Jun 10, 2019
SEED multi-chain peg and rewards
Since announcing its expansion into new blockchains, Sesameseed has shared some details on its updated participation rewards model. This article will expand on the updates to the reward model and the SEED peg to help the community better understand the previously released information.
- As of May 1, 2019 Sesameseed has been earning more rewards daily from node operation than SEED rewards distributed. The surplus amount of rewards is used to increase the pegged value of SEED.
- More participation (e.g.: voting, staking) for Sesameseed across all blockchains means more rewards are earned, increasing the pegged value at an accelerated rate.
- The reduction in daily SEED rewards to participants is offset by the constantly-increasing value of all SEED as the pegged value rises on all the represented blockchains.
- Using conservative estimates, someone participating with 100K TRX will earn an average of 45 TRX equivalent a week. By the 12th week, they will be earning more TRX equivalent per week than with the old model. These results can vary depending on total participation (votes, staking) for Sesameseed.
- To remain transparent on SEED pegging and reward distribution and provide overall health of SEED tokenomics, Sesameseed will publish a quarterly transparency report.
SEED Peg
SEED is a pegged token. The pegged value represents a guaranteed amount of coins or tokens for which each SEED can be exchanged. It is important to note this is distinct from the market value of SEED, which is determined by external market forces outside of the control of Sesameseed. From its inception, the pegged value of SEED has been set to 1 TRX. In other words, for every 1 TRX earned by Sesameseed, 1 SEED token was created, and that token was backed by and redeemable for 1 TRX.
The current pegged value is determined by calculating the sum of all node rewards held by Sesameseed and dividing by the circulating supply of SEED.
This value is managed so Sesameseed will honor its promise that the pegged value of SEED can only rise and will never go lower than 1 TRX per 1 SEED. When Sesameseed earns more rewards than the amount of SEED tokens it distributes, the surplus amount of rewards increases the pegged value. This allows for each SEED to be exchanged for more than 1 TRX. The surplus amount can increase daily based on the node rewards of all represented blockchains. To guarantee the pegged value of SEED to TRX increases, a minimum of 10% of all node rewards will contribute to the pegged value every day. This contribution to the pegged value can be much larger as additional nodes are added or node rewards increase.
When Sesameseed earns more rewards than the amount of SEED tokens it distributes, the surplus amount of rewards increases the pegged value.
For example, if Sesameseed earns 150K TRX in one day, 100K SEED would be distributed as rewards and the remaining 50K TRX (33%) would be utilized to increase the peg. This demonstrates how increased participation by the community across all represented blockchains would increase the pegged value at a faster rate, and vice versa.
To illustrate differently, if the average daily amount of rewards earned is 125K TRX, and 100K SEED is distributed as rewards, the extra 25K TRX would increase the pegged value of SEED to TRX as follows:
In these examples, the rate creates a curve based on the total participation on the TRON blockchain, increasing the TRX pegged value faster if the node earns more rewards and slower if the node earns less. This is further visualized in the graph below, which compares the difference in the rate the pegged value of SEED:TRX increases when total rewards earned per day are 125K TRX versus 150K TRX.
Reduction in SEED distributed as Daily Rewards
A result of restricting the amount of SEED distributed is the reduction of SEED issued as a daily reward to the individual participant. However, this short-term reduction is offset by the increasing pegged value of prior and future earned SEED, which exerts its effect over time. Since the pegged value increases faster when Sesameseed earns more rewards, increased participation will hasten this effect. Representation on multiple blockchains will also have a direct effect on accelerating the pegged value.
Sesameseed is currently represented on another blockchain, the Ontology blockchain. By operating a node on Ontology, Sesameseed earns rewards which enter into the calculation for the pegged value. This means each SEED token will be backed by both TRX and Ontology tokens. The sum total of rewards need to be factored in when adjusting for the rate of daily rewards as a result of the new SEED model, as shown in the figure below.
Using voting data from April 2019 when distribution was not limited to 100K SEED, someone participating (freezing and voting on TRON) with 100K TRX earned on average 52 SEED per week, which would have been equal to 52 TRX. Once daily distribution was restricted to 100K SEED or less, that average would have dropped to 43 SEED a week. By the end of that first week, each of those SEED tokens was worth 1.006 TRX, as well as 0.008 ONG. In other words, by the end of the first week, someone participating with 100K TRX earned on average 44.5 TRX equivalent a week, and by the 12th week will be earning more TRX equivalent per week (52.59) than with the old model. This effect can be seen in the table below, which uses very conservative projected rates for both the TRX and Ontology pegs.
As illustrated, the short-term reduction in daily rewards is eventually recovered as the pegged value increases. The rate at which the daily rewards recover and even outperform the old SEED model is accelerated exponentially by increased node rewards earned through participation and by each new blockchain that Sesameseed joins.
Transparency and accountability
The daily increase in the pegged value of SEED is merely one guiding principle of the new tokenomics model Sesameseed has introduced. A series of updates is also planned to be released in the coming weeks, which will delve into other principles in much greater detail. These updates will include topics such as the mechanism of the Ontology pegged value, and how SEED participates and is issued across multiple blockchains. Sesameseed will be regularly examining several Key Performance Indicators (KPI) and making adjustments to the SEED economy as needed to maintain these guiding principles. This analysis will be published in a quarterly report, which will be readily available to the community.
