Non-Premined Approach: Fee-Enabled Mining Solution
Synthchain WP (7)
It has been a relatively popular occurrence recently for developers of Blockchain and smart contracts to premine a portion of the token supply as a means of rewarding themselves or the foundations they represent in financial terms for the work undertaken at point of development. We are uncomfortable with the concept of premine for the reason that it tends to lead to a moral hazard effect, whereby the party who is the beneficiary of the premined tokens is usually excessively rewarded versus those holders who either mined the tokens or who purchase the tokens on an exchange. As a direct consequence of premine containing such a developer-biased value function, core developers who ought to be safeguarding the value of the projects they undertake to build frequently accept offers for their tokens on exchanges which are far below an acceptable market price for that of their customers, and this substantially undermines the utility token price over time.
Therefore, instead of premining the FUTR smart contract, we developed a fee schedule based on achievement of actual mining levels being achieved over time. Assuming 10 Levels of mining difficulty being achieved over 12 months, with an additional one-off charge for product development, the fee schedules we developed is as follows:
· Monthly Charge: 0.4% for first 12 Months
· Level Cost: 0.6% per Level 1–10
· Administrative Fee: 5%
These fees, which comprise a total of 15%, are removed at source upon mining of the FUTR in ETH tokens. We find this a more effective approach to rewarding the smart contract developers and the foundation than the premining alternative, principally because it incentivises us to mine and hold FUTR with the ETH received by way of the small fee payments charged instead of selling out the order books on exchange with the premined tokens.
