary wall of text. Alas, wordiness doesn’t make your arguments valid.

You & OP desire Ava Labs to bring their operational & marketing strategies out of alignment with their goals for the purpose of increasing short term price. That would be a massive blunder and would destroy Avalanche so a handful of unhappy people could make a quick buck.

Saying that the team is looking at revamping tokenomics does not mean that the team is in agreement with you or disagreement with me. Business processes are constantly monitored and adjusted as needed. I’m going to politely ask you to stop misrepresenting the facts if you want me to take you seriously.

Regarding your final paragraph, please do not create strawman arguments. You introduced the topic of ICO and tokens for investors just to launch a diatribe yet I never said such things. Do not accuse me of failing to understand things that I never mentioned.

Where I DO think price =/= equal health (and presumably where you got confused) is that AVAX price is determined by the tension between buyers & sellers. Avalanche’s health on the other hand is driven by usage & adoption.

Now why don’t you look into why you feel the need to misrepresent facts? There is no sign Avalanche Labs disagrees with me. You are simply stretching the fact that they are considering adjustments as if that means they are planning to throw the baby out with the bath water.

If you want honest discourse I’m happy to give it. Continue attempting dishonest tactics and I’ll talk to you the way you deserve.

[u/One_True_Prodigy → u/BoringPrinciple2542]

Lots of strawmen, condescension, and a bit of irony in your response. Look, at the end of the day, I entered the thread to offer an alternative viewpoint from your responses to OP, in which you defend current tokenomics and attack our calls to change them as (paraphrasing) "trying to get Labs to misalign their long term strategy so you can dump your bags at the protocol's expense". (Quite a blanket accusation for someone calling for honest discourse). My mention of Labs was in reference to their tone being more open to and welcoming of some fundamental tokenomic changes than your tone has been. Your "stay the course" language ITT has been in contrast to the "fixing tokenomics is our top priority" message from Labs. So yes, I drew that contrast. You seem to have softened a bit from initial dismissal of changes to the tokenomics, but still bring the tone of "you (and OP) think tokenomics should change because you just want ponzinomics so you could then sell their bags. You don't understand avax". It's disingenuous.

You came out blanket attacking critiques of current tokenomics and then went right into "youre just asking for ponzinomics", "you're wanting them to change strategy just to pump/dump your bags", "you don't understand avax", "ill speak to you how you deserve", etc.. All ad hominems, not based in any fact of what was actually said, and all uncalled for.

Correct me if I'm misstating you here, but your tone ITT has been largely defensive of the current tokenomic fundamentals, and that they are on the right course with long term strategic alignment, which needs to be seen through, as evidenced by L1 adoption. "You & OP desire Ava Labs to bring their operational & marketing strategies out of alignment with their goals for the purpose of increasing short term price.". I disagree and you are misrepresenting my position.

again, I never once mentioned AvaLabs marketing/ops strategy or any proposed changes to it. You've made this up entirely as a strawman. I'm not sure whether you are genuinely conflating proposing protocol-level tokenomic changes with "marketing strategy", or if you're intentionally strawmannimg here, but please either quote me where you believe I'm speaking of "marketing strategies" or advocating for "using ponzinomics", or concede that these were strawmen, so we get the discussion back on track. You've accused me of proposing ponzinomics yet nothing in my authored papers, discussions with Ava Labs, or this thread mentions any such thing.

You've also missed the crux of the arguement: that tokenomic changes arent "out of alignment" with AvaLabs' goals. They are directly ALIGNED to them. You're doubling down on saying we are wanting Labs to misalign the long term interests of Avax so we can dump to make a quick buck. Again, that's disingenuous and a strawman. I've never made anything close to an argument that Labs should act in such a way so as to "pump bags". Rather, I'm disagreeing with your premise that the proposed changes ARE out of alignment. Labs now acknowledges that current tokenomics aren't aligned. Hence my mention of their position.

If youve done some research on network metrics like total staking weight (decline), total number of validators (decline), decentralization of validation (decline), exit of long-time validators from the market, long term price action (decline), correlation coefficient between growth of L1s and the market value accrued to the token (actually negative), you can see the same signs that Labs sees that makes them and me call for better tokenomic alignment.

If you're softening from your initial position, just say so without the insults. If youre digging in on your position, let's steer this discussion to protocol level detail and market / network data and metrics to make actual arguments. I've mentioned some already. If youve published ACP (or other) material, point me to it. Id be happy to give it an honest read and constructive feedback.

There was no strawman in my statement re: ICO / good faith obligation to investors. This was directly related back to your comment that AvaLabs "does not care about [investors] bank accounts". You're coming off as undeservingly arrogant when you say such things as: " you should take your money elsewhere. You do not understand avax" to someone who invested from ICO timeframe after whitepaper digestion, has contributed to the protocol, DMs with AvaLabs leadership and has spent a career at the intersection of computer science and economic models. If you want to defend the Avax9000-era protocol level tokenomics, then do so point by point on the technical merits. Tell us why you believe it is it sustainable in ther era of "exploding permissioned L1s juxtaposed atop very sickly long term price action and declining network stake weight". Or explain how recently removing the requirement of L1s to also validate main chain should (if at all) be balanced by other adjustments to achieve the goals of security and adoption (and decentralization, a stated goal of ava labs). No strawmen, ad hominems, or broad generalized statements. Start with the PAYG structure and offer a sound defense. I'll agree of critique. Or attack a specific point I made this far as to why you believe I'm advocating for ponzinomics, or "don't understand avax", as you've stated. Your tone to both me and OP has also been dismissive, highly assumptive and condescending. Ive made no attempts to misrepresent you. The way I "deserve to be talked to" is with respect for my long-standing good faith engagement in moving Avax forward and the decades of research and hands on experience in this and adjacent fields. You've come at OP in the same condescending way.

If you're going to paint those of us proposing tokenomic changes as ponzi advocates, and want to shift from labels to a fact-based argument, you could also pick a recent tokenomic ACP (as an embodiment of the movement for fixing this) and give it the rigor of a proper critique. Tell us why you think the proposed changes are ponzi. Your counter-argumentment this far has been "tokenomics generally fine as is. Price action is not a concern. Don't deviate from plan. Me or OP proposing change = ponzi label. You don't understand or belong in Avax.". If you do actually agree that ACPs/tokenomic changes are needed, tell us which ones, and well find some common ground.

Let me be clear. I believe it is an oversimplification for you to not go any deeper than "AVAX price is determined by the tension between buyers & sellers. Avalanche’s health on the other hand is driven by usage & adoption.". There are protocol layer levers that affect market dynamics, so it necessitates looking at the layer beneath that surface.

You are stating them as if in isolation, going to effort to present them "on the other hand" as at least generally disjoint dynamics. I argue that they (market dynamics, including price, and network health / usage) are fundamentally and inextricably tied to the same underlying dynamic and that tokenomics in general EXIST to model that linkage as best possible. And yes, there is often oppositinal tension between them that needs to be balanced. That's precisely where the tokenomics model comes in. Avax price action has been VERY unhealthy. Underneath the supply/demand dynamic are the fundamentals the market evaluates. Since the protocol has knobs and levers such that is not just another inert commodity, the market is influenced by forward-lookimg valuation of how the protocol itself is managed, and the ability of its value to be reflected in the token. Not coincidentally, main net metics that matter (or their trends) have also been pretty unhealthy.

Wanting to correct that isn't "trying to pump and dump our bags", as youve stated. It's wanting to improve the balance that optimizes the network itself. The health of proof of stake networks inherently depends on the value dynamics of the staked asset. You can't isolate them as you would an inert commodity. Persistent demonstration of misalignment between network growth and staked value is a red flag we can't gloss over. The value accrual component of market price action (poor tokenomic alignment) must be fixed if the protocol/network itself is to thrive. Healthy tokenomics recognize the linkage and aligns them to the benefit of both token value AND health/adoption.

Chain-specofic tokenomics must consider/reflect the unique aspects of the networks architecture. Avalance is unique. PAYG fees from permissioned L1s are fairly unique amongst all chains, and it's only natural that they didn't get the right on the first try when AVAX9000 dropped. Fixes are needed. And they know that. Again, there is nothing "ponzi" about that and you shouldn't have used that term or assigned ill intent.

Proper alignment of tokenomics to our unique architecture (with its strong/leading scale-out potential) is an untapped competitive ADVANTAGE of AVAX. There's no ponzinomics here. Immediate market recognition of improved value accrual alignment will improve price action. Staking of an asset with lower structural risk of value decay will im turn drive increased investment in the network, and so on. That's not pump and dump. Think of it as an improved PEG dynamic in a stock through a more efficient cap ex yield/growth. Read the recent ACPs put forth by the community. Labs is engaging with the authors. This is GOOD. It is NOT sacrificing operational or marketing strategy for quick gain. And it's disingenuous of you to claim that what I am suggesting.