Gavin Wood Proposes Reforming Staking Rewards
At the recent Web3 Summit, Polkadot founder Gavin Wood introduced a significant proposal regarding the distribution of staking rewards.
Current System Challenges
Today, Polkadot’s inflationary issuance automatically mints new DOT tokens yearly based on a fixed inflation rate. These new tokens are directly awarded to validators and nominators as security incentives. While straightforward, this automatic distribution raises issues of control and restraint.
Proposed "New Funding Pool" Mechanism
Gavin suggests replacing the automatic allocation with an intermediate funding pool. Instead of sending inflationary DOT directly to validators, newly minted tokens would first enter this "buffer pot."
- Governance bodies decide how to utilize funds from this pool.
- This transforms reward distribution from an automatic process into a governed decision.
"This mechanism aims to make reward distribution more controlled and accountable, returning the right to use inflationary currency to community governance instead of defaulting to all rewards going to validators."
Goal of the Reform
The reform aims to increase fiscal discipline and oversight within the Polkadot ecosystem by giving governance the power to regulate inflationary rewards, ensuring a more balanced and transparent ecosystem.
Author's summary: Gavin Wood’s proposal introduces a governance-controlled funding pool to replace automatic staking rewards, aiming for a more restrained and community-led distribution of inflationary DOT.