Proposal to change the lock-up period from 3 to 14 days

(This is originally a Chinese article)

This is a proposal, not a referendum (yet). Voting opens when the current proposal gets pushed to a referendum. Timer and proposal can be found here. There’s currently no need to second

A while back now we had our first ever governance referendum. We asked you to vote on whether we should remove the Sudo Key from the PolkaX development team or keep it in place. A resounding AYE was chanted by the community, in favor of true decentralization, making ChainX the first project to follow Polkadot in its footsteps of complete on-chain governance.

Now, weeks later, we have our next proposal sitting in the queue. Coming from Councillor Xiamipool, he proposes to change the lock period after unbonding to 14 days from its current 3-day lock-up period. This would mean that after using ‘UnBound’ in your wallet, you would have to wait 14 days before you can use ‘Redemption’. This waiting period is currently 3 days.

Below you can find Xiamipool’s arguments for this change. Please give it a thorough read and form your own opinion. Discuss with your peers and get ready to cast your vote for when this proposal comes to a referendum.

Note: Polkadot’s governance module is used. This means you can learn more about how a referendum works here: Polkadot Governance or Participating in Governance

Note: Seconding locks 10 pcx that cannot be transferred or staked until the proposal comes to a referendum.
Seconding a proposal is only to make it become a referendum before another proposal. Currently there’s only one proposal in queue anyways, so no need to second.

The total amount of staked PCX determines the Reward Rate

Xiamipool: A lot of users have participated in staking on Polkadot and Kusama. In comparison to them, did you ever wonder why ChainX has such a high return?

Both Polkadot and Kusama have a fixed issuance. The annual dynamic inflation of 10%-20% is used to reward staked tokens. In contrast, ChainX’s issuance is much more comparable to the fixed issuance model of Bitcoin mining. Distributed to miners in a pool according to the percentage of total computing power.

ChainX is halved every two years and is currently in the first mining cycle. It produces 14,400 PCX per day, distributed to the Development team, Council, PCX Stakers, and BTC cross-chain miners according to the percentage of Mining Distribution. Currently, 57.6% of the Mining Distribution is allocated to PCX staking. That is, before the halving, 14,400 * 57.6% = 8294.4 PCX will be distributed to all users participating in PCX staking every day. The current staking rate is 75.72%, meaning about 5.84 million PCX is sharing the daily 8294.4 PCX issued. This translates to an annual percentage yield of 43.46% (Reward rate).

However, when we have more than 5.84 million PCX staked, the daily distribution of PCX will have to be shared with more users, resulting in a lower annual percentage yield for everyone. The opposite is true if less PCX is staked.

Having a longer lock period will deter users from haphazardly staking, as they have to deal with a 14 day lock period after. This will lower the total amount of PCX staked, realizing a higher rate of return for those of us who are dedicated for the long term. This is the first of the reasons why I propose to increase the lock-up period after staking and keep the coin in the hands of those who really need it and recognize it.

The game relationship between staking and market value

Historically, PCX’s staking rate has had a strong correlation with market value (price of PCX).

Market value rises rapidly -> Staking rate declines -> Users unstake and take profit -> Market value shrinks -> Reward rate climbs -> Users return and stake -> staking rate rises -> Reward rate shrinks -> Market value stabilizes -> Market sentiment brews -> Market value rises rapidly again -> Staking rate declines -> etc.

We can think of the above relationship as the life cycle of the PCX secondary market (exchanges), something affecting all projects using staking methods.

Lets compare ChainX to similar high-quality staking projects. Below we list the Reward Rate and Lock-up period of five projects:

Comparison of Reward Rate and Lock-up period between staking projects

Obviously, the odd one out is ChainX with a short lock-up period, high staking rate, and high reward rate compared to the other projects. Leading cross-chain projects like Polkadot and Cosmos have a lock-up period of more than 20 days. They have a strong consensus and a large number of fans. Why do they have such a long lock-up period? This is a question worth thinking about.

Increasing the lock-up period reduces market selling pressure

In my opinion, three days does not eliminate the selling pressure in the secondary market. It does nothing more than extending the life cycle of the secondary market mentioned before. The current lock-up period of ChainX is 3 days, the life cycle is too fast, the wave of unbonded PCX broke out after the third day of the market value increase. This left newcomers suppressed by heavy selling within a short time after joining PCX, resulting in a quick and heavy financial blow whilst not fully understanding the project. This is a large problem for newcomers entering the project and learning about its technology. It deters further learning and is bad for the market sentiment.

Therefore, I propose to revise the ChainX lock-up period from 3 days to 14 days, similar to mainstream projects. At the same time, I believe that this measure can solve the problem of poor liquidity in the secondary market, excessive volatility, and unsustainable accumulation of market sentiment. Due to the excellent features of ChainX’s community governance and fork-less upgradability, the proposal can be carried out without consuming any development time. It is also a good example of the decentralized governance within ChainX and the community’s deep participation in the project.

At present, I have put forward the proposal in the ChainX governance module “Adjust the lock-up period of ChainX staking to 14 days”. The proposal currently sits in the proposal queue and every seven days a proposal will be pushed to a referendum. PCX holders who support the proposal can second it using the ‘second’ button on the Governance — Democracy page. After the end of the current period (that is, when the countdown ends), the referendum will open. You can then vote on it here: https://dapps.chainx.org.uk/#/democracy/democracy

Note: Seconding locks 10 pcx that cannot be transferred or staked until the proposal comes to a referendum.

Please participate in the vote with either an aye or nay.

After the proposal is passed, it will be executed automatically, without the development team modifying the code. Leaving them with no extra work.

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ChainX

ChainX

ChainX is the largest Layer-2 network of Bitcoin, based on Substrate, and will evolve into the Polkadot Secondary Relay Chain.