10:1 A Global Market Meltdown
So, did you hear the one about the inflation hedge getting smashed by global market downturns driven in part by…inflation? Bitcoin’s beatdown was a reminder that the institutional money that everyone predicted would eventually go hard on the granddaddy of digital currency is well and truly here…which also means that Bitcoin is treated the same as every other assets during global macroeconomic downturns. Investor of all types bailed hard on every digital asset as FAANG stocks bled out aggressively all over every market they’re traded in.
Now that it’s been listed on a handful of global crypto exchanges, Pokt was not immune to this, riding a pricing ladder down in lockstep with Bitcoin until finally bouncing off $1.00 before starting its way back up. Retail sentiment was predictably negative, especially on the heels of a PR attack by a low tier exchange attempting to purchase tokens at a deep discount after a failed unsanctioned listing integration resulted in their paper trading millions of tokens. Current conditions seem to indicate that a recovery is already underway, with Pokt up to 1.20 as BTC holds steady above 36K.
In the midst of the chaos, I decided it was story time:
Gather round, kiddos! It's time for another Uncle Poktopus story:
Back in 2017, as bullish crypto sentiment was climbing to what was then an all time high, @o_rourke and I had a blockchain contract development company. Everyone was ICO mad, and there was big demand for…
— The Poktopus 폭토푸스 | poktopus.eth🐙 (@thepoktopus) January 22, 2022
The more challenging the marketplace, the more important it is to remember the fundamentals of what we do, and why we do it.
10:2 Network, Ecosystem, And Governance
Pocket served up another 2.5BN relays in the last seven days with perennial top chain Harmony making the majority of the requests. Defi Kingdoms players send so many RPC requests they ought to get Pocket merch at this point. In the Poktopus Den, we’ve been talking about the fragility of having so many relays from a single source, and everyone is waiting anxiously for the spin up of both Algorand and Evmos, which are expected to be two new notable relay sources.
The big topic of the week, however, has been inflation, with the drop of PUP-12, a stop gap inflationary control measure. Like the previous PUP-11 WAGMI proposal, it intends to curb the inflation rate at which new Pokt is currently being minted:
I suggest a change to the parameter that would, at current relay/node levels, provide for a 80% annual return for node runners in one year and a 10% increase to the DAO allocation from minted tokens to encourage the growth of the network. As relays increase, node rewards will increase as well.
As with other reward adjustment proposals, this one has quickly spawned an active debate on the relative merits.
These two months lots of people committed their capital to fund more that 10,000 nodes. Any drastic not communicated way ahead change in the rewards schedule will have terrible optics and some degree of reputational damage. Further exacerbated by the fact that – correct me if I am wrong here – currently it is not possible to become a DAO voter by the sole virtue of committing significant capital to run nodes. Which lead to the underrepresentation of the node owners in DAO. Specifically, the ones that joined the last month.
Although not opposed to the direction, seems the throttle could be backed off gradually rather than all at once to avoid node runners community dissatisfaction. Another lever that could be leveraged is to revisit relay growth targets as a trigger to control inflation. The growth has slowed since harmony(defi kingdom) got going…which is a short term view at this point. Just thinking that until there is more widespread growth, the node runners have more risk so the reward should reflect that until economies of scale are more achieved. Tough decision and inflation does need to be addressed, however there will be node runners churn if it is too aggressive and in turn, that will damage token price, which in turn could cause more churn. We need to avoid the death spiral.
This dramatic change in rewards would stomp out independent node runners IMO. Chain nodes are becoming increasingly more expensive to run (Harmony has doubled in storage size in a matter of months) and from my napkin math, 80% barely covers the growing expenses of node running over the course of a year with the cloud… unless you have a lot of POKT nodes.
The conversation is ongoing and needs your voice, so make sure you fully read the the discussion, and add your thoughts.
The Series of Fortunate Events continues with a new listing drop by OKCoin, the first US friendly CEX to carry $POKT:
Check your pockets for what we’re listing tomorrow. 🕵️♀️
— Okcoin (@Okcoin) January 25, 2022
The US regulatory support likely means that this listing, despite normally running fairly low volume on anything other than BTC and ETH, is likely to achieve significant liquidity once market conditions have stabilized. and, given that a million or so in volume is enough to be in the top five traded list there, I expect Pokt may gain some additional visibility there.
10:3 Mostly Clear Skies With A Chance Of #flashfloods
We handed out 71 stakes totaling 88,888 last week leading up the Thunderhead OTC Pokt Community Dinner in Miami. Needless to say, our wallet fingers are tired. However, we’ve had two stakes not claimed so far, so I’ll be dropping some random replies after this week’s community call.
Stay tuned for more #POKTSTORM coming next week.
“In it for the tech” is a meme that gets trotted out every time there’s a market downturn, but the fact is, a lot of the best projects in crypto have been born during bear markets. The money can be a distraction from the focus on building something great. Nothing is more productive than a hungry dev.
That’s not to glorify poverty, mind you; it would be wildly disingenuous to suggest that my entrepreneurial pursuits over the last decade or so have been driven by some purist need to move the world’s technology forward. That being said, Pokt has probably about the purest tech focused team I’ve ever seen, and that starts at the top with CEO Michael O’Rourke, who has made it a practice to discourage talk about pricing, and consistently supports proposals to rein in reward ratios on running nodes, preferring to keep earnings tightly coupled with performance.
In the 15 or so years I’ve been paying attention to the startup space, I’ve never seen a team with this level of clarity of vision, and a community so passionate about about working towards the long view. While retail has aggressively entered the Pokt marketplace, and brought the shortsightedness that segment is known for (“bears bring out the grizzlies”, as someone said today), the product and team is still laser targeting rewarding those who actually put the work in to help bring that vision about.
Appealing broadly to “mercenary capital” is an easy way to inject significant capital to a project, but it also comes with significant froth and churn, and otherwise solid projects can have their legs chopped out from underneath them when the capital moves on as quickly as it came in. As the financial ecosystem around Pokt continues to grow, with liquid staking, collateralization, and other financial instruments (FNFTs, anyone?) coming into play, it will be interesting to see how secondary incentives to remain staked instead of liquidating Pokt to cover noderunning costs affect the total circulating supply and market value of the token.
In the meantime, we’ll keep grinding out relays. That’s all for this week. See you on Twitter.