Initia Chain Upgrade Proposal 1 has been released! A very necessary upgrade that sets up future improvements and fixes some initial mistakes but will not be loved by all (especially farmers)! So what's in the proposal? 1. A reduction in inflation rate to the intended (5% of the staking pool)/yr. The intended emission rate planned and in the official tokenomics + docs is (5% of the staking pool)/yr or 1.25% of total supply. However at launch this was improperly applied, resulting in emissions being set to (5% of the total supply)/yr. This results in 4x the amount of intended inflation for staking/enshrined liquidity on the L1 which is NOT good! 🫱 High inflation is a much loved phenomenon from dying L1s. Why? It directly competes with opportunities in the economy and encourages users to "hold" tokens rather than "use" tokens. In this case, lowering L1 staking opportunities and increasing esINIT rewards from VIP on a relative basis encourages stronger participation and exploration amongst appchains. 🤜 With the current inflation rate, Initia is emitting about 1 months worth of "normal" inflation per week. 👉 A gradual reduction was considered however given unbonding takes 21 days, reductions wouldn't do anything unless they were done over many months and Initia needs to put VIP and using appchains first. Surely due to this some users will unbond their INIT-USDC from Enshrined Liquidity. For those that unbond but want to stick around, there's plenty of opportunities across the Interwoven Economy which are yielding 100%+ from VIP for actually using products! Some examples: - - - - - I detailed all these thoughts about high inflation cannibalizing the economy back in March in this article from Initia Main: Glad to see this mistake be corrected and focus incentives towards the growth of apps. 2. L1 set OP Withdrawal Periods Interwoven Rollups may decide how assets are bridged to their chain: IBC or OP Bridge. There's a tradeoff here between speed and security, with IBC being fast in both directions but less secure and OP being slow on withdrawals but safe if a rollup is hacked. For initial mainnet launch it's important to prioritize security with most teams choosing to use the OP bridge for assets. However OP bridge withdrawal periods are currently set by each L2 individually and the default is 7 days. This upgrade enables L1 governance to adjust the withdrawal period for all rollups — this will then allow Initia to ensure all rollups have the same withdrawal period time and also potentially decrease the default the existing/default to something like 3 days. At the same time, Initia is developing a standard that combines both speed and security for withdrawals. We are keen to release this in a few months! 3. There are some updates on Emergency Proposals and IBC Hook validation to enable flows from Noble. Lastly, going forward, all future Initia Chain Upgrade Proposals will be required to have a minimum 24 hour period in the forums to collect feedback and iterate first. This must come with clear note on the date each proposal is expected to go on-chain. If you have different views to the proposal that is A-OK! Feel free to leave your structured and well presented thoughts on the Forum as the vote lasts 7 days. This is where discussion will and should take place as twitter / discord are not the right places. Thanks and Happy Governancing!