SIP-1: Token migration to enable token economics

In the past year or so, many Ethereum projects have gone through a token migration. While it's a somewhat cumbersome process that requires a lot of coordination with token holders, exchanges, and information sites, it gives the communities the opportunity to update their token contract to implement new standards (e.g. Golem's GNT to GLM), change branding and support new features (e.g. Aave's LEND to AAVE), or raise the supply hard cap to enable inflationary token economics (e.g. OCEAN token migration to double the hard cap, setting it to the originally planned value).

The main reason for the token migration is to double the hard-coded maximum supply from 1 to 2 billion DATA.

It's very important to understand the following, so please read carefully:

• This proposal does not change the circulating supply or market cap. No new tokens are minted by passing SIP-1.
• For any new tokens to be minted, a separate governance proposal clearly describing the amount and purpose of the tokens must be created, and voted on by the token holders. Tokens can only be minted if such a proposal passes.
• This proposal is about technically enabling such decisions to be taken by token holders in the future. With the current token smart contract, minting tokens is impossible, even if the community wanted to and decided to do so.

The case against the proposal

Minting new tokens in the future will dilute existing token holders accordingly. While none will be minted with this decision, the decision signals that the community wants to explore inflationary reward models in the future.

The case for the proposal

A controlled inflationary pool is a powerful tool to incentivise network participation, as seen in almost all blockchain networks including Bitcoin and Ethereum. In the DeFi space, there are many examples (e.g. UNI, CRV, etc.) where minted tokens have been used to incentivise growth and energise the community, and often the growth has added ecosystem value orders of magnitude beyond the caused dilution. Token holders can also defend against inflation by participating in the related programs -- participation being exactly the goal of the incentives.

Subsequent proposals will need to be drafted and voted upon for any tokens to be minted. That said, here are some potential use cases for such tokens:

• Bootstrapping the decentralized Streamr Network. Similar to yield farming in DeFi, minted tokens can act as early-adopter bonuses and help focus the community's efforts. This would also enable nodes to be rewarded already in the Brubeck phase where the Network's usage fee mechanisms don't exist yet.
• Rewarding DATA holders for voting on governance proposals (such as this one)
• Incentivising long-term maintenance and development of the Streamr codebase
• Incentivising long-term ecosystem growth and building of applications beyond the lifespan of the current Data Fund.

Why exactly 2 billion DATA?

Token migrations require a lot of communication, coordination and resources to implement. While we don't expect the full reserve to ever be needed, the hard limit should be set sufficiently high to avoid ever having to do another migration in the future. Doubling the hard cap seems more than sufficient for all foreseeable incentive programs, even in the very long term. In practice, only a fraction of it may end up being created, but it's better to overshoot than undershoot here to avoid tying the community's hands to decide on incentive programs.

Implement ERC-677

The change to the hard cap is the only material change in the token migration. However, it is also an opportunity to do a few technical improvements which have appeared since the token launched in 2017, such as implementing ERC-677.

This technical change will enable smart contracts to be notified via a callback function whenever tokens are transferred to them. This is useful in many situations, including moving tokens across interchain bridges, moving tokens to Data Unions, and so on. ERC-677 is an extension of the ubiquitous ERC-20 standard, 100% backwards compatible, and used by a number of well-known projects, such as Chainlink.

The practicalities of the migration

In the token migration, a new token smart contract will be deployed, and token holders can swap their existing tokens 1:1 for the new token at any time. There will be a simple UI for doing this in a self-service manner. The Streamr team will also notify exchanges and other custodial parties, and encourage them to migrate the tokens in their custody.

The new token will adopt the DATA symbol, while the old token will be renamed DATAv1. A similar approach was used in MakerDAO's DAI migration, where the new token adopted the symbol DAI, and the old token was renamed from DAI to SAI.

You will be able to migrate your DATAv1 tokens at any time, meaning that there will be no particular urgency to do so, or any particular time when you need to have them in your wallet to qualify for the migration.