Here’s another proposal for how to handle price setting in the permanent registrar: Using tokens and voting.
Suppose we allocate ENS tokens to existing stakeholders - domain owners, possibly others - by some algorithm. Stakeholders can vote on a target domain renewal price, in ether. We take the median of these votes, and use that as the renewal price. Token holders are rewarded with a share of renewal fees proportional to their token holdings.
If a user’s share of tokens owned is the same as their share of domains owned, then there’s no incentive to vote either way: They earn exactly as much for owning the tokens as they spend on paying for the domains.
If a user owns a smaller share of tokens than domains, their incentive is to vote the price towards zero, since their expenses exceed their income. However, such users by necessity also have a smaller effect on the price, due to their small token holdings.
If a user owns a larger share of tokens than domains, however, their incentive is to maximise profits - to vote for the price that results in the largest product of price and number of domains. While our overall goal is to minimise squatting rather than maximise income, it seems like hitting the economic equilibrium for price is a reasonable approximation, in the absence of hard numbers for the ideal price to discourage squatting.
This does seem to have the nice property that a large domain holder wanting to reduce their costs would likely have to obtain enough tokens to do so that it changes their incentives to instead maximising profit from those tokens.
- Is the economically optimal price for domains close enough to the optimal price to discourage squatting to function?
- Will people act rationally to find the optimum price?
- Within what parameters does this system behave as desired? How large can the largest domain holder be before it’s economically viable for them to buy up tokens to vote the price down?