***BIG THREAD: My Thoughts on the Current Tokenomics of Harmony ONE**

Nick asked me to post this here instead of just PDF form, so here it is.


I write these words in frustration, not because I have given up hope, in which case I would have already sold my stack and written off the loss, but because I still have hope, and a good deal of it. The network is right on the edge of greatness, but the will to perform the decisive action to take it to that stage, to push it over the edge, seems absent. Perhaps the drawn out development process has taken its toll, perhaps the team is simply being cautious, perhaps I am mis-reading emotions, but whatever the case, the will to act must be found NOW, in renewed vigor, lest the momentum be lost. And this action must be taken on an objective analysis of the current state of affairs, no matter how divorced the conclusions might be from the current decisions.

My proposal includes four parts:

  1. massively and suddenly increase rewards, somewhere to around 90% per year, halving every year. Until transaction fees take over, these rewards will have to remain high for some time

  2. lock these rewards for a period of at least 6 months, with a rolling release so as to avoid a single large token dump

  3. Roughly 30% automatic delegation penalty—NOT a minimum fee floor set, but just simply less rewards allocated to the delegator

  4. major marketing campaign to get the word out, after this new rewards program has been implemented

The Current State of Affairs

Let’s look at reality for what it is: the market has priced Harmony as a VC money grab that failed to deliver on its promises. Erroneous of course, but it is how the market has priced harmony nonetheless. Momentum is not on Harmony’s side. OmiseGo has just been added to coinbase after releasing its second layer scaling solution for ethereum, and Matic will soon release its own. Elrond has been aggressively elbowing its way in to an already incredibly crowded space and, while distant, Ethereum 2.0 development progress remains a steadily growing specter in the background.

There are two main problems, as I see it, currently facing harmony, which of course impact each other and can result in either a vicious spiral downwards, or upwards:

a. Not enough validator decentralization

b. Not enough developer usage.

If one of these were to skyrocket, it would drag the other with it. And while there is a lot of focus by the team on the second point, through grants, the first is only being half-heartedly addressed.

How we got here

Last summer excitement and buzz filled the air. New buyers were joining the project in droves, harmony was getting lots of press, the team was energetic, upbeat, bubbly.

Then—the token swap happened. Or didn’t happen. And it got delayed, and delayed, and delayed again. On each of these delays the price dumped. The test net was broken several times with no easy fixes. Relentless token unlocks from seed investors and VC’s inflated the supply to over 5X that circulating at IEO, aggravating many who bought around ieo, resulting in further dumps in both price and interest.

And now that the network has finally been released (achieving in half the time what Ethereum 2.0 has failed to) everything seems muted. Many developers and investors aren’t even aware harmony’s product is finally live–all of this in spite of the fact that the network is fully functional, live, and more or less exactly what eth 2.0 is trying to implement. Instead, most are discussing layer 2 infrastructure on Ethereum and have assumed the battle for the base-layer protocol is over.

Grants are Good, but not enough

Grants are going along the right direction, and I am glad the team is doing them as that is problem (b) listed above. What in particular they should be focusing on, with these grants, is porting over existing eth projects to harmony, instead of tying to build new ones. There is an enormous reservoir of high quality code built for eth that can’t function properly due to its bloat and slowness: focusing on porting these projects over would be by far the most cost-effective use of the grant money, rather than trying to code new projects from scratch, which with all due respect is completely idiotic. I’m not sure which path is being emphasized, so I don’t mean the former sentence as an insult to Harmony per say. But until the network is actually strong enough to stand on its own, people won’t give much credit to this boost in performance: plenty of networks from Tron to EOS are faster than eth—are they respected? No, for the simple answer that they are essentially centralized servers, and have committed to being such for the remainder of their existence.

Why Increasing Validator Slots Alone will NOT Result in the desired Decentralization

It is true that the upcoming increase in validator slots will indeed lower the barrier for validators to enter the network. But which ones actually will? With rewards being so low, the answer is only holders who are committed to the health of the network, and want to stake not because it is profitable for them to do so, but rather because they want their long-standing investment to appreciate in price.

This is a deeply undesirable state of tokenomics. Relying on the good-will of participants as a strategy for the health of the network is folly: financial incentives for their actions MUST be given. Harmony pumped by more than 15% today (June 21st, 2020): you’re telling me that the network is supposed to rely on an ANNUAL 10% reward rate for validators, when the DAILY volatility of the token exceeds 10%? Lol.

Ultimately for decentralization to happen, Binance’s enormous supply must be more evenly distributed. We cannot hold the network’s health hostage to the whims of whoever binance chooses to delegate to. The only way for this to happen, is for new outside buyers who have no affiliation to the project as of yet, to come in in droves and purchase binance’s tokens, and spin up new validators. And…


The Bottom Line: Profitability

Lots of discussion has been made so far about how to get more validators entering the space. The bottom line is: profitability. YOU HAVE TO MAKE IT PROFITABLE FOR NEW VALIDATORS TO JOIN THE NETWORK, or at least give the hope of it being so. This is really the end all be all of the conversation, and yet I’ve seen very little of it being discussed. So let me re-iterate: the network has to give FINANCIAL INCENTIVE to new validators to join the network, rather than just relying on micro-managing new entries with sales-pitches and goodwill. The potential appreciation of the token’s price, along with a high rewards rate, is sales-pitch enough for harmony to get all the new validators it needs to become secure and decentralized—this is further fleshed out in the psychology section of this letter. But on top of rewarding validators, speculators MUST BE PUNISHED: while boostrapping a network from scratch, anyone buying into the token to trade and not to use in a dapp or meaningful transaction should be running significant risk for doing so.

Inflationary Criticism of New Token Release

There is of course the issue of inflation, which is almost always immediately brought as a counter argument to the outlined proposal: assuming a fixed market-cap, logically what a massive new printing of tokens would do is not give validators more baseline money, but simply dilute the existing value of money. Which is partly true—assuming a fixed market-cap (actually, assuming a fixed staking ratio and fixed market cap, increasing rewards just extremifies the wealth transfer from traders to stakers that already happens in any proof of stake network).

My response to the critique is two-fold: first, all increasing rewards does is increase the natural transfer of wealth that happens from traders to stakers, which happens in any proof of stake protocol. In a nascent, speculative, and not necessarily battle tested protocol, this transfer of wealth needs to be extreme in order to shock holders of the coin into action. If we assume a fixed percentage of tokens staked, say 60%, then those 60% of stakers are becoming wealthier at the expense of the 40% of traders. If we raise the rewards rate from 10% to 90%, that rate of wealth transfer increases, massively. So traders holding the token for short term speculation will be diluted. They will in essence be punished for not contributing to the network.

So in other words, an increase in rewards will increase the percentage of tokens staked. Speculators will not be able to hold their tokens carefree, they will have to stake them. And if they stake them, the total percentage staked will increase drastically.

But secondly, the market cap will not stay the same: it will rise. When combined with the locking period, this proposal will actually lead to a potentially large INCREASE in price. Why? For the simple reason that the circulating supply will be massively reduced, amplifying the price effect of any new dapp onboarding massively. The flip-side to rewarding stakers with new tokens is punishing those who are not locking up their tokens to stake. No one will be able to hold their tokens in their wallet waiting for the next pump to sell, without risking massive dilution in the process. If you hold tokens, it should be because you actually plan to use them for dapps or other transactions, not to speculate. In a proof-of-stake network, unlike proof-of-work, speculator freedom comes at the cost of the network’s health—a very serious cost when a network is attempting to establish itself as legitimate.

One item along this vein—that is important to stress—is that, for better or worse, the market currently prices harmony as a speculative shitcoin. The critique of my proposal, that Harmony is going to squander its reputation as a stable store of value by increasing rewards, is absurd: the reality is, the market doesn’t view Harmony as anything close to a stable store of value. Such a reputation can only be built ONCE the network has already established itself as relevant and usage is high. Until then, game-changing and headline capturing changes must be made.

Counter-Argument: What about Market Forces?

There is another counter argument to what I have said: that currently, the protocol is actually designed to have high rewards—it all depends on the number of tokens staked. Thus, the line of thinking goes, the market will naturally reach an equilibrium of tokens staked in which everyone is happy—if rewards get too low, people will actively unstake.

This is flawed thinking—and it’s been exposed as such by how the network has evolved so far. The fact is, that the majority of current validators WOULD STILL BE STAKING, even if the lower bound of rewards were 5%, maybe even 1%. Why? Partly because the price for undelegating is so low (only a 1.5 day wait). But…mostly because the majority of tokens lie in the hands of investors who are committed to the health of the network, even if it costs them short term money. As such, the market is distorted, and does not reflect a true satisfactory nash equilbirium.

Whatever the minimum amount of rewards is, given the current token distribution, it will always be met. Plain and simple. Too many holders will stake regardless of what they are making in rewards. So in determining a proper rewards rate, we MUST look at the MINIMUM possible rewards, and increase that drastically regardless of whether or not it is met, because it will almost certainly be met.

Psychology becomes Destiny: Why a Massive and Sudden increase in Rewards is Needed

Trump’s election illustrated a key fact: in a crowded field, any press, even negative press, is far far better than NO press. The crypto space may be the most ruthlessly darwinian explosion of businesses in the history of capitalism; as such it is extremely crowded. Even if tomorrow Harmony makes headlines for having “ponzi-scheme tokenomics” (even though the above proposal is absolutely no such thing), that would still be far better than the current state of things, which is market indifference. Some potential new validators would be caught in the hype, buy tokens, join the network, which would snowball into more and more adoption and usage, in turn snowballing into more people buying the tokens to stake and make money.

A few paragraphs before I discussed how, assuming a constant market cap, new stakers won’t make much in dollars/bitcoin due to token dilution. But…if a massive increase in rewards is combined simultaneously with more network usage through dapps, and therefore more token demand, a strong upward spiral in price will occur, where fresh capital is coming in, buying and staking because it thinks there is a good chance it makes 90% in DOLLARS, not just Harmony tokens. That in turn will decentralize the network further, leading to more dapp porting, further increasing the price…

This is where the psychological component comes into play: a large rewards increase results in a strong psychological kick to the network, giving validators and delegators the temporary but ultimately self-fulfilling illusion of making lots of money. Even though it is in theory partly counter-acted by inflation, this component of market psychology results word spreading, further capital influx, more hype…and becomes a self-fulfilling prophecy. Seeing numbers go up on your screen irrationally plays to human psychology and engineers positive momentum for the network out of nothing.

One last point on the psychology aspect: the market is fickle, and gets tired of news quickly. If the rewards increase is pussyfooted, where say only increased to 20%, and then 30%, trying to inch upwards to find the exact right percentage that will generate sufficient market momentum, the momentum may never be generated at all. Sudden shocks are essential for inertial shifts. So, need to go big at the outset, with a large marketing campaign, and not be afraid of “overshooting” the amount, because there really are no downsides to doing so.

Reasoning Behind Specifics of What I Proposed

  1. There is nothing scientific about the proposed numbers: 90% just seems like a good eye-grabbing number, without resulting in too much instability in the network. I personally feel as though offering 100% or over would be something the market glosses over as just being too high (it doesn’t seem to carry the same gravitas to me as a number starting with a ‘9’), and would be unnecessary, as no other protocol is offering anywhere near 90% anyways. But again the specifics here should certainly be amenable, and are mostly meant to offer a baseline for discussion.

  2. Locking is crucial. It commits the supply staked to be out of circulation, reducing circulating supply massively, and counterbalancing the enormous amount of tokens that have been dumped since IEO—a sort of consolation prize to investors who have held through the unlocks. It commits newcomers to the long-term health of the protocol, on-boarding more validators while incentivizing these validators to build on Harmony so their investment pays off. What we currently have, a 1.5 day unlocking time, will lead to immense network instability if/when the token price increases. In fact, increasing this unlocking time in some way should be at the forefront of any agenda.

  3. A delegation penalty is also necessary—otherwise, there is no incentive to run ones own validator. The network is currently experiencing issues with this: and while several proposed solutions are circulating (such as limiting the amount of tokens that can be delegated to one node), these efforts are ultimately futile: validators will simply create more nodes to circumvent this limit. A fundamental cost must be paid for delegation, a significant cost, regardless of who one delegates to. It is the only way to force decentralization and incentivize active rather than passive contribution to the network.

  4. Simultaneous marketing campaign along with rewards increase: this goes without saying, really. Some sort of massive, energetic, vigorous campaign to get the word out about how much money you can make staking ONE, to maximize the impact of these protocol changes: flooding telegram, reddit, twitter, existing members and validators of the crypto sphere, will all be natural given the allure of Harmony’s superior tech and user friendly staking experience.

Nothing is Lost–Yet

I actually believe that the time spent so far in having the rewards be 10% or so was not a bad thing: there were several bugs that had to be ironed out on both ends of both the validators’ side and the development team’s side, and so a “trial” period with low rewards actually makes a lot of sense: since my proposal includes locking rewards, locking the rewards without fully understanding how validators will interact with the protocol and ironing out last minute bugs would be problematic and lead to lots of frustration. But now we are past that: validators understand the game, they understand how to tweak their machines optimally, and so now its time to give them their due.

To conclude, so long as Eth 2.0 is not implemented, so long as Eth alternatives are valued at billions of dollars, the battle is not over. But decisive action must be taken imminently to push harmony into the foreground, and soon.


Lol. If that’s the case why are you still here trolling the forums?

Hi, edmund:

Thanks for the sincere and thoughtful proposal. I agree on many fronts of your arguments.

  1. Right now, the delegation is basically much more attractive than running your own nodes, which is counter to the decentralization purpose. Even thought there are commission fees for the validators, but the competitiveness of the market force that fee to be extremely low. A few validators have voiced the idea to set a hard floor of commission fee so that the competition won’t drive the fee to too low. I actually agree that it’s better to add protocol rule so that it’s always more profitable to run as a validator compared to delegating.

  2. Locking is indeed crucial to reduce circulation and help reduce market volatility. The current 1.5 days locking time is a temporary setting in the early stage of the staking launch. We will definitely consider bring back the original 7 epoch locking time once the network is fully stable and also after cross-validator redelegation is implemented.

  3. Regarding the significantly higher block rewards of 90%, I agree with the rationale behind it about getting enough people’s attention and creating the snowballing effect. But I think it’s a bold move and there comes a lot of potential risk if not well executed. This proposal may be the key to shift the momentum but it may also backfire. We will need to discuss it among the team first.

Overall, I think the reasoning and rationale behind your thinking all looks reasonable to me. Those proposal are all viable alternative solutions than the current ones. But admittedly the staking is just launched for 1 month and we are still in early stage of the network where many changes is going to happen, we will need to be careful about drastic changes of any kind.



What I know is that for 1mil tokens I get 40$ per month a thats really disappointing. Staking is definitely not profitable, and lot of people told me that they will leave soon if price doesn’t change. We need something that will resonate, I completely agree with Edmund.


Thanks for the read RJ. As for the 90%–mostly I just wanted to get the team thinking big.

Glad to see we see eye to eye in general here though–makes me feel more at ease. One thing I would stress is that if rewards are indeed increased at some point, the locking period should also increase commensurately, possibly beyond just a 7 day epoch

Keep up the good work.



Well done! You have attracted a lot of Indonesian bounty hunters to the project as usual… OMG! You guys are trolling investors. LMAO! Harmony angels…really? You have created a radically fair economy for millions of Indonesian bounty hunters…omg! :rofl: :rofl: :rofl: :rofl: :rofl:
Cheap people attract cheaper people…

Thanks for your well-thought out reply, RJ.


Excellent writing. Strong points. Clear thinking. I strongly agree on 1 and 3.

  1. The current staking rewards are too low. As you rightly point out, these numbers have been chosen as if we were already a store of value. 3% annual inflation is what Bitcoin was at before the halving! For the first 8 years Bitcoin’s inflation was much higher in order to radically incentivize early adopters. We similarly need to give radical rewards to those who are choosing to stake this early on. They are taking a large risk, so they deserve a large reward in return. Those looking to speculate on Harmony in the short term and therefore choose not stake should be taxed accordingly. Higher staking rewards achieve both incentivizing long term holders and disincentivizing stakers.

The follow up here is agreeing on an issuance rate that is radical enough yet not too crazy. Also, we need to carefully plan how we dial back the issuance rate over time. Should we implement our own halving process?

  1. A minimum delegation fee is the best solution I have heard so far for promoting more unique validators. Most of the other approaches have easy work arounds for determined validators. This one is truly unavoidable unless someone makes a direct deal with the validator and has some kind of custody or smart contract pool set up. Right now, even large ONE holders have little incentive to run their own validator. But if they have to give up a substantial % of their staking rewards, then it does.

Follow ups here include, how will this affect small stakers who have no choice but to delegate? Will this just increase “off-chain” delegation or maybe smart contract staking pools? Finally, how do we choose a fair commission floor for validators? Would all validators then just stick to the floor commission rate?

  1. Number 2 is also a great idea, but I think we need to iron out the details more. The main idea is to make the opportunity cost of staking larger in order to make the divide between speculators and HODLers very distinct. If speculators can stake short term and then turn around and sell, then they are not taking the same risk as HODLers and should not be rewarded the same. So, other than longer unlock periods, what mechanisms could we use here? Let’s start thinking about this.

I think you have laid down a solid general proposal. RJ and I at least are for it. Now we are left with the work of getting down to brass tacks and defining/debating the actual changes we would make. Let’s continue the discussion on these points.

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Thank you Edmund!

I think these are viable points. I agree with @nickw, 1 and 3 are urgent.

Meanwhile I would prefer technical progress more, like: shard-agnostic development environment, greater validator security (no private keys on the validator servers)

these are major changes too, but IMO more important in the long-term than higher token valuation asap

I avoided running our own validator on mainnet, because of two things: 1. Being a delegator is more profitable if we calculate with time too 2. Running a Harmony validator requires high opsec & a senior devops dedicated to running staking nodes (which we lack atm)

In 2020, cracking the defense of an average vps is a common thing and if one professional hacker group would like to target attack Harmony validators, they could potentially drain out most of them. They only have to find a chain of bugs in one of the softwares associated with staking and use it on every server.

I know this is not a common thing atm, but I fear it will be in the future. Other chains like freeton take security mad seriously, because they know a project like these could be torpedoed.

To me and my team: technical progress is more rewarding than higher token valuation, but I know we (as a community) need both to prosper.


@rongjian and @nickw i also like the idea of setting up a minimum fee for all validators, might be the most elegant way to incentivize one to run a validator instead of just delegating its stake. I don’t know exactly what would be the bare minimum, but we could start with 5% or maybe even higher like 7% or 10%. Right now a few validators are running with 0% or even close to 1% and concentrating their staking power and giving no incentive for people to move away and run themselves.

I have been talking to many other community members about this idea on Telegram and many agree with this as well. Issue is i haven’t seen other chains setting up a minimum fee to run a validator, but it doesn’t mean this is not a good solution.

About increasing the undelegation epoch time back to 7 epochs, i agree on this as well. At the very beginning of the network we had to lower it because of a few misbehaving validators had much of the staking, but now that the network has become more mature and with almost 60% of all tokens staked, we can think about getting it back to 7 epochs again. This will lower market volatility and benefit more long term stakers than speculators like Nick has said already.


some other projects who have implemented a similar rule:

there are protocols where everyone has the same fee, in icon we cannot control the fee, I know in cardano you can set a fixed fee and a variable fee.


fixed + variable fee looks like an interesting idea.

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I agree with setting a fixed fee on the protocol level of at least 5% + validators can set their own individual variable fees. I also think the unstaking period should be returned back to at least 3 epochs.

As of right now, it makes no sense that some validators have 0% fees with the hopes of attracting delegators—with the intention, of course, of raising their fees once they reach more delegations. Everybody knows this is the strategy and it’s understandable, but it really shouldn’t need to be this way. It’s just silly.

By assigning a fixed fee, running a validator will inherently be more profitable than simply delegating right off the bat. That’s what we want.

However, since delegators will be hurt by these fees (and given that rewards are already relatively low and will go lower), I think that any fixed fee change must also correspond to an increase in rewards. How the tokenomics will be fixed is up for debate, but there have been some ideas thrown around already. We want to incentivize STAKING for the long-term, not trading. Simply put, a 10-11% reward rate is simply not attractive right now given the price volatility of ONE and our very small market capitalization. Individuals can get the same staking reward rate with Cardano (ADA), for example, for much less risk based on market conditions.

We cannot design a staking system as if we are an already-established top-tier project. The market is simply not pricing us that way… for now :slight_smile:


I personally think it should be much higher than 5%. That’s just weak. Probably somewhere closer to 50%, but that’s would only make sense with a large rewards increase

I personally think, some major changes need to be made. In contrary to some virtue signaling guys here and in TG who trying to sound smart and caring, I am not in Harmony for the tech and those memes and I am certain even the team are not in for the tech and NGO and making the world a better place and other cliche being throwing around.

It has been 12 months since when I got into this project as an early investor and believer to the project where was seeing a good opportunity and team and idea which was mostly ready and main net and all the features were going to be launched until Sep’19. But in reality, an easy token swap took forever and after that just bunch of random partnerships and promises which got forgotten after a couple of months and all of them postponed to after OS launch and here we are yet.

Nobody outside the immediate community of Harmony in crypto cares about this project and building some monitoring apps for the network and protocol is not building on it. Even the new marketing manager who was hyped about several weeks ago, seems doing nothing meaningful for the project and people are just coming and going with no tangible outputs and the investors like me and many other who I am in contact with are down too much from their initial investment and wasted their time, money and energy and still are being played with empty “soon” promises which never arrives. I wish never trusted to the team and sold my tokens like several others and moved on although was still down a lot more and had not got involved into this at all.


Over 60 dapps are building on Matic. 115 smart contracts are being deployed on Elrond mainnet. FYI!

I think this is the key takeaway from your post, and why drastic change to the tokenomics is needed to shock the market into action. Investors and the team who have been living inside the project’s bubble for months need to realize this and be radically honest about what’s going on: it’s the only way to survive other than sheer luck

Check out the history of transactions. How much of them are dumped!?

I think 90% is crazy! Something like 20-30% maybe… but we would need to half that every year until it settles near 3%, otherwise we would just devalue the current price massively and it would create the same situation that your holding is worth nothing. 90% rewards would simply mean the current price would half on the open market.

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Locking them up for 6 months does nothing! What do you think will happen in 6 months? The same Dump you are trying to avoid today. You are delaying the inevitable!

Also forcing people to lock up rewards for set amount of time will put people off staking or validating in the first place!

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