Behind the Network (BTN): July 29th, 2022
A breakdown of Burn-and-Mint Equilibrium and RNP-001 v2
Similar to the previous re-issue of RNP-000 as RNP-000v2, which included community feedback suggestions from the open comment period, RNP-001 has been re-released as RNP-001v2. In the spirit of growing community transparency, the Render Network team wanted to recap RNP-001v2, the significant changes made, what it could mean for the Render Network, and more:
RNP-001 (Burn-and-Mint Equilibrium): What it means and how it works
As the cryptocurrency landscape has matured, properly rewarding and incentivizing all stakeholders within a community has been at the forefront of projects as they evolve. One solution that has gained traction has been the “Burn-and-Mint Equilibrium” (BME) model of token emissions. Among projects like the Helium Network (HNT), BME models have seen a rise in popularity, but with any change there are positives and negatives, so let’s dive deeper into what BME actually means.
“Burn-and-Mint Equilibrium” describes both the process and the ideal state of the token model: in the ideal flow, a relative equilibrium state is maintained between tokens burned and tokens minted in a given marketplace. On a macro level, transactions within an ecosystem work the same way as they currently do on the Render Network: tokens (ex. RNDR Tokens) are exchanged by users for services/products (ex. Work rendered).
On the backend is where the change occurs. When tokens are tendered for a service, those tokens are ‘burned’ once the service has been completed, removing them from the market ecosystem. This burn provides an on-chain verification that the amount of tokens needed for the work provided was used and this information is then stored by the chain and used both to log payouts to the service providers/product creators, as well as provide additional rewards based on criteria met (as determined by the chain/project/community). These tokens are provided during a minting process, which occurs on an epoch-by-epoch basis.
As you can guess, in the ideal state, the amount of tokens burned will be paid out (and then some) to the service providers within the ecosystem, keeping the token supply at a state of equilibrium and encouraging more token flow throughout all parts of the ecosystem. For a more detailed breakdown on the benefits and drawbacks of this system, please read Petar Atanasovski’s piece, which dives into more detail.
Changes Made between RNP-001v1 and RNP-001v2
Similar to RNP-000, RNP-001 was put to the community for review a little over a month ago and received a large amount of feedback. Rather than move ahead for a community vote as is, the authors of RNP-001 decided to go back and make changes based on the community feedback, addressing some of the largest concerns the community had.
Chief among the concerns presented was a lack of clarity on the proposed emissions schedule that this new model would operate under. That has been cleared up, with a graph of the proposed emissions schedule (below) and a detailed spreadsheet outlining all of the numbers that went into this creation now available for the community and public. One point to make clear when reading into this: this information only covers half of the proposed model, the “Mint” of “Burn-and-Mint Equilibrium”. This does not cover the rate at which tokens would be burned, nor is it a comprehensive look at the potential effect on token value.
In addition to the visual breakdowns, RNP-001 v2 also further illuminates how the model is designed to properly reward active network participants, incentivize new user acquisition through token rewards, the potential for minor inflationary actions to the token being capped at 10%/year maximum, how in the ideal scenario the token value will accrue at a rate outpacing any inflation given burned amounts, and a breakdown of the exact periods of token emission that the model proposes.
Some general notes on the above chart and spreadsheet, from the author:
- “The specified schedule only defines a cap on the total circulating RNDR tokens, and does not account for the substantial amount of burn that will occur as a result of network activities.”
- “Please note that the emissions schedule outlined is subject to forthcoming governance procedures, and relies heavily on parameter tuning in order to reward actors in later stages of the network.”
What comes next?
From here, RNP-001v2 will be entering into a second period of community commentary for 1 week, after which it will enter into a community Snapshot vote to determine if it moves onto further technical and infrastructural review by the Render Network team. Look across Render Network socials for more announcements regarding the voting period, and any updates to the RNP-001v2.
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