Minter 3: Dynamic Mining and 3Y Stake Lockup
A large Minter Network update aimed to modify the tokenomics of BIP is set to take place on April 12 this spring. Two of the most important changes:
- Dynamic mining
- Ability to lock stake for three years
Let’s take a closer look at how each of these can contribute to the strengthening of BIP, the network’s native coin.
Right now, a set number of BIP coins is mined in each block. At the time of writing, this figure stands at 238 BIP, which is distributed among validators and their delegators. It’s gradually going down (once every 200,000 blocks), making it more difficult to mine new coins.
The decrease in block rewards is common in many chains and algorithms. For example, the halving was first applied by Satoshi Nakamoto in his Bitcoin mining protocol design.
New dynamic mining in Minter implies that the number of BIP mined will depend on the price of BIP.
ℹ️ For example, when the supply of coins on the market exceeds the demand, BIP’s price drops. To make this less impactful, we introduce 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.
With dynamic mining, the block reward depends on the price of BIP. The greater the price, the greater the reward, and vice versa. There are, however, two different delegation schemes, under which delegator block rewards are reset and then accumulated until a pre-specified value is reached. A ‘pre-specified value’ here refers to the amount of BIP in a block. This one is re-calculated every 24 hours at a pre-determined time (somewhere between 12:00 p.m. and 1:00 p.m. UTC).
The user will have an option to choose either of the delegation schemes:
- Regular delegation (no stake lock) — the reset feature enabled
- Delegation with stake lock-up period of 3 years — the reset feature disabled, rewards multiplier = x3
Regular delegation is a standard scheme, under which you can get your stake back in 518,400 blocks after unbonding. During that time, the amount withdrawn won’t be generating any new rewards.
To delegators, a rule of ‘one-by-one unbonds’ will apply. This means that it will be impossible to make the next unbond transaction while the previous one is still in progress (518,400 blocks).
Block Reward Calculation Formula:
Price ^ (1/4) * 350,
- Price : BIP/USDTE rate
- ^ (1/4) : power function with a proper fraction. Its graph is a curve
- 350 : scale
- 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
Block Reward Reset
When block reward is reset, the number of BIPs in a block goes to 0. The reset occurs if there’s a sharp, 10-percent drop in the price of BIP:
100 - Price_new / Price_old * 100,
- Price_new : self-explanatory
- Price_old : price as of the previous snapshot
Return to the pre-specified value happens if the criteria below are met:
- The following snapshot does not record another 10-percent drop
- Each drop-free snapshot adds 10 BIP to the block reward (for example, in order to return to the pre-specified reward of 100 BIP, you’ll need 10 days with no price drops)
Burning by Balancer
When block reward is reset, the BIPs that haven’t yet been distributed to the pre-specified value are burned via being sent to the 0th address. For example, if the block reward has been reset while the pre-specified value = 100 BIP, then that 100 BIP is burned. The next snapshot sees the addition of 10 BIP, the difference between that and the pre-specified 100 BIP is 90 BIP, so the 90 BIP gets burned as well.
Delegation with a 3Y Lockup
Unlike the standard scheme, the three-year lock means:
- unbond is not allowed until the period is over
- reset (i.e., accumulation of block rewards until a pre-specified value) is not allowed, hence the stake is protected against the absence of rewards
- 3x more rewards
The lock applies to the entire address.
Block Reward Calculation Formula:
Price ^ (1/4) * 350 * 3
- Price = $0.001, reward = 187 BIP
- Price = $0.0025, reward = 235 BIP
- Price = $0.01, reward = 332 BIP
- Price = $0.10, reward = 590 BIP
- Price = $1, reward = 1050 BIP
The DAO and the Team will still be each receiving a 10-percent tax on the new BIPs mined and transaction fees collected. This tax will be applied to the base amount of block rewards, and not their threefold product. The validator fees will also be calculated using base rewards from stakes.
The test Toronet was launched on March 29. Everyone is welcome to join and try the new mechanics!