Brief on Sentinel’s New Mainnet Token Economics
More information about the utility of Sentinel will be released after mainnet, the next paper will be focused on higher-level economic abstractions that will bring additional features to the network.
This article provides a brief overview of the Sentinel Network’s token economics. Once the network goes live, Sentinel will be on Cosmos’s DPOS based network with staking/inflation reward. It is important that all the different users in the network are well versed with the economic structure so that they can understand how to best situate themselves to gain the most value from their stake and participation in the network. The token economics structure for Sentinel is inspired by Akash Network’s economic model and Sentinel would like to commend Akash network for the exceptional research and implementation that they have done in this area.
Unlike traditional POS networks, where the inflation is perpetual and the max supply is uncapped, the Sentinel Network has a decreasing inflation reward schedule as well as a fixed maximum token supply.
In DPOS networks such as Sentinel, the network is only as resilient as the strength of its holders/stakers. The lower the overall number of a network’s tokens are staked, the higher the surface for attacks like double spends, and parallel chains/forks to occur. While this will always be a viable attack vector for all networks with both small and large market caps, the smaller networks are the most susceptible especially in their early years of growth as the cost to attack them is much lower in their initial stages.
In order to make the Sentinel Network as robust as possible in its earlier years of rapid growth, Sentinel will be employing a halving-like model during the first period (which bitcoin demonstrated is the best way to bootstrap networks) to incentivize staking while also rewarding early adopters and community members with greater rewards. The second period will employ an exponentially decaying emission curve, similar to what you can see in Akash Network, the assumption is that Sentinel Network will have grown substantially bigger in size by Period 2, where the network’s token value can accrue value by increased scarcity and demand/revenue sharing from node hosts.
Period 1: Target Monthly Inflation Rate
The inflation of the Sentinel token ($DVPN) will be divided into epochs of 6 months. After each epoch, the inflation rate decreases by 6% in halving-like fashion. The initial inflation rate will be 49% on genesis (a monthly rate of 4.0833% in the first epoch). This model will be adopted until the blockchain validation rewards reach a 13% annualized inflation. From that point onwards, inflation will proceed in a constant decay model (on a per-block basis) approaching 0, until the Sentinel chain maximum hard cap of 48 billion tokens.
Token Supply Curve Visualized
The red and orange lines assume 100% and 70% staked, respectively.
Monthly Inflation Rate Visualized::
Tiered inflation rate
The next planned significant upgrade after the mainnet launch will be focused on implementing a tiered inflation rate depending on a variable lock rate from 28 days to 12 months.
As delegators lock their tokens for more time, their reward will increase; this is a plan to incentivize long-term supporters of the network and create minor variance in network security, the base rate will be ⅓ of the maximum rate at all times and increase will be linear.
Minimum delegators fee
To avoid any validators gaining an unfair initial advantage at the start of the network Sentinel is setting a minimum of 0.25% validator fee.
Unbonding time
DVPN tokens will have an unbonding time of 28 days.
DVPN fees
dVPN node hosts will be able to accept any token as payment after IBC is enabled.
Maximum validators
The Sentinel Network will have a maximum number of 50 validators on genesis to be increased through governance as Tendermint and Cosmos SDK matures.
Foundation delegations
The Foundation will delegate to validators with a maximum commission of 5%.
Node host subsidy
Community based efforts will be incentivized from the community pool which will take 2% of block rewards. More details on the governance structure of the distribution of these rewards will be shared.
More information about the utility of Sentinel will be released after mainnet, the next paper will be focused on higher-level economic abstractions that will bring additional features to the network.
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