Summary
Cosmos-SDK chains have a community tax parameter that earmarks a percentage of inflation to the community pool. Currently, this is set to 0%, and the community pool has 1M BLD tokens with a market value of roughly $114,000.
A well-funded community pool can help attract and incentivize contributors, developers, and users. It also brings transparency and accountability, and gives the community an opportunity to participate in decision making.
Problem
Given market conditions and a 0% community tax, the community pool has been depleted quite a bit despite not actually funding anything yet. It could be argued that the pool is too small, and any meaningful grants or expenditures would deplete it too much. As such, contributors might be disincentivized from requesting funds, and other opportunities, like the recent EC Committee funding proposal, might not gain support due to operational challenges / lack of funds.
Proposed Solution
I propose a parameter change to increase the community tax from 0% to 3%. Pulling together some rough estimates, it would seem that a 3% tax would have a minimal impact on stakers (~10.69% APR → 10.05% APR) while bolstering the community pool by more than 250% over the course of a year.
| No Tax | 3% Tax | 4% Tax | 5% Tax | |
|---|---|---|---|---|
| Price | $0.14 | $0.14 | $0.14 | $0.14 |
| Supply | 1,048,676,141 | 1,048,676,141 | 1,048,676,141 | 1,048,676,141 |
| Inflation | 5% | 5% | 5% | 5% |
| Bonded | 46.77% | 46.77% | 46.77% | 46.77% |
| Annual Inflation (BLD) | 52,433,807 | 52,433,807 | 52,433,807 | 52,433,807 |
| Staking APR | 10.69% | 10.05% | 9.85% | 9.66% |
| Community Tax | 0% | 3% | 4% | 5% |
| Community Pool Inflation | 0 | 1,573,014 | 2,097,352 | 2,621,690 |
| Community Pool Infl. $ | $0 | $220,222 | $293,629 | $367,037 |
| Community Pool Balance | 1,000,000 | 2,573,014 | 3,097,352 | 3,621,690 |
| Community Pool Bal. $ | $140,000 | $360,222 | $433,629 | $507,034 |
This increase would reduce a potential expenditure for the EC committee to less than ~14% of the pool, and potentially provide a path towards more sustainable funding. It also leaves the opportunity to fund other things, say another 6x $50k grants, 30x $10k grants, 3x $100k grants, or something along these lines.
Considerations
- A 3% community tax could be considered low compared to other projects - Cosmos and Akash both accrue 10% - so I would love hear discussion around what the number should be. I chose 3% because it seems like a reasonable start to me.
- Calculations assume the USD price of BLD is constant, which likely won’t be the case.
- I think the community tax should stay at 0%
- I support a 3% community tax
- I support a community tax higher than 3%
- I support funding the EC from the community pool if a community tax is in place