Introducing The Merge: Setting Ferrum Network up For Success

Ferrum will be merging the supplies of FRMx and FRM in order to ensure the success and longevity of the Ferrum Network.

Published in

FerrumNetwork

22 min readMar 3, 2023

A lot has changed by way of our ambitions since the days of providing solely Blockchain as a Service products and incubating projects through Ferrum Advisory Services. The team at Ferrum has been focusing their energy entirely on building out their interoperable L1 network.

Since Ferrum is evolving from a dApp based project to a network that will service a multitude of dApps, it has become abundantly clear that the FRM and FRMx tokenomics need to evolve as well in order to support the success of the network.

In this article, we’re going to be outlining Ferrum’s master plan for a FRMx/FRM merge, why this is in the best interest of the community and the future network, and the tokenomics and monetary policy that will support the Ferrum Network for years to come.

Understanding Why

The Polkadot and Kusama Dilemma

For a long time, we were quite certain that the 2 parachain approach was the way we were going to go. However, as time went on we started to realize that the 2 parachain approach was becoming less and less popular to newer projects building in the Dotsama ecosystem. We then asked ourselves, WHY have we been planning on opting for the 2 parachain approach ourselves? The two answers we kept coming back to were:

All of the early parachain projects were doing it so it seemed like this was the standard approach.
We have 2 tokens and this seemed like the logical way to maintain utility for FRMx.

These are obviously pretty underwhelming answers as to WHY you should build something. This prompted us to dive deeper into the pros and cons of the 2 parachain approach. Although, at the time, it seemed like a daunting hurdle that would be difficult to overcome, what we found has led us to possibly the single greatest blessing to happen for Ferrum in some time.

We learned that most folks on the inside of the Dotsama ecosystem are urging young projects to steer clear of the 2 parachain approach. Even the founder of Parity, Gavin Wood himself, in an interview with Space Monkeys Crypto Podcast at Polkadot Decoded Buenos Aires, mentioned his disapproval of the 2 parachain approach, when he says “one of the things that’s happening wasn’t something that I foresaw and it’s not something that I necessarily think is a good idea, is that teams often times launch 2 networks. They launch their parachain on Polkadot and a parachain on Kusama.”

There are a multitude of other reasons as to why we think it’s wise to focus on a single network.

It requires double the buy pressure to move the price of one token. Take the relationships between Moonriver/Moonbeam or Karura/Acala or Shiden/Astar for examples. Imagine what the valuation of their Polkadot chains would be if their community members didn’t have to decide between them and their Kusama counterparts. Currently, Ferrum faces this same problem with our two token system. Imagine where Ferrum could go if people didn’t have to decide between two tokens. Frankly, it confuses people who are new to the ecosystem. Beyond that, constantly seeking out ways to add utility for FRMx in order to maintain its value, is to ignore value in the form of utility that could’ve been added to FRM.
Having 2 parachains requires splitting your attention between the development and maintenance of 2 separate networks. In order to provide sufficient attention to each network, we would need to expend double the resources or risk seeing one network become abandoned or neglected. And even if one of these networks ends up receiving less attention than the other, it still serves as a drag on the one who is being prioritized.

Retaining Enough Reserve Tokens to Ensure the Success of the Network

Perhaps an even more important factor in our decision to focus on a single network was related to the limitations that exist due to the current token distribution of FRM and the opportunity that the current token distribution of FRMx presents us.

There’s an important distinction to be made when studying the way that dApps function compared to newly established networks. When evaluating a dApp, one may look to see how many of the tokens are in circulation relative to the total or max supply. This can give them an idea as to the inflation that the token may be subjected to in the future and how evenly tokens are distributed amongst the community. When evaluating a network on the other hand, especially one that has not garnered the attention of builders, users, and validators, one will want to understand how they intend on attracting such participants. If one notices that a network yet to experience meaningful adoption doesn’t have a healthy portion of tokens in their reserve relative to their pre-existing circulating supply they may wonder how they intend on incentivizing both user engagement and dev activity on the network.

Take Bitcoin for example. BTC are mined as a way to reward validators on the network. One day, when BTC’s total supply has been distributed, network validators will only receive rewards in transaction fees. However, if from the beginning, miners were relegated to solely receiving transaction fees as opposed to newly mined BTC, nobody would’ve ever participated in the network. In order for a network to gain adoption, there needs to be a large enough incentive for early adopters.

So how does this affect FRM?

FRM has a fantastic distribution for a utility token used to power dApps. However, it does not lend itself well to establishing a presence as a network. Considering that nearly 2/3 of FRM is already in circulation and Team tokens, funds reserved to help secure a parachain, and funds reserved for exchange liquidity have yet to be released for their respective purposes, that doesn’t leave much FRM to warrant folks wanting to participate in bolstering the effectiveness of the network by way of becoming Quantum Portal Miners (QPM) or Quantum Portal Validators (QPV). QPMs and QPVs would be reliant solely on transaction fees. This means that transaction fees would need to be extremely high to justify validators wanting to stake on the network, and extremely high transaction fees would in turn discourage users.

So how do you solve for this? THIS is where FRMx comes in. The circulating supply of FRMx is extremely low relative to its total supply. This presents us with an incredible opportunity. In order to increase the reserves of FRM to ensure the success of the network, we will be merging the supply of FRMx proportional to the current supply of FRM.

“By becoming a network, Ferrum is in some respects starting over. FRMx allows us to have the best of both worlds. We are able to absorb the supply by merging the two tokens thus making the valuation of the Ferrum ecosystem dependent on 1 token as opposed to 2, while at the same time, not having to start entirely from scratch. And we can do this while still honoring our commitments to existing stakeholders and creating additional utilities for the FRM token. Critically, this means we can focus all of our time, energy and resources on a single network rather than trying to juggle two networks and two tokens.”
— Nick Odio, Chief Growth Officer at Ferrum Network

Will Ferrum still be launching a parachain on Kusama?

Another factor in our decision to launch a single chain with a single token was through observing the first project to ever launch their network on Kusama initially and then, once thoroughly battle tested, migrated both the tech stack AND their token to Polkadot. This project was Kilt Protocol. To us, and many others in the Dotsama ecosystem, this was the best display of how Polkadot’s canary network, Kusama, was intended to be used, and very reminiscent of Gavin Wood’s quote from earlier in the article.

Ferrum intends to follow this same approach by launching the Ferrum Network on Kusama first. Only after thoroughly launching the various components of mainnet, tweaking and altering elements based on insights gleaned through our iterative build-measure-feedback process, and then stress testing everything, would we decide to migrate Ferrum Network AND FRM to Polkadot.

It’s important to note that Kusama parachains are much more inexpensive to secure meaning we likely won’t need to give up many tokens, if any, by way of a crowdloan. We can likely reserve much of the FRM for a crowdloan on Polkadot in the future. These are examples of decisions our Governance Committee can help us decide. The goal is to be so successful on Kusama, that we won’t need to conduct a crowdloan on Polkadot either!

How will The Merge Take Place?

Of course, the biggest consideration that we had when determining whether or not this was the best path forward, was the community. While we knew this was in the best interest of the network long term, we wanted to ensure that our existing community of both FRM and FRMx holders weren’t adversely affected.

Won’t this increase the Supply of FRM?

The first question you may be asking yourself is whether this will increase the supply of FRM. In short, the answer is yes. However, it’s important to remember that the valuation of the Ferrum ecosystem as a whole is currently derived from both FRM and FRMx. It is important to remember that this is a merge of two assets within the same ecosystem as opposed to the inflation of the overall value of the token economy. The supply of FRM will be increasing, however the value of FRMx is coming along with it, thus canceling out any potential impact of a supply increase. This will also have the positive effect of moving FRM into the top 1000 of tokens on CMC and Coingecko, which comes with a host of marketing benefits.

The Merge is designed to simplify Ferrum’s tokenomics, technology, roadmap, and value proposition to new and existing community members.

Here is a breakdown of how the Merge actually impacts the supply of FRM and current FRMx and cFRMx holders and stakers.

Total supply of FRM after the merge

The p formula is used to determine the total supply of FRM after the merge. The formula is:

p = (p1 + 𝚫p1 + s1 + 𝚫s1)

where:

p is the total supply of FRM after the merge
p1 is the current circulating supply of FRM
𝚫p1 is the change in circulating supply of FRM resulting from the merge
s1 is the non-circulating supply of FRM
𝚫s1 is the change in non-circulating supply of FRM resulting from the merge

The variables in the p formula represent the different components that make up the total supply of FRM after the Merge. The current circulating supply of FRM (p1) is added to the change in circulating supply of FRM resulting from the merge (𝚫p1), which gives the new circulating supply of FRM after the Merge. The non-circulating supply of FRM (s1) is added to the change in non-circulating supply of FRM resulting from the Merge (𝚫s1), which gives the new non-circulating supply of FRM after the Merge. These two values are then added together to give the total supply of FRM after the Merge (p).

The p formula is important because it ensures that the total supply of FRM after the Merge is accurate and includes the newly converted FRM resulting from the Merge. This is important for maintaining the integrity of the Ferrum ecosystem and ensuring that the Merge is fair for all existing holders of both tokens.

The Exchange

As of today, upon making this announcement, we have since pulled the liquidity from all FRMx LPs and taken a snapshot of the current prices and valuations of each token to ensure that the amount of newly minted FRM would be precisely proportional to how much FRMx is worth.

Amount of newly converted FRM tokens that a user will receive in exchange for their FRMx tokens

The x1 formula is used to calculate the amount of newly converted FRM tokens that a user will receive in exchange for their FRMx tokens. The formula is:

x1 = (ua * m) / n
where:

x1 is the amount of newly converted FRM tokens that the user will receive in exchange for their FRMx tokens
ua is the amount of FRMx or cFRMx tokens that the user currently holds
m is the market price of FRMx at the time of the snapshot
n is the market price of FRM at the time of the snapshot

Let’s assume that a user holds 2 FRMx tokens at the time of the snapshot. Since the market price of FRMx is $570.88 and the market price of FRM is $0.06635 to calculate the amount of newly converted FRM tokens that the user will receive in exchange for their FRMx tokens, we can plug the variables into the x1 formula:

x1 = (ua * m) / n
x1 = (2 * $570.88) / $0.06635
x1 = 17208.138658628485305 FRM

The user will receive approximately 17208.138658628485305 FRM tokens in exchange for their 2 FRMx tokens.

To find out how many FRM you have been airdropped in exchange for the amount of FRMx and cFRMx you were either holding or staking, be sure to check out the Merge Calculator!

Ferrum Joins the Arbitrum Ecosytem

Which Network will the merged FRM be minted?

Due to the fact that BEP20 FRM is a non upgradeable token contract, Ferrum is taking the opportunity of the Merge to continue its multichain endeavors. Layer 2s are all the rage right now and for good reason. We have done a considerable amount of due diligence on all of the major players and have concluded that Arbitrum is the best fit for the newly minted FRM supply. From a tech, ecosystem and community standpoint, Arbitrum ticks all of the boxes. All wallet addresses who hold FRMx or cFRMx on any network will be receiving their cFRM on Arbitrum!

Does this mean that Crucible will be live on Arbitrum?

Since cFRM will now exist on Arbitrum, that also means that Crucible is also now compatible with Arbitrum! Users who receive FRM in exchange for their FRMx will be able to immediately stake their token in the Crucible dashboard. We anticipate quite a lot of volume to be generated from transactions happening in the first days of Crucible being live on Arbitrum so make sure to get in early to take advantage of the early APRs.

Take your newly received FRM and stake it!

On Wednesday, March 15th at 16:00 UTC we will also be opening the following traditional staking pools where you can stake FRM and earn cFRM rewards. This will reduce both potential sell pressure and emissions of FRM upon the Merge. Countdown to Merge Staking and learn more here!

Supernova Pool — Stake your FRM for 12 months and receive 14% APR 5MM FRM Cap
Shockwave Pool — Stake your FRM for 9 months and receive 12% APR 8MM FRM Cap
Ignition Pool — Stake your FRM for 6 months and receive 10% APR 10MM FRM Cap
VIP GC Pool — Stake your FRM for 3 months and receive 65% APR
Anyone who holds or stakes a minimum of 420,000 FRM/cFRM will be whitelisted to join this pool. Existing and new GC members are invited!

Note: The APRs do not account for any sort of Crucible transaction fee. However, even if you were to opt for the highest Crucible fee and unwrap your cFRM, the APRs are still considerable. Of course, you can simply stake the cFRM rewards that you generate in Crucible!

Since staked FRM will not count toward Presale allocations, if the user does not want to stake their FRM they can also choose to:

Convert their FRM to cFRM and stake it in Crucible to earn sustainable APRs. Those who get in early will stand to earn the most from others who choose to stake!
In order to have your holdings count toward Presale and GC requirements, you must mint the FRM you receive for cFRM and stake cFRM in Crucible.
Hold it without staking to take advantage of cFRM/FRM arbitrage opportunities
Simply hold FRM

How will Governance Committee and Presale Holdings be Affected?

Since holding FRMx will no longer be a requirement to be a part of the GC or qualify for FAS presales, we will be increasing the FRM holding requirements for each.

Presales
The minimum requirement for Presale participation is now 27,500 cFRM staked in Crucible.

For more information on Presale holding requirements, check out this link:
https://ferrum.network/fas-incubator/

Governance Committee
Previously GC Members were required to hold either 250,000 cFRM / 20 cFRMx OR 750,000 cFRM / 10 cFRMx. Using the same logic as outlined above, the new requirements for the Governance Committee will be 420,000 cFRM staked in Crucible or FRM staked in Merge pools.

Important Note: Keep in mind that if you want your newly airdropped FRM tokens to qualify toward Presale allocations and/or Governance Committee holding requirements, they will need to be converted to cFRM and staked in Crucible.

How does this impact FRM tokenomics?

Ferrum’s original tokenomics were designed in 2019, which is an eternity in Web3, and frankly were not optimized for a network. In addition to the upcoming Ferrum Network mainnet, the Merge calls for necessary adjustments to be made.

If we remember earlier in the article, we discussed how the tokenomics of dApps and networks differ from one another. Because Ferrum is going from a product based solution approach to its own network, we had to ensure that the updated tokenomics reflected this and gave the network the best chance at succeeding over many years to come without compromising the resources necessary to support exponential growth. We strongly believe that these updated tokenomics put us in a position to achieve our long term vision and goals. To prove it, no more FRM will be released until mainnet is live. We want to ensure that the release of FRM is in line with our Monetary Policy and the goals of the network.

Token Categories

The new dedicated categories are simple. They are Treasury, Team, and ECOP (Employee Crypto Ownership Plan).

Team
One major change that was announced a while back pertains to the Ferrum team tokens that make up 10% of the Max Supply. The team is in it for the long haul and have agreed to increase the duration of the Team token vesting period significantly. Originally, the team had a 1-year cliff, meaning tokens would’ve started vesting 12 months after launch or in August of 2020. The ensuing release schedule was spread out over 3 years. Team tokens would’ve been entirely vested by August of 2023. In August 2020, the team decided to extend the lockup to 3 years and increase the release schedule from 24 to 36 months as well. This would’ve meant that Team tokens would’ve been fully vested by August of 2025…

Well, the Ferrum team has done it again. This time they’ve agreed to lock the Team tokens for an additional 12 months and extend the release schedule from 36 to 48 months! The release of these roughly 66 million tokens will not begin until August 2023, and they will not be fully vested until August of 2027! That’s an extra 2 years that Ferrum has added to the vesting for their own tokens.

Note: Most Web3 teams have between 6 and 12-month cliffs and release schedules lasting from 12 to 36 months. Ferrum now has a 48-month cliff followed by a linear release schedule lasting 48 months for a whopping total of 96 months of vesting!

Since Ferrum’s inception, the team has DOUBLED the amount of time they’re waiting to tap into their allocation of $FRM. That’s dedication and clear proof that there is much more to come from Ferrum…!

ECOP (Employee Crypto Ownership Plan)
As Web3 continues the brain drain from Web2 and other traditional sectors, organizational benefits for new employees are becoming more common. ECOP stands for “Employee Crypto Ownership Plan’’ and is structured very similarly to ESOP (employee stock ownership plan). We believe that a team whose goals are in line with the company makes for the most motivated and productive organization.

“The ability to enjoy rewards from the success of the company is a significant motivator candidate. ECOPs are quickly becoming one of the strongest elements in the recruitment toolkit to attract top-tier talent.” — Taha Abbasi, CSO at Ferrum Network

We have reserved 4% of the Max Supply to the ECOP category to ensure that Ferrum keeps attracting and retaining the best talent.

Treasury
The Treasury is where all network related items and expenses will be sourced from. This includes but is not limited to areas such as Exchange Liquidity & Market Making, Bridge Liquidity, Ecosystem, and Mainnet and Parachain Fund. Treasury tokens will remain in multi-sig safes and will be released via governance mechanisms as we continue to iron out a state of the art approach towards governance.

The Treasury will contain 7% of the Max Supply from the onset. However, more on how the Treasury will be funded by network activity will be discussed in the section surrounding Ferrum’s Monetary Policy later on in the article.

Ecosystem
This is a big one! To ensure that projects and developers looking to build on Ferrum Network will be incentivized to do so in the coming years, there will need to be tokens allocated from the Treasury to said projects. These tokens will be used for major future grant programs, hackathons, bug bounties, incentivized testnets, and other Ferrum-ecosystem growth oriented initiatives.

3% of the Max Supply will be added to the Treasury for this purpose.

Mainnet and Parachain Fund
To ensure the successful launch and evolution of the Ferrum Network, we want to remain open to secondary mainnet or node raises and/or parachain crowdloans.

4% of the Max Supply will be added to the Treasury for this purpose.

Exchange Liquidity & Market Making
Ferrum has done a great job of reaching different types of holders across multiple centralized and decentralized exchanges alike. While Ferrum’s main utilities have been limited to BSC thus far, Ferrum plans to take its products multichain and create a multichain token standard via the Ferrum mainnet. Therefore, you can expect to see utility across multiple networks as well as FRM listed on other DEXs in the future.

In terms of CEXs, we’re happy with being listed on Kucoin, Gate.io, and Ascendex. However, we’re hoping for other major tier 1 exchange listings in the not so distant future!

Bridge Liquidity
There is a chance that some Treasury tokens will go to support bridge liquidity. Perhaps FRM will serve as a sort of routing token for MultiSwap in the future. Bridge pools would need to exist on networks that MultiSwap is integrated with.

Multi-Sig Safe Addresses by Category

Treasury: 0xb5fe65261770dC8BAB499460aa2Ee2257Cf0Be81

Reserves: 0x8DC02b215D22fE5d7acBc5AB114f3810A7eF2b14

Team: 0x458Bbc356DD8d077364f3ad51A0Aa4e98Ddcf457

ECOP: 0xC2C486270C37f93a31df7231726Fb591B0EEC8d6

Other Important Addresses

FRM Contract Address:

Arbitrum — 0x9f6AbbF0Ba6B5bfa27f4deb6597CC6Ec20573FDA

BEP20 — 0xa719b8ab7ea7af0ddb4358719a34631bb79d15dc

Ethereum — 0xe5caef4af8780e59df925470b050fb23c43ca68c

Polygon — 0xd99baFe5031cC8B345cb2e8c80135991F12D7130

Avalanche — 0xE5CAeF4Af8780E59Df925470b050Fb23C43CA68C

cFRM Contract Address:
Arbitrum —0xe685d3CC0be48BD59082eDe30C3b64CbFc0326e2

BEP20 — 0xaf329a957653675613D0D98f49fc93326AeB36Fc

Crucible Stake Multi-Sig Gnosis Safe (Buyback Wallet):
0x13450275A5D13C83F4add8a4f641c07419518950

Burn Address:
0x0000000000000000000000000000000000000000

Ferrum’s Monetary Policy

A network’s monetary policy is one of the biggest differentiating factors when it comes to tokenomics that are designed for networks. If you remember earlier in the article there was a section regarding ‘retaining enough reserve tokens to ensure the success of the network’. Ferrum’s monetary policy is where this comes into play. Remember, in order for a network to gain adoption, there needs to be a large enough incentive for early adopters.

Expansion Periods

An expansion period is the amount of time that elapses between the times in which tokens are released from the reserves. You can also think of the reserves as the uncirculated supply. An expansion period will have a duration of 7 days. How many tokens are released via the Merge will determine how many tokens will be released every expansion period from the reserves (aka the uncirculated supply). What we do know is that we want FRM’s reserve to have a half life of around 4.5 years. That means that every 4.5 years, the remaining supply of the reserves will be cut in half. This approach accomplishes something similar to Bitcoin’s halvening only through PoS mechanisms.

For example, let’s say that 40% (roughly 265,000,000) of our total supply of tokens are in the reserve after the Merge takes place. If every expansion period, a total of 0.3% of those tokens are released, that means that the supply of the reserves will reach 132,500,000 in just under 4.5 years.

We have put a tremendous amount of thought into this to ensure a few things:

How Quantum Portal Miners (QPMs) and Quantum Portal Validators (QPVs) will be rewarded for ensuring the security, efficiency and overall effectiveness of the network
QPMs and QPVs will be incentivized to grow their stake in the network
How the Treasury can stay funded to ensure that operations can continue and both builders and users can be incentivized
How the distribution of these tokens for the aforementioned items can sustain equilibrium as it pertains to emissions

Rewarding QPMs and QPVs

If you remember earlier in the article we discussed how the folks ensuring the security of a network need to have an incentive. Early on in a network’s existence, transaction fees alone will not suffice as a rewards mechanism since transactions may be few and far between. With our reserves having a half life similar to that of Bitcoin, we believe that there will be enough of an incentive to reward early adopters of the network.

Incentivize QPMs and QPVs to Grow their Stake

One interesting note here is that block rewards generated each expansion period will potentially be distributed to QPMs and QPVs as cFRM. This means that QPMs and QPVs will be less inclined to sell their rewards as they would incur a fee. We will in fact, however, consider removing the unwrapping fee if they so choose to opt for our autocompounding feature that allows them to restake their rewards on the network.

Note: This would mean that at the very least, 2% of the uncirculated supply would automatically be distributed to cFRM stakers as each time block rewards are distributed tokens from that expansion period will be subjected to the 2% transfer fee. This will also add to Ferrum’s goals of maintaining a deflationary token economy as each time cFRM is transacted, tokens are burned.

Funding the Treasury

Up until now, Ferrum has taken a product oriented approach to the way we ran the business. Now, as we pivot, we need to take a network oriented approach to how the network runs itself. A million dollars a year in revenue from a suite of Blockchain as a Service products simply will not cut it when it comes to maintaining a network and incentivizing behavior on a network.

Therefore, we have decided that 20% of tokens released every expansion period will be allocated to the Treasury. As stated previously, Treasury tokens will be used to support subcategories such as Exchange Liquidity & Market Making, Bridge/MultiSwap Liquidity, Ecosystem, and Mainnet and Parachain Fund.

Emissions Breakdown

According to this article from September 2020, year 1 for Ferrum had the largest emission rate at 41.9%. This was primarily due to the vesting for the private and public sales. Year 2 saw a drastically reduced emission rate of 7.45%. Since then, the emissions rate for years 3 and 4 of 7.45% has stayed consistent.

We will start measuring yearly emissions from the moment the Merge is complete. Due to the necessity to boost the engagement on the soon-to-be newly launched network, there will be a slight uptick in emissions during the first year of the network’s lifespan.

We will know more regarding exactly how many tokens will be left in the reserve after the Merge is complete, but lets assume there is 40% of the max supply left in reserve post-Merge. If we release 0.3% of that supply every 7 days, we will have a year 1 emissions rate of around 12.35%. This yearly rate of emissions will reduce itself as the supply of the reserve fades.

Transaction Fees

Choosing how much transaction fees are to cost is another important consideration for any network. Transaction fees are mostly meant to cover the processing and long term storage cost of transactions. So there are a few items to consider when determining how to charge transaction fees.

The size of the transaction. The larger the transaction, the more resources are needed to store and process it.
A minimum payable fee. This fee needs to exist regardless of the size of the transaction. This is meant to prevent DDoS attacks by making such attacks prohibitively expensive and eliminating the possibility of an attacker generating millions of small transactions to flood and crash the system.

The parameters set in response to these items will ultimately be contingent on criteria such as current transaction volumes, hardware prices, and FRM valuation and should be subject to alteration by way of approving referenda via governance as a means of adapting to changes in the above criteria.

To calculate the fees generated in one year:

Assuming we have a fixed transaction fee of 0.1 FRM for each transaction.
We have 100,000 transactions per day initially.
The transaction volume is increasing at a rate of 20% per month.

To calculate the number of transactions in one year, we need to multiply the initial transaction volume by the number of days in a year:

Number of transactions in one year = 100,000 * 365 = 36,500,000

To calculate the fees generated in one year, we need to multiply the number of transactions in one year by the transaction fee:

Fees generated in one year = 36,500,000 * 0.01 = 3,650,000 FRM

However, the transaction volume is increasing at a rate of 20% per month. To account for this, we need to calculate the transaction volume for each month and then sum up the fees generated for each month. Here’s the formula to calculate the transaction volume for each month:

Transaction volume = 100,000 * (1 + 0.2)^n, where n is the number of months

To calculate the fees generated for each month, we need to multiply the transaction volume for that month by the transaction fee:

Fees generated for each month = Transaction volume * 0.1

We can then sum up the fees generated for each month to get the total fees generated in one year:

Total fees generated in one year = Fees generated for each month in month 1 + Fees generated for each month

How will Transaction Fees support QPMs, QPVs and the Treasury?

Transaction fees are also one of the mechanisms used to reward QPMs and QPVs as well as fund the Treasury. At the end of every expansion period 5% of the transaction fees generated on the network during said period will be burned. The rest will be distributed to a virtual pool along with the 0.3% of reserves. This pool will then be distributed with 80% going to QPMs and QPVs and the other 20% going to the Treasury.

Token Burns

FRM became a deflationary asset as part of the creation of the Ferrum Cross-Chain Token Bridge, which is of course evolving into our multi-chain swapping protocol, MultiSwap. We furthered this agenda with the advent of our latest DeFi 2.0 product, Crucible, which burns between 0.1–0.4% of all transacted volume of the wrapped reflection version of FRM, cFRM.

Not only does burning FRM make the asset more scarce, it also helps to combat emissions. These tokens have been effectively removed from the Total Supply!

It has long been the goal of the team to make FRM deflationary by way of the network as well. While assets like BTC are deflationary in nature by way of the Halvening, so will be FRM by way of our monetary expansion policy. As each year passes, the amount of FRM left in the Reserves will be less and less. However, we wanted to take it one step further and introduce regular burns through two other mechanisms:

Through transaction fees on the network
By using cFRM as the token through which monetary expansion takes place.

There will also be a major Burn Announcement coming soon! Be sure to stay tuned to our announcement channel.

In Conclusion

We realize that this is a major foundational step in Ferrum reaching its true potential and we have the utmost conviction that this is the best way to ensure the success of the network. Being a project that had existed long before the network and had a vast majority of tokens already in circulation or accounted for, we were really struggling to understand where we were going to find the tokens to ensure that network participants, whether builders or validators, were incentivized. As it turned out, the answer was right in front of us the whole time in FRMx. However, the fact that we were planning to launch two networks blinded us to this possibility. It wasn’t until we realized that the two network approach was not in anyone’s best interest that it became clear that the Merge WAS in everyone’s best interest. We couldn’t be more thrilled, and transparently, relieved that we were able to find a solution to this problem.

Furthermore, we are thrilled to bring our newly designed tokenomics and monetary policy to the community along with the newly released Whitepaper! We feel that these foundational elements are on par with the level of transparency that we strive to adhere to in each and every aspect at Ferrum. Most importantly however, we feel that the newly designed tokenomics,monetary policy, and Whitepaper will help set Ferrum Network up for success as we push forward toward mainnet and our vision of Interoperability 2.0!