Earlier this month, another important proposal was passed in the Pocket DAO: PUP-22: Further Reduction of Emission Numbers (FREN). FREN has a significant impact on managing the number of POKT tokens minted, and represents the next step after the WAGMI controls that were implemented previously.Let’s dive into some more details about the proposal, and the effect it should have on Pocket Network.

Shifting from Bootstrapping Towards Growth

At a high level, FREN is about a transition between two key phases of Pocket’s long-term plan: the Bootstrapping Phase and the Growth Phase. As Pocket has bootstrapped its network in recent months, node count approached 50,000 at one point, in large part due to a higher rate of rewards for node runners (i.e. higher token emissions) which acted as an attractive incentive to spin up a node.This Bootstrapping Phase comes with substantial network costs, though. Through a combination of many node runners selling a chunk of their POKT to cover infrastructure costs, plus the rewards being divided between more and more nodes, our community realized the need to shift more towards long-term economic sustainability, rather than continuing to prioritize the bootstrapping of the network. Bootstrapping went according to plan, but overprovisioning of nodes can cause several pain points in the network.

Picking Up Where WAGMI Left Off

Towards the end of July, the last of the planned WAGMI inflation adjustments was made, leaving the network at a target inflation rate of 50%. Taking into account some of the above points and the overall node running/market environment, many in the Pocket DAO and the broader community deemed this target to still be too high, and felt that this rate of continued token emissions could bring unnecessary long-term economic risks.These concerns were the springboard for FREN and the subsequent discussion around it.FREN proposed an extension of the gradual step-down of the emission rate of POKT for another 5 months following the end of the WAGMI adjustments. The term “emission rate” is key here - the proposal targets a specific number of POKT tokens minted per day (which can therefore remain constant), rather than an “inflation rate” (which, despite a constant “rate,” would still result in a growing number of POKT token emissions, since the total supply would always be increasing).The gradual step-down approved in the FREN proposal looks like this:

• September 1, 2022: Target emission rate = 1M $POKT/day (~26.8% effective inflation)
• November 1, 2022: Target emission rate = 880k $POKT/day (~23.6% effective inflation)
• December 1, 2022: Target emission rate = 780k $POKT/day (~20.1% effective inflation)
• January 1, 2023: Target emission rate = 690k $POKT/day (18.5% effective inflation)

(Note: there is no adjustment to target daily emission rate on October 1, 2022. This is because what would have been the October step-down was accelerated by a month and combined into the September 1 step down, so that the inaugural step down represents a double-sized reduction from the last WAGMI adjustment)Implementation is straightforward - to accomplish this step-down, the Pocket Network Foundation (PNF) will calculate the RelayToTokenMultiplier (RTTM) by dividing the target daily emission rate (denominated in uPOKT) by the Trailing 30 Day Average Relays. After the January 1st adjustment, emissions would stay fixed at 690k per day in the absence of another proposal.

A Combined Approach to Long-Term Sustainability

FREN is not taking place in a vacuum - the proposal goes hand-in-hand with other recently approved proposals and projects aimed at managing network costs and moving towards long-term sustainability. For example, we have PUP-19’s increase of Validator rewards, PIP-22’s implementation of stake-weighted servicer rewards, and LeanPocket’s light client, which is aimed at drastically reducing required resources and costs for node runners. As changes like these bring node-running costs down across the board, and subsequently reduce the need to sell off POKT rewards to cover costs, a proposal like FREN (i.e. to reduce the number of POKT tokens being rewarded and control inflation) makes more and more sense.These community-driven changes to the network are all combining with FREN to incentivize larger nodes, consolidate the network away from overprovisioning, properly manage token emissions, and in general to lay a foundation for the fulfillment of Pocket’s Growth Phase.Plus, all of this is taking place against the backdrop of the work being done on Pocket v1, which will bring serious improvements in quality of service, scalability, bandwidth requirements, and efficient use of compute resources.We couldn’t be more excited about the positive, collaborative changes to the network that we’re seeing play out in front of us, thanks to this tandem of FREN, other DAO proposals, and all of the effort being put into v1. As always, thank you to our community for being such a huge part of our journey!