The Inflation Governance Dilemma of Aptos: Controversy Arising from Stake Yield Adjustments, Ecological Prosperity as a Possible Solution

Recently, the Aptos community has been embroiled in intense debate over a proposal AIP-119 to reduce staking rewards. Supporters argue that this is a necessary move to curb inflation and activate ecological liquidity, while opponents warn that it may undermine the decentralized foundation of the network and even lead to capital outflows. When the struggle between throttling and open-source clashes with the redistribution of validator interests, this reform in Aptos concerns not only the future of APT token economics but also reflects the deeper contradictions in PoS public chain governance.

The "Surgery" of Inflation Provokes Debate on Healing or Harming the Economy

The AIP-119 proposal suggests reducing the base staking reward rate of Aptos by 1% each month over the next three months, with the ultimate goal of lowering the annual percentage rate (APR) from about 7% to 3.79%. This proposal aims to alleviate APT inflation but has also touched upon the core interests of large staking nodes that are accustomed to passive income, thus sparking considerable debate within the community.

Supporters believe that this proposal can not only quickly reduce the inflation of APT, but also incentivize token holders to move their funds to other DeFi activities on-chain, rather than relying solely on passive stake.

However, opponents point out that significant cuts to staking rewards will have a greater impact on small validators. The profit margins for many validators may be compressed to a point where they cannot cover operational costs, forcing them to exit the network. This may indirectly weaken the decentralization of the Aptos network, concentrating power and resources among large validators.

A co-founder of a certain DeFi platform calculated a specific account in the forum: currently, validators holding 1 million APT have annual server costs of approximately $72,000 to $96,000. However, if the yield is reduced to 3.9%, the final earnings may only be $13,000, resulting in a deficit. Only by holding more than 10 million APT can one barely make a profit, which will directly eliminate small validators.

In addition, some comments suggest that the reduced stake yield lacks competitiveness compared to other chains that offer higher returns, which may lead large investors and institutions seeking high returns to transfer funds to other networks, reducing Aptos's TVL and liquidity, and creating a risk of capital outflow. The lower stake yield will also decrease the attractiveness of Aptos DeFi protocols to liquidity providers, affecting the growth of the protocol and user participation.

The Common Dilemma of PoS Governance: The Balancing Act of Rewards and Inflation

In fact, this proposal is very similar to a previously proposed proposal on a public blockchain that was ultimately rejected, both attempting to suppress network inflation by lowering validator yield, reflecting the dilemma of interest games in public chain governance. This governance dilemma is even more pronounced in the POS consensus mechanism.

Currently, Aptos's token inflation model is an annual increase of 7%. According to the AIP-30 proposal, this maximum reward rate is planned to decrease by 1.5% each year (relative to the previous year's value) until it reaches a 3.25% annual lower limit after more than 50 years. As of April data, the staking rate of APT has reached 76%, maintaining a relatively high proportion among public chains. In terms of fee destruction, all transaction fees on Aptos are currently destroyed; however, since Aptos's on-chain fees are only a few thousand dollars per day, this destruction is hardly sufficient to resist inflation.

In contrast, a well-known public blockchain adopts a year-on-year decreasing inflation model, starting at 8% and decreasing by 15% each year, currently around 4.58%. This dynamic inflation model seems to be the expected goal after the Aptos proposal reform. However, for this public blockchain, this inflation is still considered too high by the community, which has led to similar proposals being put forward.

Another MOVE-based public chain has a low staking yield, ranging from 2.3% to 2.5%. Additionally, its token has a hard cap limit of 10 billion, fundamentally controlling the possibility of infinite issuance. In terms of staking rate, this chain's staking rate is about 76.73%, which is close to APT. However, regarding fee handling, the network's choice is to use it as rewards, without a burning mechanism. Relatively, the hard cap model seems to have reduced the community's inflation anxiety significantly, thus also performing relatively well in terms of price.

In addition, there is a typical staking yield of a certain cross-chain ecosystem, reaching as high as 14.26%. From the perspective of the circulating supply of tokens, it also shows a continuous upward trend. Currently, the staking rate of this ecosystem is about 59%, and this inflation will continue until it reaches 67%. However, although the staking yield is high, the price trend of its tokens has been continuously declining. It has dropped from a peak of 44 dollars to a low of 3.81 dollars, a decrease of 91%.

The Choice of Aptos: Throttle or Open Source?

Overall, among the major POS public chains, none has perfectly solved the balance between inflation rate and network participation. In the process of addressing these games, on one hand, it is necessary to control the inflation rate to maintain the healthy development of the token economic model; on the other hand, it is essential to attract validators to participate in network governance through relatively reasonable stake rewards.

Solving inflation is like throttling, while increasing network activity is like opening the source. For an active network, the balance between opening the source and throttling is naturally important, but for a network that is not particularly lively at the moment, how to increase activity is the true way to enhance the network token. Looking at the problems currently faced by Aptos, its TVL is only $1.1 billion, ranking 11th among public chains. Overall data is not particularly impressive, and there are currently 149 validators and 495 full nodes in the network, which is also not very high. If many validators exit due to reduced yields, there is indeed a possibility of causing significant damage.

Therefore, for Aptos, while considering "throttling" through AIP-119, it may be more prudent to thoughtfully consider its potential impact on the validator ecosystem and network decentralization. Compared to drastically cutting rewards, a more urgent choice at the current stage might still be how to "open source"—that is, to enhance the network's activity, attract more quality projects to settle in, thereby building a truly prosperous and sustainable ecosystem. This may be the key to supporting APT's long-term value.