In short, what I propose is that only accounts that directly or via proxy participate in the governance of Hive receive a share of the 15% of the inflation distributed currently to ALL HIVE Power holders.
Reasoning: Governance voting is one of the main reasons to hold a significant HIVE Power. There is of course another wider-spread use case of HP for curation. But the least a curator could do is set a proxy to receive the interest. No proxy and no direct governance involvement - no interest.
Now, some definitions, for newer people.
What is the Hive Power interest?
Every account holding HIVE Power continuously receives a so-called interest on their HP. Apart from very big accounts, most people won't notice more HP accruing in their account every block, but it does. 15% of total HIVE inflation is paid out as HP interest, and its yield is currently somewhere between 2 and 3%.
What represents a governance action?
Here's the complete list of governance actions:
- voting a Hive witness
- unvoting a Hive witness
- starting/updating a Hive witness node, probably
- voting on a Decentralized Hive Fund (DHF) proposal
- unvoting a DHF proposal
- creating a DHF proposal, probably
- setting a proxy (I recommend Hive Keychain for this operation, not PeakD - reason: more flexible)
- clearing a proxy
Background and Details of the Proposal
In HF25, changes were made to remove governance votes and proxies set by accounts that haven't performed any governance action in a year.
This is already in effect, and if you don't regularly perform governance actions, or had set a proxy account and forgot about it, you were probably notified by your favorite interface at some point when you logged in that you need to perform a governance action or your witness and DHF proposal votes or proxy will be removed.
My proposal goes in the same direction.
To keep things simple from all points of view, I'd keep the same deadline after which interest stops being paid, meaning that after one year of no governance actions, besides removing witness and DHF votes or proxies, we should stop paying interest to the respective accounts until a new governance action is taken.
When the decision for removing votes or proxies was taken, one of the edge case that was analyzed was long-time inactive users who had voted in the past, but have no interest in Hive anymore, or even worse, dead people whose votes kept being counted.
That was fixed with HF25, but using the same examples, why should we keep paying interest to dead people's accounts or to those long gone and not active on Hive anymore?
One year is a long enough time for someone to drop by and confirm some governance actions, so it's not like we force anyone to be active daily or even weekly on Hive.
What To Do with Interest Not Paid?
Let's analyze 3 options:
- distribute to the other HP holders active on governance
- send to the DHF
- create a fund to pay LP rewards
1. distribute to the other HP holders active in governance
As much as people would prefer this option, I don't think this is feasible because with the programming background that I have, I know that would mean a serious increase of processing requirements, which puts pressure on the infrastructure. And that may not be the only hold-back, but I believe it's big enough to be a "no" from the start.
2. send to the DHF
That's the easy but also non-committing option. Another decision needs to be made to distribute the funds from the DHF. That could be fine if another better solution isn't found.
3. create a fund to pay LP rewards
This is my favorite. Given the context involving likely restrictive regulations that will probably affect Hive directly or indirectly, we will need more and deeper LPs for HIVE and, hopefully, HBD in other major ecosystems, to avoid becoming isolated.
Those LPs will need to be incentivized. This fund can be used as a (partial?) source to finance rewards for such LPs.
What Changes Are Required to Put in Practice This Proposal?
First of all, it affects the financial aspect of Hive, which means it must be part of the changes proposed for a hard fork and accepted by the super majority of top witnesses for the hard fork to happen.
From the coding side, I don't know the blockchain core code, but as far as I can tell from a high perspective, it would mean a change like this:
interest_to_pay = formula;
if (last_governance_action > last_year)
pay_interest(current_account, interest_to_pay, ...);
else
redistribute_interest(where, interest_to_pay, ...);
(non-coders, don't get too excited, the actual code wouldn't look quite as simple)
That would happen at every block, since interest is paid at every block and for every account (as far as I know), so it has to be a highly optimized piece of code, and if a needed operation takes too long, it can be a reason not to implement such a change.
Then, new test cases would need to be defined to automatically test this. And obviously, it needs tested.
Final Words
I believe people need more incentives to participate in governance. Losing rewards is something that will convince more to be active. Plus, we wouldn't pay rewards to long inactive accounts or worse, accounts of dead people. Ideally, it will be direct governance participation, but we can't ask everyone to do that, and after all, that's one of the reasons proxies exist on Hive (even though I encourage direct participation).