Aptos Proposes 50% Staking Reward Reduction

Proposed Background

Aptos is a Layer 1 blockchain project built with the Move programming language, which is notable for its high scalability, security, and usability. Since its mainnet launch in October 2022, Aptos has attracted attention for its valuable airdrop campaigns and support from large investment funds, with a total capital raised of over $350 million. Staking rewards, which are an important factor in attracting validators and investors, are currently set at 7% per year, with plans to gradually decrease over time to a minimum of 3.25% over 50 years.

The new proposal, dubbed AIP-119, not only accelerates the reward reduction process but also aims to incentivize validators to explore other profit-making opportunities within the Aptos ecosystem, such as MEV (Miner Extractable Value), RPC (Remote Procedure Call), restaking, or DePIN (Decentralized Physical Infrastructure Networks) projects. However, this move raises many questions about its impact on the community and the long-term development of the network.

Objective of the Proposal

According to the published information, the main goal of reducing staking rewards is to motivate validators to not only focus on locking APT tokens to receive rewards but also actively participate in other activities to diversify income sources and strengthen the ecosystem. Specifically:

• Fostering Innovation: By reducing staking returns, Aptos wants developers and validators to find new profitable opportunities, thereby promoting the building of more diverse applications and services on the network.

• Increased Sustainability: Reducing rewards can help control APT token inflation, thereby maintaining long-term value for investors.

• Increased Competition: This proposal is expected to create a more competitive environment among validators, forcing them to improve efficiency and contribute more to the network.

Potential Risks

Despite its ambitious goals, the proposal is not without risks. Some concerns include:

• Reduced incentive to participate: Staking rewards are an important factor attracting validators and investors. A sharp cut from 7% to 3.79% in a short period of time may cause some validators, especially small node operators, to feel that it is no longer profitable to continue participating. This risks reducing the number of validators, thereby affecting the decentralization and security of the network.

• Negative Community Reaction: This move has caused a lot of controversy within the Aptos community. Some argue that reducing rewards too quickly could erode investor confidence, especially in an already volatile cryptocurrency market.

• Competition with other blockchains: Many other Layer 1 blockchains such as Solana, Cardano or Avalanche are still offering attractive staking rewards. If Aptos reduces rewards too much, validators could move to other networks, weakening the project's competitive position.

Impact on APT Token Price

Another factor to consider is the impact of this proposal on APT token price. Historically, events that change staking rewards or tokenomics have caused significant price fluctuations. While Aptos has gone through token unlocks without significantly impacting APT price, the reduction in staking rewards could create selling pressure from short-term investors. On the other hand, if this proposal is successfully implemented and promotes ecosystem growth, APT price could benefit in the long term due to the increase in real network value.