Forgive my ignorance (and somewhat off topic), but has there been any recent considerations in moving away from a capped token supply to an uncapped token supply with an inflation schedule?
Safety incentives in particular seem like they should be funded by token inflation. It’s still debatable, but over the years, I think an on-going, inflation rate has found its footing. Maybe it’s even dynamic, linked to the safety model?
Could you elaborate here? I’d really like to hear your reasoning.
Personally, I don’t see token inflation as an escape route for protocols or a way to be unsustainable. I view it as a tool to incentivize certain behavior and disincentivize other behavior. Similar to how ETH inflation works post-merge to incentivize staking depending on how much is already staked.
For example, if there was a modest or dynamic inflation of the AAVE token all going to the AAVE staked in the safety module, the safety module would perpetually be funded by diluting un-staked AAVE. This ensures the safety module is always incentivized. And, conversely, there’s a disincentive for simply holding AAVE since it’s being diluted, which directs more AAVE to the safety module.
All that said… AAVE being the only asset in the safety module is probably a bigger issue with most asset prices being highly correlated. Anyways, would love to hear your perspective.