Investors rally behind Polygon revamp to kill POL inflation

A growing contingent of investors is rallying behind a new proposal that aims to revitalize Polygon’s tokenomics by urging the network to finally eliminate its 2% annual POL inflation and introduce buybacks to preserve token value and guard against a dwindling mint, which would dilute already tight pockets.

The proposal was posted on the Polygon Governance Forum and sent in by Venturefounder, an activist investor. The 2% inflation, he notes, also continues to introduce selling pressure and pull its POL price below bear-market lows for 2022. The objective of the plan is to stop inflation altogether, or at least gradually reduce it over the next few quarters, with assistance from the treasury for a buyback or token burn programme.

Investors want Polygon to end inflation and stabilize the token value

The Polygon community is inquiring about the reasons behind POL’s price drop of almost 46% over the past year, despite the project’s continued growth and development of new products. People believe the problem lies with the design of the token system, rather than with the team or technology.

Venturefounder shared posts stated that the total number of tokens continues to grow, even as demand remains stagnant. He explained that the 2% yearly inflation rate adds approximately 200 million new POL tokens to the market every year, increasing the number of sellers and decreasing the number of buyers.

Venturefounder also stated that the Polygon team has been slow in launching major projects, such as AggLayer, which aims to connect different blockchains within the Polygon ecosystem. These delays have disappointed the community because people expected faster progress. He said it’s about time the company fixes the issue once and for all, so the token can reflect the real value of the Polygon market. 

The activist suggested ending inflation immediately and making the total supply of POL tokens fixed permanently to help stabilize the price and increase the token’s value over time. He also proposed gradually reducing inflation (by 0.5% every quarter) until it reaches zero, giving the Polygon team more time to adjust to the change.

The proposal also suggests a buyback and burn program to make the tokens scarcer and help support its price. Polygon would use  20% of its quarterly net revenue to buy POL tokens from the market and destroy them to reduce the total number of tokens in circulation.

Venturefounder also wants Polygon to build an on-chain dashboard that shows live updates about the number of tokens in circulation and to stop discretionary token sales until the price stabilizes.

Polygon leaders and users debate plan to restore confidence

Many people in the community believe that this is one of the boldest reform ideas in Polygon’s history. The company’s leaders, Polygon Labs CEO Marc Boiron and co-founder Brendan Farmer, have both publicly recognized the proposal. Investors have also expressed frustration over watching the POL token lose a significant portion of its value, even as Polygon continues to develop strong technology and expand its partnerships.

However, validators feel that an end to inflation will make it harder for them to continue operating their validator nodes, because they receive part of their rewards from the newly created tokens. Many users in the discussion support the idea of using Polygon’s treasury funds or transaction fees to cover validator rewards, rather than printing new tokens.

Meanwhile, the Layer-2 blockchain space is heating up with projects such as Arbitrum, Optimism, and Base drawing significant interest. This is thanks to their speed and low transaction costs, as well as their active user bases. These projects have stolen some of the market share that was once an exclusive preserve for Polygon.

Market experts say the changes could inspire other blockchain projects with similar inflation issues to follow a similar path. Some analysts even believe that POL could regain its position among the top 10 cryptocurrencies by market capitalization in the coming years, provided the community approves the proposal.

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