In this one, we’ll study changes in BIP coin tokenomics that have come into effect following today’s upgrade. We will also consider their role in decreasing the supply of BIP on the market.
The mechanisms below have been operating at the core level of Minter blockchain since being accepted by the network validators.
1. Free Autoredelegation
Description
Earlier, all rewards were sent out to delegator addresses approx. once every hour. Autoredelegation has changed that in a way that from now on, rewards are automatically staked, leading to growth in both stakes and rewards themselves. To claim, the user will need to make a regular unbond transaction in the amount they need.
BIP Supply Impact
In ~30 days after the upgrade, 135 000 000 BIP (or 4 500 000 BIP a day) will have been stopped from entering delegator wallets and by proxy, free circulation.
The market will practically lose a steady inflow of rewards for a period of one calendar month. One may call it a ‘rewardless month,’ because all rewards will be automatically redelegated while unbonds will take around 30 days.
The ‘rewardless month’ will set a unique precedent for BIP circulation. The absence of rewards will significantly decrease the supply of BIP on the market and provoke its shortage.
2. Dynamic Mining
Description
When the supply of coins on the market exceeds the demand, BIP’s price drops. To make this less impactful, Minter 3 introduces a block reward balancer that reacts by reducing block rewards when the BIP price falls, helping to avoid further BIP surplus.
At the same time, when the BIP price goes up, the balancer increases the rewards to maximize staking outcome.
On the graph below, you may see the correlation between the reward per 1 block produced and the price of 1 BIP in U.S. dollars, i.e. how many BIPs found in each block will be distributed as a reward for delegation.
- Price = $0.001, reward = 62 BIP
- Price = $0.0025, reward = 78 BIP
- Price = $0.01, reward = 111 BIP
- Price = $0.10, reward = 197 BIP
- Price = $1, reward = 350 BIP
BIP Supply Impact
Considering the current price of BIP at ~$0.0021, the reward will drop by ~3 times, from 237 BIP to 75 BIP per block. This Minter 3 mechanism will drastically reduce the supply of BIP on the market, removing the surplus of coins, which negatively affected the price of the asset, from circulation.
BIP supply generated through delegation rewards will be reduced by 3.2 times. But a reduction in the delegators’ BIP yield will not necessarily lead to a decrease in dollar value, as the dollar yield may remain the same or even increase due to the increase in the price of BIP due to its scarcity.
In any case, the reduction of block rewards by more than 3 times will drastically affect the availability of BIP on the market. The BIP shortage after this upgrade may be quite noticeable.
3. Three-Year Stake Lock
Description
A new staking option is offered to users with Minter 3 release. They can send their BIP into delegation with a 3-year lock and receive 3x rewards. The unbonding is impossible until the lock-up period is over.
BIP Supply Impact
Given the current BIP value of ~$0.0021, the block rewards for users who have delegated their stakes will be 225 BIP, down 5% from the old value of 237 BIP.
Three-year-lock users can’t withdraw their BIPs and rewards generated through delegation. A complete freeze of the stake’s body and rewards for three years will help ensure that a significant amount of BIP stays out of circulation for at least three years.
This, of course, will have a positive effect on reducing the supply of BIP on the market, and will contribute to the shortage of BIP.
4. Undistributed Rewards Burned by Balancer
Description
If there is a sharp, 10-percent drop in the price of BIP, the balancer stops distributing rewards to delegators who haven’t locked while block rewards are burned down to the base value. Once the price is no longer decreasing, block rewards return (+10 BIP every 24h) to their base values and are distributed as usual.
BIP Supply Impact
A sharp drop in the price of BIP will translate into a sharp stop in the distribution of rewards to delegators. At the same time, the rewards that delegators should have received but didn’t will be sent to the zeroth address. In other words, they will be burned, permanently removing the BIP from circulation.
If the market and the BIP price behave in a way that allows the price to fall by more than 10% per day, that would mean that there is a strong surplus. In this case, stopping the distribution of rewards to delegators and burning them sharply “sobers up” the market, causing the necessary level of shortage to quickly restore the price.
5. Ticker Fees Burning
Description
When creating a new coin or token, the issuer pays the fee that depends on the length of the ticker — the shorter, the cheaper. Instead of being distributed to validators and their delegators, this fee will now be sent to the 0th address and burned, taking the coins out of free circulation.
BIP Supply Impact
This one speaks for itself — all fees spent by users to create coins in Minter (which are paid in BIP) will be extracted from circulation for good (burned). This mechanism leads to a gradual decrease in the supply of BIP.
6. Buyback and Burn of BIP
Description
When swaps are made within liquidity pools, BIP is bought back and later burned. We’ll increase the in-pool fee from .2% to .3% (market average). Liquidity providers will still be earning .2% on swaps within pools, while the remaining .1% will go towards BIP buyback and burn.
BIP Supply Impact
As Minter DEX and in-pool trading evolve, .1% of the fees charged on all swaps in the pools will be used to buy BIP back, thereby raising its market price. These BIPs will then be burned by sending them to the 0th address. This mechanism has two positive sides to it:
- Direct impact on the growth in the price of BIP via purchasing the asset
- Direct impact on the decrease in the supply of BIP in circulation through the burning of the purchased asset, or fixing the BIP tokenomics upon creating a shortage
The BIP tokenomics modifications that have been activated after the upgrade today will result in a highly shortened supply of BIP, making it a scarce asset.
