Our Burns Explained
Unilateral rewards — one burn at a time.
Today we’d like to explain how the Burn Initiatives planned for the Sylo Smart Wallet and Network will operate.
But before we get started, let’s define for those new to this concept, just what we’re talking about when we use the term ‘burn’.
A ‘burn’ is a process that can only be undertaken by a cryptocurrency’s creator and involves permanently removing an amount of that cryptocurrency from circulation. Burning a token means lessening its supply.
A burn of any sort is a serious matter, and we’ve taken our time to consider different Burn initiatives for the Sylo Token (SYLO) to find what will best benefit the Sylo Network and its participants, as well as the users of the Sylo Smart Wallet.
We have settled on the two following Burn Initiatives that will be instigated. Here’s how they work…
BURN INITIATIVE 1 — NETWORK BASED BURNS
The first Burn Initiative we are launching is part of our system of probabilistic micropayments on the Sylo Network, centering around enabling trustless payments to nodes and preventing malicious users from taking advantage.
In layman’s terms, it works like this…
In order to purchase relay services on the Sylo Network, some SYLO must be put aside into escrow to pay for the communications relay, as well as some penalty escrow, as a guarantee of ‘good behaviour’.
Penalty escrow prevents a malicious sender from exploiting nodes for free relay, by preventing an attack known as front-running. Without penalty escrow, the attacker would be able to request some work from a node and then empty their payment escrow by impersonating a second node, “paying” their funds into another wallet that they control. Then, when the original node turns up later looking for payment, they will find that there is no money to pay them, leaving them out of pocket.
To prevent this, if a node tries to redeem a micropayment ticket and there’s no money in a user’s escrow to pay them, the penalty escrow balance will get burned. This means that an attacker attempting front-running will still lose funds, and it makes paying for relay the least costly decision for the sender, whether they are honest or not.
More detail on how micropayment tickets work can be found here.
Overall, implementing a Burn Initiative in this situation will both improve the quality of the Sylo Network’s participants and reward those who hold SYLO.
BURN INITIATIVE 2 — SMART WALLET BASED BURNS
The following Burn Initiative focuses on closer connecting usage within the Sylo Smart Wallet to the Sylo Token, and centres around burning the profits earned from running other blockchains’ nodes.
As a result we will be further integrating the token into the Smart Wallet experience and realising certain revenue streams to buy back and burn tokens over time.
We will announce new initiatives within this space as they come up, but will be starting with the profits from the Tezos Baker which is accessed via the Smart Wallet. One characteristic of this effort is that we want to provide a way for our community to accelerate these initiatives, so the more these features are used, the more impact this mechanic will have.
Being a multichain non-custodial wallet, it makes sense for the Sylo app to run other network’s nodes that we want to incorporate, and using the profits generated by running these nodes is a great way to reward and incentivise our users and token holders. Beginning in Q1 2022, we will perform these burns quarterly.
So if you’re a Sylo Token holder, this means that every time you use the Earning features in your Sylo Smart Wallet, you’re not only earning rewards but also contributing to decreasing the supply of SYLO — it’s a win-win.
We had also previously considered (and then decided against) the following Burn Initiative:
‘PHASE 3 REBALANCE OF SYLO NODES — BURN AS PUNISHMENT’
The operability and ultimate success of a decentralised, distributed infrastructure such as the Sylo Network relies upon the consistent high performance and ‘good behaviour’ of its nodes.
Therefore, we know that in preparation to roll out Phase 3 (full incentivisation) of the Sylo Network Incentivisation Plan, once Phase 2 is completed, there will need to be a reassessment of all nodes’ performance in order to progress to the next stage with solid, reliable providers in place to support the scaling network.
As a result of this reassessment of all nodes’ conduct, we had planned to confiscate some of the staked SYLO from underperforming nodes or those who had shown ‘bad behaviour’ and burn those tokens as a method to simultaneously incentivise/motivate those node operators to become more reliable, whilst rewarding the community as a whole.
Now those of you who have had a good read through our recently released Documentation will be aware that we have adjusted this approach.
Instead, we decided that what would better benefit the Sylo Network and all node operators displaying ‘good behaviour’ is in fact, a redistribution.
Through this new redistribution method, the stake in escrow belonging to bad performing nodes will be redistributed to well performing nodes, ensuring a higher quality of service is in place for users and to support the Sylo Network.
We’re pleased to have reached this solution as we think it better aligns with our goals for the success of the project. More information about this new stake redistribution method can be found here.
Overall, we see the addition of the Burn Initiatives as yet more ways for our human-first, community-driven projects to support each other, behave well, and help advance the Sylo Network, while receiving evenly spread rewards and value.
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Got questions about the Burn Initiatives, Sylo Network or Sylo Smart Wallet? Reach out to a member of our team by DM now.
Experience the Sylo Smart Wallet now by downloading from the Google Play or Apple App stores.
For further announcements, follow Sylo on Twitter, Telegram or visit www.sylo.io
