This is a discussion thread for a candidate parameter change LIP related to token emissions in the Livepeer Network. It is the output of work originally announced in Continuing discussions on Inflation and discussed there, on Discord, and in the water cooler chat.
It’s time to bring the discussion down to earth with a concrete proposal. Please read it here: [PROPOSAL]
For additional context, consult @dob’s discussion thread on LIP-100 from last March.
I will maintain an FAQ section in this post as discussion evolves.
FAQ
How will this affect Orchestrators and Delegators?
The upper tail of possible yield outcomes for H1 2026 comes down, reducing uncertainty. Yearly trailing yield remains above 60% with high confidence. See the relevant section of the proposal.
If we vote to pass this proposal, what happens after that? What do we do past the end of the forecast period?
The simplest thing we can do is consult the community again for updated objective-setting, rerun the simulations, and if deemed necessary, propose another parameter LIP with updated parameters. There is also more that could be done to streamline this process and make it more robust. See the relevant section of the proposal.
Why do we want to do this?
There is a lot to say on this topic and as many of you reading this know, it has been discussed extensively. Our view is explained in detail — including exposition of how the emissions system works now, what it is for, how it has been performing, and why we might want to bring it under control — in the relevant section of the proposal.
How did you use the responses to the November survey?
The November survey revealed clear themes within community opinion, including what we saw as broad agreement that Livepeer would be better off if emissions slowed down. However, it also revealed a diversity in understanding of what the emissions system actually does, how it impacts different actors within the system, and the plausible rationales for bringing down emissions.
Respondents were asked to give quantitative targets for yield and dilution, and we received a very broad range of responses — too broad, in my opinion, to use any of those numbers as objectives on the basis of community agreement. I’m aware that people were confused by some of these questions, and want to reassure you that we did not take your responses as a mandate to treat those particular numbers as objectives.
The only specific number from the survey data that we used directly was the bonding rate threshold of 40%, a figure that was found acceptable to nearly all the respondents to one of the most straightforward questions on the survey. This was used in our modelling as an acceptance threshold for simulation outcomes — we wouldn’t accept any parameter settings that allowed bonding rate to drop this low (and we didn’t find any such settings, anyway).
How are emissions are on track to be higher than last year if participation is already over 50%?
We’re not claiming emissions are “probably” going to be higher than last year, just that there is a significant risk that they will be. Participation is over 50% now, but it can go up or down in the future. By looking at the size of historic stake movements, we can estimate the size of this risk.
What are the current parameters set to again? How much of a change is this?
The current value of targetBondingRate is equivalent to 50%. Our proposal is to reduce it by four percentage points. This is a much smaller reduction than has been considered in earlier models.
The current value of inflationChange is 500. We are proposing to increase that to 700. That has the effect of compressing timelines on emission rate changes by 40%. For example, if emissions carry on trending down, under the new parameter setting it will come down in ten days as much as it would otherwise have done in 2 weeks.
The outcome of these changes is so small, why are we bothering? Shouldn’t we be trying to drastically reduce emissions?
The space of parameter tunings for this mechanism is still mostly unexplored. Making a moderate adjustment keeps us close to familiar territory while still giving us high confidence that things are moving in the right direction.
Moreover, even under much more aggressive tweaks to inflationChange, the emission rate would take a while to come down to the point that we’d see major changes to aggregate quantities like 1Y trailing yields. So regardless of what we do, the community has some time to observe how the effect of the changes play out and, if necessary, recalibrate mid-year.
The current system is working as intended.
Not a question, but a sentiment we’ve seen enough times to warrant a response.
Every mechanism deserves to have its objectives (what it’s intended to do) and performance (whether it actually does it) reviewed to see if they still serve the community’s objectives. That’s what we’ve done with our community survey, proposal, and risk report.
- We asked the community what they think about the 50% target, and almost no one considered it a red line: anything over 40% bonding rate is perfectly fine. So if the price adjustment mechanism’s job is to keep the bonding rate over (or at) some threshold, there is no reason to insist that threshold be 50%.
- We studied the performance of the adjustment mechanism from a theoretical and empirical perspective, and found little evidence to support the claim that very high emissions are necessary or sufficient for high participation. If they aren’t, it’s really unclear how they can be worth the risk of externalities, which have been discussed at length elsewhere.
Will this make the token price go up?
While of course every proposal ought to serve the long range goal of increasing the value of the network, we don’t claim this is going to have any immediate impact on token price. Our proposal is about preserving the capital pool and limiting wastage, not pumping the token.
We should implement an emissions cap.
Another common suggestion. Our proposal is a soft touch approach to the same goal as an emissions cap: prevent emissions from growing uncontrollably. Implementing this proposal does not rule out introducing an emissions cap later on.
Shouldn’t we wait until fees are enough to sustain Os before cutting emissions?
Orchestrators need emissions-funded rewards to support their operations until fees are enough to make an unsubsidised O sustainable. That subsidy isn’t going away. We’re talking about walking emissions back towards levels they were a year ago, when fee income was even less than it is now: this isn’t unexplored territory for Os. We don’t have to wait until fees ramp up.
Why should I, a staker, vote to prioritise non-stakers?
Catering to non-stakers is not the priority. It’s a question of balance: managing emissions-based rewards is about managing a tradeoff between diluting non-stakers and incentivising staking. Our proposal is to fine-tune this balance, because the incentive to stake is already enough to sustain adequate levels of staking — not to prioritise non-stakers above stakers.
Acknowledgements
I’m grateful to @b3nnn for feedback and suggestions on the framing of this proposal. I would also like to thank @Jonas_Pixelfield and Arunas from Pixelfield for their valuable input in the early stages of the project. This work was commissioned by the Livepeer Foundation.