In this article, we want to bust a few myths about mining rewards and token issuance on the Nervos CKB network.
Token-economics is a crucial aspect of every blockchain and cryptocurrency project. It provides a clear definition of the type of token, its use cases, the distribution of tokens, and scheduled issuance over time. As an organization we are committed to maintaining transparency with our investors, users, and miners.
What is Token Issuance Schedule?
The token issuance schedule refers to the number of cryptocurrency tokens to be issued in a fixed period of time. In terms of Bitcoin, which runs on the proof-of-work hash function SHA256, the total number of bitcoins is capped at 21 million. And the mining reward is halved every 210,000 blocks, which takes approximately 4 years to happen. So, only a predefined number of BTC can be mined over every four-year period until a total of 21 million Bitcoins are mined.
Although the Eaglesong hash function largely differs from SHA256, Nervos network also follows the same method for rewarding its miners.
Miner Compensation
In Nervos CKB, miners are compensated with both block rewards and transaction fees. They receive all of the base issuance reward and a portion of secondary issuance. As base issuance moves toward 0, miners will still receive state rent income independent of transaction demand, but tied to the occupation of the blockchain and adoption of the common knowledge base.
Impact of ASICs
The Nervos exclusive proof-of-work hash function Eaglesong was developed to lower the barrier to mining CKByte, while still keeping the security of the network intact. While most blockchain networks have grown highly demanding over time, we want our miners to generate high profits with low-cost mining rigs and lower electricity costs. As always, we have stayed neutral about ASIC mining rigs.
We know many of our miners are concerned about ASIC miners joining the network, based on the assumption that they could mine CKByte tokens at a faster rate, and potentially dump the tokens, causing CKByte’s price to drop drastically. This is where our structured token issuance schedule comes into play.
CKByte Token Issuance Schedule
The issuance schedule for CKBytes is divided into two parts
- Base issuance
- Secondary Issuance
Base Issuance
Base issuance of CKByte refers to the total number of tokens that will ever be mined on the Nervos network. Of the total 33.6 billion CKBytes, miners would mine a total of 16.8 billion tokens in the first four years. Nothing more. In the following four years, the total mining rewards would be automatically reduced to 8.4 billion CKBytes and so on.
This process will follow until 0 issuance is reached.
Secondary issuance
Every year, a total of 1.344 billion CKBytes would be issued and distributed among miners, Nervos DAO depositors, and a treasury fund. As defined under our positioning paper, the secondary issuance is designed to impose an opportunity cost for state storage occupation. And once the base issuance reaches zero, there will only be a fixed secondary issuance of 1.344 billion every year.
The DAO functions as an ‘inflation shelter’ against the effects of the secondary issuance. Since mainnet launch, over 4.2 Billion CKBytes have been locked in the Nervos DAO. Keep reading to learn more about the DAO
