[Proposal] Revision of the limitation of the number of masternode

Update 1Sep2023: (I vote YES) After seeing the math behind the inflation provided by @dust and lots of conversations about the implications good and bad about increasing the amount of nodes on the network, I have come to my conclusion. I vote YES to this proposal. Thank you SBI VC Trade for the interest on the XDC Network to provide your solutions to the public.

Let me start off by saying that we need more information to be able to vote on such proposal as this one. This proposal cannot be taken lightly and it cannot be approached with self interest of one of several businesses. I understand the importance that these institutions can and will bring to the XDC Network, and the adoption that will come from it. Currently the tokenomics cover the amount of nodes up to 350 nodes. If we were to increase the amount of nodes from 350 to 508 (which is a very specific number if you ask me) this will create an immense flood of rewards, and create more inflation. There are several things to address here:
Tokenomic restructure
Longevity of the network
Deflationary system
Possible current reward rate change

The conversation about more nodes being added to be part of the network is not a new conversation and has been proposed informally many times in different social media channels (internal and external).

Questions that arise from this proposal:
Are they considering the current tokenomics of the network?
How will they help with inflation?
Will this affect the current reward rate of current core and standby nodes?

We can't in good conscious just say "because we need more masternodes to stake we need to increase the amount of current nodes" because this brings several changes that can take a while to iron out and possibly affect the future of the network. We need to study a model with such number of nodes and see how this will affect the current state of the network and the inflation that this will cause.

I dont mean to sound abrasive about this but I have a lot of passion about the network and I want the network to exist for many years to come. We need to really consider this proposal and not just vote without considering all the things that could go wrong if upvoted or executed incorrectly.

I'm a Yes vote.

Considering the current market cap of $800M, the proposed increase in the standby nodes count from 242 to 400 would potentially elevate the inflationary pressures on the XDC Network's market cap by $7.332M annually. Or, assuming current market cap, the annual inflation rate—for standby nodes alone, I’m not counting core node minting—would increase from 1.4% to 2.32%. That’s a 65% increase overall. (See below for the relevant calculations.)

Apart from the inflation, one might be bit concerned about one single entity having so many nodes—assuming they will quickly buy out all the additional nodes they’re proposing we create, that’s a lot of nodes under the control of a single entity.

On the other hand, it will be in their best interest to support (not hurt) the network, and that shouldn't be discounted. Moreover, having such big institutional players leveraging the network for their users can only be good. A small amount of inflation is a small price to pay for this. Our decision must carefully weigh the financial implications against the tangible and intangible benefits to the broader XDC Network ecosystem, and the benefits to the network do, I think, outweigh the relatively minor increase in inflation.

For the CURRENT 242 Standby Nodes Configuration:

• Annual inflation from Standby Nodes: 242 × 66,666 × 12 = 193.599M XDC

• Annual inflation rate: 193.599M/13.8B x 100 = 1.4%

• Monthly inflation from Standby Nodes: 193.599M/12 = 16.133M XDC (or $935,714 @ .058)

• Inflation impact on (CURRENT) market cap: 193.599M XDC x $0.058 = $11.228M

For the PROPOSED 400 Standby Nodes Configuration:

• Annual inflation from Standby Nodes: 400 × 66,666 × 12 = 319.992M XDC

• Annual inflation rate: 319.992/13.8B x 100 = 2.32%

• Monthly inflation from Standby Nodes: 319.992M/12 = 26.666M XDC (or $1,546,628 @ .058)

• Inflation impact on (CURRENT) market cap: 319.992M XDC x $0.058 = $18.56M

Summary of Differences:

• Annual inflation increase due to more Standby Nodes: 126.393M XDC or 0.92%

• Monthly inflation increase: 10.533M XDC or 0.076%

• Market cap difference due to increased inflation: $18.56M - $11.228M = $7.332M annually, a 65% increase.

200 nodes at 10 million xdc per node being purchased on open market sounds good. Whatever they have planned I say let them cook. What might the long term negatives be ? Inflation and sell walls every 4 weeks ?

First of all it's great to see the interest from an organisation like #SBI in #XDCNetwork.

As the MN's maximum cap is already laid out at 350 and it almost reaches in a couple of months which is already a done thing now we only speak about incremental standby MN's and its impact.

If we increase the Standby MN count from 242 to 400 the over all increase will be 158 MN's and @10M XDC for each node it will be 1580M (1.58B) tokens will be locked. The inflation from these 158 new MN's rewards will be 126.34 M XDC per year.

Now if we take the period of 12.5 years as below with 126.34M infl per year
✓ 126.34M * 12.5 = 1580M (1.58B) XDC
so in 12.5 years we are generating as many tokens as we have staked in the master nodes ie 1.58B XDC for the additional 158 standby MN's.

from the above if we can draw a conclusion we should be able to burn atleast an additional 1.5Billion XDC in a period of 12.5 years

If we take scenario of all the 400 (242+158) Standby MN's.
✓ 400*10M = 4000M (4B) XDC locked
✓ 400*66,666*12 = 320M XDC / year

If we take the same scenario of 12.5 years with the inflation of 320M XDC per year
✓ 320M * 12.5 = 4000M (4B) XDC
So in 12.5 years we are generating as many tokens as we have staked in all the 400 standby MN's.conclusion we need to be able to burn an additional 4B XDC in a period of 12.5 years.

I am not taking into account 108 core MN's here because they are the must nodes in order to keep the network running wether we could be able to burn or not the inflation causing due these nodes.

Options for burning
•Increased use cases
•Increased transactions on network
•Increasing the Gas fees to optimum level etc.

Could inflation be controlled by means of constant adjustment like the hash rate in bitcoin.... automated ? So rewards are never a set number but they fluctuate depending on price - this may be open to abuse if its even possible. Could rewards be distributed over time like a clock ... nodes 1 to 100 gets rewards on first week , nodes 101 to 200 get them on second week and so on..... rewards % are based on price against the dollar per xdc

Will the tokens be purchased on open market or OTC ... I recall Atul inviting companies to enquire about OTC options a few months back in a video. Any information on this aspect would be appreciated from community.

Thank you Mr. Xiong Long Bao and Mr. Tadashi Yoshda for believing in and being part of the XDC Network project. We are thrilled to have you all here with us and appreciate your contribution to our important mission and cause, mass-adoption and usage of the XDC Network.

When $XDC gets listed on all of the larger exchanges (Binance, Coinbase, Kraken, etc.), plus all the others that will follow, the liquidity needs to be there to support required volume for a healthy market and to attract traders. Having more reward payouts via an increased number of Standby nodes will help support this.

Also, locking up more $XDC which has been acquired on the open market should help to increase the price.

The crypto community loves to stake and earn rewards, especially in projects they believe in. It is a fight for investor's investments; XDC needs to be competitive to gain and hold market share.

Increasing Standby node limit to 400 is a reasonable start and we can reevaluate in the future as necessary.

Vote = YES

Seems this proposal is based on a business case of ‘exchange staking’ - not on network usage. Also not the time to even discuss change of % rewards at the present prices. To look at this further I would have to see the full proposal including effect on rewards and tokenomics.

How much does it cost to get listed on binance for instance.... ? What if the voting for 200 additional master nodes passes if we/they could guarantee we get listed on the entire top 10 CEXs

Could a deal be structured that all new node rewards go to the exchanges for joining fees they each require.

Or do SBI want to be the big player , does trade finance prefer that SBI be the main goto for XDC - I assume more cexs = more liquidity? So can we grow this into the new master node structure of 508

Mr. Yoshida, First off thank you for participating in the XDCNetwork and expressing your trust in this remarkable chain on behalf of SBI VC Trade and it's clients.

From a Retail (& Institutional client (-to retail)) perspective the desire to increase in either cap of n0 of MN / SB Nodes or increase limitation of 10mio XDC to be staked has been there. For retail it would provide a passive income stream, allowing (long term) HODLERs to lock their precious XDC against a lucrative APY. In turn this would increase TVL on the network which results in greater network stability. win - win.

Yet, there is much more to this, from a technical & tokenomics-perspective than just elevate the caps & limitation to increase the n0 on the network. This would be something to collaborate on with the core team (XinFin or Foundation).

But with that being said, as far as I'm concerned, as a Retail investor / XDC OG, I hereby do like to express my support to increase the # of (reward earning) nodes in any way possible as long as it doesn't affect the network's current stability = YES.

Seems like lots of the new inflation will need to be offset with the proposal of EIP 1559 being implemented on the network and gas fees increased. If the vote of more nodes increases more demand for institutions (as SBI has show) then I’m all for it.

Absolutely, the natural limiter to the # of masternodes is the 10 million xdc requirement ... which will be more and more expensive over time.

There's no need for an arbitrary cap on the # of masternodes right now and 508 is doable as that puts us in that 1% inflation range.

How would the potential increase of nodes affect the reward % for node holders?

Interesting idea and proposal to expand the list of nodes on the network.

My vote = YES

Hi Team

Are there any updates on this proposal and its outcomes

Thanks