Funding: beyond 2020 if price stays low


#1

CH said Cardano is fully funded until 2020 for its development.
After 2020 the treasury funds are going to be used to continue the development, and Cardano ecosystem will vote on who should continue the development.

The treasury will be funded from transaction fees if I understand well.

What if price of ADA and the crypto environment stays that much depressed that the value in the treasury isn’t enough to sustain the development?

Any of you smart people has ways to evaluate a threshold for sustainability?


#3

@Vanamonde you bring up a very important point here. I don’t have a way to figure it out “threshold for sustainability” since the transaction fees are adjustable and we may not know what they are. But price and transaction fees will have to support paying people to do the work.


#4

Its already solved.

Its called expanding the supply. Pay by inflation.

Paying with fees is not even an option at this point.


#5

Luckily the Cardano ecosystem is composed of three entities, IOHK, Emurgo, and the Cardano Foundation. All three have a vested interest in seeing this project thrive, and it isn’t all monetary gain either, open peer recognition is a potent incentive that will be going long after 2020.

Over the coming decade, the Cardano foundation will grow its stake around 20% or 139,000,000 ADA a year, that is in addition to the genesis block creation, which was also set at 20% or 5,185,414,108 ADA under management now.

On a personal note, we will not be converting our stake profits into fiat, anytime soon, if ever, as we want to live in the Cardano ecosystem, an ecosystem that works for everyone, not just those that qualify for debt.

I know we are not alone holding this view.


#6

I could even imagine a tax rate on accounts (ADA Wallets).

Something like 0,01% per month or so, but have it dynamically configurable following a consensus in governance.

This tax rate would go in pair with the margin on transaction fees to feed the Treasury to have a constant & continuous supply.

Would the transaction counts lower, the tax rate would increase and the other way around.

I would prefer this compared to inflation via extending the supply.

The governance capability with liquid democracy could vote on the monthly ADA target of the Treasury that would determine the tax rate and margin on transaction fees. I personally believe a monthly min. 500k but maybe even 1-2m USD would be necessary. So based on the current ADA/USD price the monthly ADA Treasury target could be reset anytime.

I would also think this is a fair approach as it should not be free to keep your ADA in a Wallet doing nothing with it. You should still be obliged to contribute to the Treasury and the development of the Cardano Ecosystem.

What could be left open is what kind of taxation to use, fix or incremental, etc.


#7

It’s very interesting your point yet I really don’t believe that ADA price or the whole market would stays low
1- if this happens a lot o projects would disappear, we are talking about more than 1000 coins and most have no funding for next year!
it would be saved just the 10% of all this coins ( I m feeling generous ), cardano eventually would be part of this 10%, as they have funding till 2020 and their academic apraoche, which would attract a lot of capital leaving the 90% of coins to Cardano
2- Etherium: if Cardano, once decentralised and with KEVM, EILE and PLUTUS, keep the promise that smart contract would run more efficiently ( cost, security … ) than Etherium… also if we consider the process of migration from etherium to cardano happens smoothly … I really believe the value of ADA would get much higher as it would acquire value from the projects that could leave etherium for cardano
3- Staking, it’s inevitable the desire to gain monetary prize for having ADA and stacking it, as it grows in people the desire of Minning it would be too for stacking which would allows to ADA to gain value as considered the vehicule to gain more ADA, just for owning it…

One important thing: global crisis is always a circle equation, it will happens again, 100%, will be cruel and more sever! I really expect a lot of capital would go toward crypto which would make the price go up


#8

Some of the idea’s you have seem contrary to the foundation of a decentralized monetary network.

It is truly ok for some things to be free in the world man

This is just very insane to me, can you please elaborate on the benefit of bringing such an idea onto the Cardano network?
It would seem to me that you have much catching up to do concerning the birth of decentralized cryptocurrency and monetary liberty, I am far from expert on the matter but open source projects such as this are by design to lift a burden off of people not add to it, I pay taxes on my dollars - buy Ada - and then be taxed just for holding onto my Ada by the network??? I will carry a tax burden on my holdings if they are significant anyway, so then I would be subject to being taxed twice if this was a feature of the platform.


#9

Someone has to pay for the Ecosystem, nothing is for free. There is no free lunch, forget that!

Initially you can inflate it by releasing additional coins, this does eventually inflatate your holdings.

You also pay with the transaction fees and a part of this goes to Treasury, other part to stake rewards.

Tax may sound bad because of your association to governments induced taxation. But it’s just another way of paying for the Ecosystem.

If you have not enough transactions to fill the Treasury, then you are running quite a risk for Sustainability. So either you release new coins or collect taxes. Impact for you will be the same.

However ADA has a hardcap, so you can’t release new coins after a while. Hopefully adoption catches up enough by then to deal with the problem of filling the Treasury. It really depends also on the price of ADA.

What I don’t think is fair is to have only the active Cardano holders paying for the development / evolution of the Ecosystem via the transaction fees. Passive members, long term speculators should be also contributing to it, which you may best solve with taxation once you can’t release more new coins.

So taxation is just another technique to collect the CAPEX cost of the Ecosystem. For OPEX we have mainly the transaction fees. Well in case of a Cardano DAO we might need more for OPEX.

I don’t see any contradictions with the philsophy of decentralization or the vision of Cardano.


#10

I could be wrong man, really if people vote for taxes than that is what they want, I do not like it.
But the design is meant to be sustainable and taxing a wallet just hit me in a sore spot.


#11

I do not really see this as a big issue so far and only potentially down the road 10+ years. Cardano has a hard cap that will allow it to have 10+ years of founding just from reaching the hard cap and inflating the value of all users. (not a tax but everyone pays this burden.) I do not like to introduce taxes and frankly it could probably cause some legislation problems as well. Granted this assumes Cardano does not reduce another 90% and we are at 0,006 $ per ADA and having to use a massive amount of the hardcap for rewards.

In that time for ADA to reach hard cap (assuming price levels stay here or gets higher) transactions are likely to have grown massively, while the computational power to make the transactions with PoS will be cheaper and cheaper. If that happens (and yes it is a IF) then the treasury is likely to fill itself as each epoch will probably have more transaction fees collected than ADA given in rewards.

And regarding IOHK foundings it could be taken from the hard cap and inflating users just as with the PoS. But yes if the prices crash another 90% we need an alternative. This could be to increase the hard cap or to get external financing for the project. But I certainly do not hope we get to that point. I have seen quite too many stock emissions where some strong capital swoops in and gets a lot of shares on the cheap. Could happen to Cardano as well if the ADA price plummeted enough. Then again for those who do have capital these things tends to be opportunities.


#12

I am just saying this, there is nothing bad about taxes until (1) the magnitude is very low, (2) there is full transparency in the system and (3) the taxes collected are invested into improvements & expansion of the Ecosystem, which indicate a positive price impact.

People are too negative about taxation as the governments misuse the technique and nothing of the above is actually met.

Until further supply is available before we reach the hard cap, it’s fine not to use taxation (well eventually releasing new coins into the System has exactly the same impact). Then once we reach the hard cap I believe the only fair way to go is by having a fair balance between the taxation system (taxing the accounts) & margin on transaction fees.

Anyway as a response to the topic, Treasury will never dry out, this way or the other we will pay for it, as it’s in our very best interest.


#13

I am not totally against taxation if the need was there. I am just not sure if it will break with legislation in some countries. But there are ways around that. Subscription fee to service etc. And yes I agree it is in our interest so unless the fundamentals of Cardano deteriorates then users will find a way to keep founding going.


#14

Wow, some other person who started thinking economics differently.

Nope, if you would understand the fundamentals of economics, and not just following the monetarism, but have a look at other different schools such as classical economics, Austrian, Keynesian, steady state etc. etc. and would try to understand the whole picture instead.

A very oversimplified brief example: Imagine that you are living in a closed system, in a village or small town in which the bartering was replaced and some coin (currency, the medium of exchange) is used to exchange goods. Imagine there are 1000 ppl live there, and ideally, only 100 coins are required to maintain the market sustainably. Also, imagine that you’re farming apple, which last only a month, but you require some wheat or other necessities or goods, which will be available only later e.g. in autumn. Therefore, your incentives are to keep some coin for later use (time precedence, store of value), means buy wheat later. What does it cause? You remove money from the circulation, less coin for exchange things means the value of the coin started to rise (deflation), means more ppl want to have it, means the system will collapse after some time. What can you do to keep the system running? I do not want to bring the interest and other things, but only the inflation. So, you will need to create more coins which go into the system to have some balance, which causes the prices of the necessities or goods to rise. And back to the cycle again and again. It’s a very simple math, really.

So, how taxation could fix it? It’s really a TL;DR, but read the Worgl experiment as an example. But, this is much more complex.


#15

It seems like value should be able to be created by producing a service or medium valuable enough to continue to be desired to be used. Same idea with any business entity. That’s why all businesses exist.

Cardano creates value, and is projected long term to do this. The scope of projects are vast. Taxes on things we consume I think makes more sense. Everyone consumes. This puts the incentive in the right place. Criminals and common people alike all pay their share based on their appetites. It’s simpler. Function of the IRS is simplified just like that and reduced.

This business model of solving a global inefficiency (such as these countries finding real use cases that won’t just stop) is a value. Most countries have this extant taxation model (that I think you are proposing - I may have Misunderstood) - isn’t that part of the problem?

Again, I may be missing something, but it seems like a difference in overall economic model. You shouldn’t be taxed “just because “, or just to “exist” this itself reduces motivation to work, or be part of the system.

It creates other problems. There might be a smarter way. The system shouldn’t be oppressive to its participants.

We live in a model where the taxation model doesn’t promote production. It penalizes it (I.e. the more you produce the more you are taxed - and at a higher rate - than the less productive). It creates unwillingness and indigence. It a bit sinister.

I would ask that you broaden your view of the problem and inspect if the existing system actually solved a problem more than created one (any government-most are insolvent-tax in a similar fashion). A solution shouldn’t “solve” the problem by consuming itself, which is another problem)

I think change, by people who have the clearest view of the problem, should be given a chance. And I think ‘looking ‘ at what people actually DO instead of just LISTENING to them and sticking to the same old way, would be a good first step. ( Observe what is actually happening in the real word, and not just listen to the PR machine)

The extant System (and it preceding philosophy) is broken. If it worked. We wouldn’t be here. It’s supposed to serve us.

This is my opinion and observation. Everyone is welcome to have their own point of view. I think what we are solving is bigger and includes this mechanism as well. Thank you for listening.


#16

I’m not getting the point of this taxation thing. I am risking my money in an unfinished project and for me this is an investment. Really who is paying for the ecosystem is not my problem. Who ever is creating this project has to think about this and not tax ADA holders. If this is the system Cardano ADA is going to adopt I can tell you now there would be a lot of Cardano ADA available as I would be the first one to sell. I invest to make money not to be taxed. I come from a country that used to be heavily taxed & the economy was dying a natural death. There was no work and life was becoming impossible. We got a new government and removed most taxes. The economy is booming and the country has a surplus every year. That country is #blockchainisland !

Forget about taxing ADA holders cos then you will def have a problem to finance not only the ecosystem but the whole project. I will be the first one to sell.


#17

Anyone who didn’t buy ADA at the ICO is not really an investor, but speculator.

I can’t emphasize more, taxes are not bad and there is no such thing as a free lunch. If via taxes you have more income to the Treasury, which money is invested smartly improving the ecosystem, then it can further push the price of ADA on its delfaltionary path and overall your holdings value might increase.

Releasing new supply or taxing has exactly the same impact, just one technique is psychologically better to deal with.

If you would sell your ADA because of a 0.01% tax per month, then you don’t see the full picture yet.

Don’t worry a tax system might not be needed for the next 10 years as the supply not yet released will be used for stake rewards and Treasury fillment until the hardcap is reached.

I am pro-tax believer as passive holders of ADA must contribute to the Treasury, as they would benefit from the investments to the ecosystem and the ADA price increase for free without really bringing any value to the ecosystem otherwise, which is crazy. Also their ADA is kept safe on the cost of all operating stake pools storing & maintaining the ledger, for free again, only paid by the active ADA holders who eventually transact occasionally.

Your country didn’t go bankrupt because of taxes. It went bankrupt because taxes were too high, money collected were spent in a non transparent way and not on the most important & beneficiary projects / topics needed by your country. Obviously the Cardano Ecosystem doesn’t allow for this as the entire system is transparent on the Blockchain and we shall have reputation based governance and supplier network, while having the Community (The People!) voting for the investments to be made.

So there is absolutely NO problem with taxes in such a System, it’s even more democratic and fair to have them, then not having them … and it’s healthier for the system, elevating the sustainability capability and likely (if the voting on improvements is smart and delivery is quality) incresing the value of the ecosystem hence the price of ADA.


#18

I recommend you to dive deep into the fundamental of economics. Start /w this really.
Taxation what @bercinho suggested only just increases the velocity of the money (V=PQ/M), by putting some economic incentives for using it (you should know why it is good). Like hot potato in your hand
I would use a dual-money system instead, I would not tax/punish a kind of deposit wallet (e.g. ADA) but would tax the other tokens/coins/wallets.

CCs work opposite, they are taxed by using them (transaction fees), that means incentives of not using it (deflationary incentives). Also, PoS CCs has economic incentives to stake them, remove money from circulation. That’s why I would separate completely the two of the three functions of the money the medium of exchange and the store of value e.g. dual-money system. As they’re the complement to each other (opposite drives, incentives). The fundamental of the economics is very simple, what makes it very-very complex is how the human behaviours, the different markets and the rationals affect the whole economy (oversimplified explanation).


#19

I hope someone from CF / IOHK is reading this thread.

You have some advanced & great ideas for the Economics of Cardano, I would love them to consider.

I was always wondering why are there no Economic Professors working for IOHK to deal with topics such as this.


#20

Hi Ilap,

I watched that video you suggested. I appreciate you sending it. It was pretty detailed in it’s explanation and rationale.

However, it seems to be based on printing money by a central bank as a fundamental solution. This is basically my point of disagreement. This system needs this, which I think is a flaw in its philosophical design. Sounds like Keynes.

There is a reason Cardano has a cap. I done claim to be an expert. But I this this different approach is sounder as an approach.

I think the taxation portion of the discussion is just an element of the overall situation. I would say the viability of the model you suggest is not sustainable.

I admit I maybe missing something as this is my profession, it just makes sense to me compared to what we are experiencing in modern times.

Thanks for listening.

Kenny


#21

Those of us in other parts of the world who could not participate in the ICO disagree.