Minter 3: BIP Tokenomics Update
In light of the changes that leading blockchains have recently made in their tokenomics, Minter Team is proposing a large-scale update of the network. Its goal is to improve the economic model and implement deflationary and counter-inflationary mechanisms, stimulating the strengthening of BIP.
The Minter team has started to design mechanisms outlined below. We plan to gradually roll them out in Q1 and Q2 2022.
Future Changes Network-Wide
1. Dynamic Mining
A block reward balancer based on the BIP price dynamics over a specific period. For example, if BIP price shows a 10-percent weekly increase, the block reward distributed among delegators goes up. If, however, the price shows a decrease of +10% over said period, the block reward volume goes down. The actual timeframes for monitoring the price of BIP and extent to which the reward is to be increased or decreased will be calculated in detail later.
In each block, new BIP coins are mined in the pre-determined amount. At the time of writing, that amount stands at 249 BIP. This number is lowering over time, flattening the curve of total supply issuance. Dynamic mining implies that the quantity of BIP mined per block will depend on its price changes.
For example, if BIP price drops over the course of a week, the block reward will drop from base 249 BIP to 224 BIP (by 10%) for the next 7 days, down to the minimum value set. If BIP price dynamics is positive, the block reward will rise from base 249 BIP to 274 BIP (by 10% as well) for the next 7 days, up to the maximum value set.
BIP’s price drops when the supply of coins on the market exceeds the demand. The balancer reacts by reducing block rewards and by proxy, supply on the market.
When it rises, the block reward rises as well, accelerating the mining of new coins and shortening the deadline for total supply to be reached. Once there are no new coins anymore, deflationary mechanisms will be in full swing.
2. Burning by Balancer
If the price of BIP goes down, it doesn’t slow down the mining of new coins, meaning the deadline for reaching total supply doesn’t change. In this case, undistributed rewards (down to the base value) will be burned via being sent to the 0th address.
If the balancer sets rewards at the level of 224 BIP, then 25 BIP (249-224) will be burned in each block, lowering supply in the form of available coins on the free market.
Currently, all delegation rewards are sent to addresses of delegators about once every hour. Auto-redelegation will change things in a way that all rewards will be automatically delegated, increasing the stake. To claim rewards, the user will need to make a regular unbond transaction, specifying the number of coins they need.
Average users are already acquainted with this mechanism. It’s applied in liquidity pools, where providers need to withdraw part of their liquidity that’s been inflated by swap fees to collect the rewards they’ve accumulated.
This move will allow to cut the number of coins available in circulation and bring pressure on the market downside.
4. Burning of Transaction Fees
Portion of each transaction fee will be withheld and burned.
The base transfer fee is 0.5 BIP, it’s distributed among validators and their delegators. On top of that, an additional 0.5 BIP fee will be burned via being sent to the zeroth address, therefore cutting supply. Because transactions on Minter are pretty cheap, average users will hardly notice any difference while with each transaction, there will be fewer coins freely circulated. It is important to understand that no new coins will be burned (which is the case with the balancer) but those that are already in circulation.
5. Burning of Ticker Fees
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.
6. BIP Buyback and In-Pool Liquidity Lock
When swaps are made within liquidity pools, part of the fee is forever locked into the pool (e.g., by transferring LP tokens to the 0th address) or 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 either of the following options:
- BIP buyback and burn
- Freezing inside the pool
Under the first scenario, .1% of the transaction volume will be converted into BIP by buying it back from the pool; it will then be sent to the 0th address and burned. This approach not only decreases supply, but might also trigger the growth of the network’s native digital coin.
Under the second scenario, .1% of the transaction volume forever stays in the liquidity pool via the sending of LP tokens to the zeroth address. That way, the pool would expand even more, and some of its liquidity would be frozen permanently, making swaps even more user-friendly as each transaction’s Price Impact would now be reduced.
Since limit orders are integrated into liquidity pools (AMMOB), their fees will also be increased to buy BIP back or locked in the pool, enriching it forever.
Same as with transaction fees, the impact on average user will be close to zero.
7. Mechanism of Locking Tokens for Set Duration
This mechanism opens up extra opportunities for DeFi services and Minter-powered projects. The ability to lock BIP, HUB, project tokens, and LP tokens in a decentralized way will help services craft attractive lending, farming, and staking products. In turn, this will extract assets from free circulation and freeze them, and in the case of liquidity pools, guarantee stabler trades. For example, a project/service can establish a liquidity pool and lock LP tokens for a specific duration, ensuring that the pool will be liquid for that time.
The list of economic measures is not limited to items mentioned above; if you have any suggestions related to the strengthening of BIP tokenomics, you are more than welcome to share them through this form or an official chat using the #minter3 hashtag. Authors of the best three proposals will each get 100,000 BIP.