Columbus 3 instituted a five-fold tax rate increase to 0.5% to boost staking rewards. As expected, this resulted in a notable rewards spike. Nonetheless, the on-chain calibration algorithm, whose job is to ensure a gradual and steady increase in rewards, has – counterintuitively – kept increasing the tax rate (0.625% at the moment). This has occurred because the rewards benchmark was re-set in Columbus 3 – simply put the calibration algorithm can only consider the trend in rewards post Columbus 3. Transaction volume has not grown sufficiently in recent weeks (after Columbus 3), therefore the algorithm has reacted by increasing the tax rate. The lack of historical context (rewards pre Columbus 3) has resulted in action contrary to the algorithm’s intent.
I propose a temporary freeze in the tax rate until sufficient reward history has been established and the volume uptrend resumes. This logic was previously implemented in Columbus 1 in the form of a 12 week “probationary” period during which the tax rate is fixed. A similar measure would make a lot of sense here and solve the “lack of history” problem.
Please share your thoughts/alternate proposals. A formal governance proposal will follow.