On Dyme Token Allocation
Dana Love, PhD
dana@lifetoken.ai
Summary: This paper reviews the economic and incentive premises for the Dyme Protocol.
Introduction
Dyme’s eponymous native token aligns incentives across all network participants, including network operators, users, and holders.
Dyme’s economic and incentive model (or tokenomics model) has been designed to work hand-in-glove with Dyme’s novel governance module, economically neutral architecture, and the Ignite consensus algorithm. The Dyme proof-of-stake system takes full advantage of the Ignite consensus algorithm and participates in the Cosmos Interchain. Dyme’s Commission Fee Mechanism delivers a competitive mechanism for broad, easy access to blockspace. The Dyme Validator Incentive Mechanism sets aside a substantial amount of DYME to subsidize commission fees in the network’s early epochs. Dyme’s novel governance module shifts governance to a democratic footing from the outset.
Definitions
Blockchain: a digital ledger maintained by a set of validators that remains correct even if some of the validators are malicious. Each party stores a copy of the ledger on their computer and updates it according to the rules defined by the protocol when they receive blocks of transactions. The goal of blockchain technology is to make sure the ledger is correctly replicated, meaning that each honest party sees the same version of the ledger at any given moment.
BFT: Byzantine Fault-Tolerance. Byzantine faults within distributed systems are some of the most difficult to deal with. A Byzantine Fault-Tolerant consensus algorithm guarantees safety for up to a third of Byzantine, or malicious, actors.
Cosmos: A decentralized network of independent parallel blockchains, each powered by BFT consensus algorithms like Ignite consensus.
DAO: Decentralized Autonomous Organization
Dyme: When styled with typical capitalization, this refers to the Dyme Foundation and its various operating companies.
Dyme DAO: Decentralized Autonomous Organization created by Dyme.
DYME: When styled in all capital letters, this refers to the cryptocurrency of the Dyme DAO that can be held in the Dyme wallet.
Dyme Protocol: The cryptocurrency and associated business logic and governance are termed the Dyme Protocol.
Dyme wallet: wallet holding DYME.
Dyme Community Member, DCM, Dymeian: Members of the Dyme DAO community who hold at least one DYME in their Dyme Wallet.
Tokenomics: Derived from the words token and economics, is the study of the supply, distribution, utility, valuation, and incentives of cryptocurrencies.
Utility
Dyme intends to be the reserve cryptocurrency for distributed ledger and associated Web3 projects.
The Dyme tokenomics are designed to align incentives across all network participants, including network operators (e.g., validators or those token holders who validate transactions), users, and token holders. Dyme’s tokenomics defines the initial path for the DYME token. Whether DYME is used for staking, for paying commission fees, as a source of native on-chain liquidity, as an underpinning for a Web 3 project token, or as a claim on future governance, the DYME token enables a distributed and decentralized network like Dyme to flourish and grow.
Thus, understanding key elements of the DYME token is important to the community. To that end, this paper describes the token allocation structure contemplated for Dyme.
The chart below contains an approximate description of the DYME token allocation at Mainnet launch.
Maximum Supply, Circulating Supply, and Market Capitalization
The total supply of Dyme is capped at 50,000,000,000 (i.e., fifty billion) DYME.
A share of Dyme’s total supply will be liquid at mainnet launch, with the remaining tokens vesting over the coming years or distributed as future validator reward subsidies. Each DYME token is divisible to many decimal places.
The supply cap is set in the genesis.json file of the blockchain. This file location is also where the maximum threshold of blocks per year parameter is set.
Majority of Dyme Supply Issued To Community
We are excited to show that 60% of the total DYME is allocated to the Dyme community. Most of this allocation is managed by the Dyme Foundation, which is itself managed by the Dyme DAO.
Dyme Foundation
The Dyme Foundation will manage the Community (25.0% of total DYME) and Reserve (20.0% of total DYME) allocations. As a memberless foundation based in the Cayman Islands, the Dyme Foundation is governed by the Dyme community through Dyme’s novel governance module.
In Cosmos parlance, “smart contracts” and “modules” are equivalent enough to say that Dyme’s governance is run by smart contracts.
This means that Dymeians will directly and democratically control through on-chain proposal and voting the usage of these tokens, subject to the governance rules described in the code of Dyme’s novel governance module.
Dyme Incentives: Monetary Policy Meets Game Theory
Dyme’s Validator (15.0%) allocation is used to shift reward across time and compensate network operators (e.g., validators) for early adoption of Dyme. This will be managed by the core Dyme blockchain code, which we call Dyme’s Validator Incentive Mechanism.
The Validator allocation is skewed to provide favorable outcomes to early validators. This is both transparent and intentional. For the community to thrive, validators require incentives to join. Once the community is thriving, the sole incentive can be the commission fee.
In Cosmos parlance, the validator allocation is termed “inflation rate” in that it represents an increase to supply. The calculation uses the theoretical maximum block creation (the number of new blocks per year) which we previously described, and the inflation rate. Dyme intends to modulate the inflation rate over the lifespan of the validator allocation to provide the game theory-driven early adopter incentive described above.
The Validator Incentive Mechanism is expected to run for 16 epochs (roughly 16 years) before running out. Over that period, the digital assets in the validator pool will be exhausted, and the community is reasonably expected to be both mature and thriving.
The Launch Distribution: First Buyer, Big Buyers, and Small Buyers
Dyme intends to buck the trend of crypto tokens being held by a centralized few. While finding a few venture capitalists to make bulk purchases is an attractive way to raise funds, Dyme believes that crypto projects require a broad audience of interested, engaged users.
In addition to impairing the independence of decentralized autonomous organizations, governance tokens in the hands of a few resemble an oligarchy much more than a democracy.
So Dyme’s token allocation sets an equal number of DYME for “big buyers” and “small buyers.” A small buyer can only acquire a small amount of DYME, perhaps 50,000, in their Dyme wallet. To promote a decentralized Dyme from launch, small buyers will receive a price advantage over big buyers.
Big buyers will not be capped on the amount they purchase, subject to the maximum allocation.
Allocated but unused DYME in these categories would be used for a subsequent public sale. We hope to find exchanges to manage this process, but a series of smart contracts can be written to complete the task.
The first buyer is intended to be one entity or individual who receives the benefits of both big buyer (in the ability to make a large purchase) and small buyer (in the ability to receive greatly preferred pricing, even beyond that of the small buyer.)
Combined with the novel governance module intrinsic to Dyme, this process should put coins in the hands of many people. Dyme’s goal is to create a democratic blockchain for all stakeholders.
Closing
As designed, Dyme’s token allocation model aligns with Dyme’s broader tokenomics model, Dyme’s code, and Dyme’s governance framework.
The ultimate goal is for Dyme to serve Web3’s growing projects and their next billion users.
About Dana:
Dr. Dana Love is currently the CTO of Lifetoken Software. He guides the economic engine and blockchain development for Dyme. Love is a 32-year technology veteran who has been active in bitcoin and blockchain since 2011. From 2018–22 Dr. Love founded and led the blockchain payment platform Radpay, where he was recognized as a fintech innovator by both 500 Startups and the Arizona Commerce Authority. From 2012–18 Dana spearheaded four different blockchain ICOs and led different enterprise leadership roles. From 2007–12, as CEO of military contractor Bright Dawn, Dana led the development of complex real-time data systems, big data and data fusion projects, and a variety of digital and kinetic work for the IC, Defense, and civilian agencies. From 1995–2007, Love founded or served in leadership for various firms, including Cisco Investments-backed Metacloud and Warburg Pincus-backed Radnet, and led divisions of public companies, including GTE (now Verizon), Prosodie (now Cap Gemini), and ADC. Dana’s career began in civilian service to the U.S. government. Dana Love holds a doctorate in public policy economics from the University of Glasgow, is a Harvard Business School Baker Scholar, and graduated from the University of Richmond.
