TL;DR
- VAL tokens were formerly called STK in some documents
- VAL tokens are a new token in the SORA economy that are used to reward validators
- The total supply of VAL will start at 100 million and go down over time, because VAL will be burned with every transaction on the SORA v2 network
- VAL token holders can group together in DAO structures and vote to allocate liquidity on Polkaswap; the liquidity they allocate comes from half the margin in the SORA token bonding curve
- VAL tokens will be distributed to 3 groups equally, in 3 stages: former v1 XOR holders (within September), ERC-20 XOR holders (at v2 network launch), and the upcoming SORA Parliament (after v2 network launch)
- What was formerly referred to as “v1 XOR” will completely go away and not exist anymore
Tokens in the SORA Ecosystem: A Quick Summary
The following tokens are in the SORA ecosystem:
XOR (天): Used for transaction fees (gas) on the SORA Network
- Elastic supply, managed by a token bonding curve
- Enables holders of a certain amount to become a citizen and member of the SORA Parliament
VAL (≚): Used to reward validators on the SORA Network
- 100 million initial supply; decreasing supply over time, with tokens burned with every SORA network transaction
- Elastic rewards to validators and stake nominators are given in VAL
- Holders receive a part of the XOR created by the token bonding curve to provide liquidity on Polkaswap. VAL holders can group together into DAOs to pool their liquidity and vote to provide liquidity to trading pairs on Polkaswap and receive PSWAP tokens as a reward
PSWAP: Used to reward liquidity providers on Polkaswap
- Decreasing supply, with tokens burned with every token swap on Polkaswap
- Governance and token details to be explained in a future article
Background: Moving Towards the SORA New Economic Order
On October 17, 2019, the SORA v1 network was launched, issuing approximately 1,618,033,988 XOR. In March of 2020, approximately 350,000 XOR were moved from the SORA v1 network to the Ethereum network and trading was started on Uniswap. The goal of the initial launch on Uniswap was to perform preliminary price discovery and build the SORA community by incorporating users of the Ethereum network. However, our technology has improved, giving us the possibility to shape a new and more ambitious type of crypto ecosystem. Whereas our medium-term goal remains generating value for our community, our analysis of the SORA economy has led us to embrace the long-term goal of realizing a supranational world economic system.
To realize this system, we proposed SORA: The New Economic Order, as a bold and profound upgrade to the SORA network and SORA tokenomics. The upgrade will be voted on at a future date to be ratified by the SORA community, but we feel that this is a system that can add value to humanity and we strongly support its adoption.
Whereas our previous article focused on the overall macroeconomic model for the SORA New Economic Order, in particular the XOR token, this article focuses on the details of the VAL validator reward token. To ensure the security of the SORA network, it is important to have solid economics behind the validator rewards, and based on our analysis and system dynamics simulations, we think we really nailed it.
SORAnomics Meets DeFi Agriculture
Polkadot and Kusama offer exciting opportunities for teams to readily experiment with new technology and economic models, by giving sovereignty to projects that control their own networks, while at the same time, providing tools for safe and efficient interoperability. SORA readily takes advantage of this by enabling applications like Polkaswap that will exist on the SORA network but can communicate and transfer value to and from many other networks. The Fearless Wallet, made by the same team that created SORA, will also push forward the interoperable future of digital assets, with the SORA network as an important hub for value creation and exchange.
To secure the network, large amounts of XOR must be locked up by validators and stake nominators in bonds that will be slashed if bad behavior is detected. This is great for creating economic incentives to keep funds from being stolen or payments from being disrupted by colluding validators, but it is also a huge opportunity cost for validators and stake nominators. Therefore, to compensate users who lock up large amounts of XOR, sufficiently large rewards should be given out. Therefore, this would ensure that the economic incentives are correctly in place for a more stable ecosystem.
Because Polkaswap will run on the SORA network and in addition to the Polkadot/Kusama parachains, bridges to other blockchain platforms will be created, large amounts of assets from many networks will be deposited into the SORA network and these assets must be properly secured by the validators. Therefore, the barrier to entry to become a validator must be necessarily high and the staking bonds should provide sufficient value so that they can be meaningfully slashed if validators are proven to be engaged in malicious activity.
To incentivize validators and stake nominators, VAL tokens will be distributed as a daily reward (at 13:37 JST), with rewards elastically adjusted based on the use of the SORA network.
VAL (≚): A Validator Reward Token
As XOR is becoming a token that has forward FX-rate guidance, a new token will be added to the ecosystem that captures value related to ecosystem growth and use. This token is called VAL and is a validator and staking reward token that incentivizes validators to join the SORA network, as well as nominators to nominate the validators with their XOR. Economically, this also adds the ability to determine long and short sentiments, as the market and price trends for VAL can reveal the preferences of market participants.
VAL will be free-floating in price and limited in supply. With each transaction in the SORA network, a small amount of VAL will be burnt, making the limited supply of VAL deflationary in nature.
Elastic Rewards
VAL tokens will be given to validators and nominators as a reward for staking. They are also a token for those who are bullish about the use, but not the price of XOR. Unlike validator/staking reward tokens on other blockchain platforms, VAL tokens will be deflationary by nature and also will adjust elastically with the use of the SORA network:
- Half of XOR used in SORA network transaction fees will be used to buy back and burn VAL tokens
- Half of the margin of the SORA token bonding curve primary market will go to VAL DAOs (described below), 10% of which is used to buy back and burn VAL tokens; the remaining 90% of the XOR tokens will be voted on by the VAL DAOs to allocate to liquidity pools on Polkaswap, nominate to validators, or subsidize citizenship for VAL DAO members
- New VAL tokens will be minted to reward validators and nominators for the SORA network; rewards start at 90% of VAL burned within a 24-hour period and decreases daily, down to a flatline of 35% after 5 years.
- 10% of the amount of VAL tokens burned within a 24-hour period will be minted every day and given to the SORA Parliament
Example: Let’s say the buyback and burn from transaction fees for a day resulted in 10,000 VAL being burned. If the daily reward is 80%, then 9,000 new VAL tokens will actually be minted, out of which 8,000 VAL will be given out proportionally across all the validators and nominators, and 1,000 VAL will be given to the SORA Parliament.
The “buyback and burn” concept is a key concept to understand. What it means is that XOR will be used to buy VAL on Polkaswap from the XOR-VAL liquidity pool. Then the bought VAL are just de-minted (burned), permanently reducing the supply.
Once a day, a percentage of the amount of VAL burned in the last 24 hours will be reminted, based on the reward amount. Because the reward amount decreases over time and is less than the amount burned, the supply of VAL will go down each day.
In addition to receiving half of the SORA network transaction fees, half of the margin of the SORA token bonding curve primary market will go to VAL holders, such that 10% will be used to buy back and burn VAL from Polkaswap and 90% will be used to provide liquidity to trading pairs on Polkaswap.
Liquidity Democracy
In addition to the buyback and burn of VAL tokens, VAL token holders will also be rewarded with PSWAP tokens for providing liquidity on Polkaswap. Half of the margin of the token bonding curve (XOR) will be given to VAL token holders to vote and decide how to use it. Because there are many VAL tokens to start with, each VAL token has the authority to allocate only a small fraction of the XOR from the token bonding curve. To make things more interesting, VAL token holders will be able to form DAO structures to pool their voting power together and allocate XOR to liquidity pools on Polkaswap in more interesting ways. Each DAO will be able to set rules for entering/exiting the DAO as well as rules about how to reach a consensus to allocate their XOR.
The PSWAP rewards from providing liquidity will be shared with each DAO that added the liquidity, so there is an incentive to provide liquidity for trading pairs that are expected to have large transaction volumes. Additionally, all VAL holders will benefit from added liquidity to Polkaswap because more liquidity will drive more users to the SORA network.
Additionally, VAL DAOs will also be able to vote to help subsidize citizenship bonds for their DAO members and to nominate XOR for validators, so that more VAL can be farmed through staking rewards. However, there will be limits on the amount of XOR available for uses other than liquidity provision on Polkaswap.
Initial VAL Distribution
VAL needs a large initial mintage because it is a deflationary token. This initial mintage will be 100 million and it is proposed to distribute the VAL tokens in three stages, as follows:
- The existing v1 XOR holders will receive 1/3 of the token supply. The distributed amounts will be rescaled from the initial v1 XOR total amount to 100 million and burn most of the v1 XOR tokens to fit within 1/3 of the VAL supply (approximately 33 million). These VAL tokens are planned to be distributed within September 2020.
- 1/3 of the token supply of VAL will be given to ERC-20 XOR token holders, with some given as an airdrop, and the rest allocated as incentives for giving liquidity, helping increase the reserves of the token bonding curve, and also other actions that will help the ecosystem, which is to be defined. These VAL tokens will be released on the SORA v2 mainnet at the v2 network launch.
- 1/3 of the VAL token supply will be given to the SORA Parliament to allocate through the democratic process for the common good. The Parliament is expected to be operational within 2021.
Levers of the VAL Economy
To adjust the demand for validators as needed to incentivize nodes to be run to secure the SORA Network, the deflation rate of VAL can be adjusted through governance by the SORA Parliament. In particular, the following parameters can be adjusted:
- Changing reward percentage of the burn
- Changing XOR pool percentage that is used for buyback and burn of VAL
We simulated the SORA v2 economic model’s causal loops using a stock-and-flow model created with the excellent BPTK-PY library. Our results show that about 1% of VAL tokens are expected to be burned on average per month, during the first year of system operation. Because most of these tokens will be reminted and distributed to validators and stake nominators, this is a significant reward amount to incentivize securing the network.
After the second year of operation, the net burn of the VAL token will increase, as should the use of the SORA network. Thus from the third year, it is expected for the value of the rewards distributed to validators and stake nominators to increase dramatically. The long-term time scale (years) of the incentive structure further reduces the likelihood of short-term attacks, and also gives a high incentive to kickstart validation and stake nomination from the very beginning.
Bringing VAL to the World
As next steps, we propose holding a referendum on :
- Distributing 1/3 of the VAL supply to v1 XOR holders and removing v1 XOR, as explained in this article
- Creating a bridge from the SORA v1 mainnet to Ethereum for VAL
- At the SORA v2 network mainnet launch, VAL will be distributed to ERC-20 XOR token holders and then the SORA Parliament; details on the distribution will be announced closer to the SORA v2 network launch
FAQ
How can I earn VAL?
- You can become a validator or nominate a validator with your XOR. These activities will be enabled at the SORA v2 launch.
What is the value of the VAL token? What is the use of the VAL token?
- The VAL token is used to reward and incentivize validators and stake nominators to secure the SORA network. The value will be determined by the market.
What does the deflationary model of VAL mean? Will the price go up? When can we expect the price to go up?
- The supply of VAL being deflationary means that the supply of VAL tokens decreases over time. Whether there is an effect on the market price or not is up to the market to decide.
What will the price of the VAL token be? Where can I buy it?
- If there is a demand to trade the VAL token, then it is likely that some users will list it on an exchange after the Ethereum bridge is opened.
What will happen to v1 XOR that was voted to be given to projects and the v1 XOR airdrops?
- We will distribute a portion of the v1 XOR to projects and airdrop to SORA v1 mainnet users before making the transition to VAL. For future project distributions, after the v2 launch, the SORA Parliament should review all previous votes and the progress of projects and decide whether or not to give XOR to the projects and how much.
Will there be any governance token?
- VAL token holders will be able to vote on what pairs on Polkaswap to provide liquidity to using their pool of XOR tokens received from the margin of the XOR token bonding curve. Overall governance in the SORA economy will be under the SORA Parliament, which is not expected to use Plutarchic token voting, but rather governance by multi-body sortition.
I heard that STK tokens will be airdropped. Will I get STK tokens?
- VAL tokens are STK tokens. The name was just changed.
Who are the v1 XOR holders?
- Currently, around 300 people who developed SORA, tested the app on the test network, did translation or other bounties, or received v1 XOR from someone. An additional 1000~2000 users will also get v1 XOR as airdrops from voting on projects.
How can XOR v1 holders access the bridge?
- There will be a convenient mobile interface built into the app, to be released within September 2020.
What will happen to the votes of XOR v1 holders?
- They will be used to vote on the VAL referendum, as well as the upcoming constitutional referendum. After the v2 launch, no new votes will be distributed as the governance structure will change.
How will the SORA Parliament decide on how to spend its VAL?
- There will be a democratic process in place where the Parliament can allocate its funds.
I am a XOR ERC-20 holder. What proportion of VAL tokens will I get? When? Can I get them with the ERC-20 bridge opened?
- 1/3 of VAL tokens are designated to be distributed to ERC-20 XOR holders at the SORA v2 network launch. Out of these, a minority will be airdropped and the rest will be given for doing some kind of actions, to be determined later.
What is the total supply of the VAL token?
- The initial supply is 100 million VAL.
