An Update on Umbrella Network’s UMB Tokenomics
This post is a follow up to the Proposal for the UMB Token Staking, Rewards and Distribution issued on Nov 30, 2020. It incorporates the updates provided in Umbrella Network Updated Tokenomics issued on February 3, 2020. The goal is to provide a single post with all of the details provided in the original proposal along with the new updates.
EXECUTIVE SUMMARY
Umbrella is a community owned, layer 2 oracle currently built on Ethereum with active plans to run on multiple chains in the near future.
TOKEN UTILITY
The UMB token is a governance token that is enhanced by liquidity mining type features. The token is used in a Delegated Proof of Stake (DPoS) system that benefits from the active participation of the community and token holders. UMB Utility Token holders will 1) select Validator Nodes, 2) participate in governance and 3) stake tokens in consensus rounds.
By staking UMB tokens, the staker will receive rewards as well as a share of user fees paid into the system.
Validator Pools
By participating in Validator Pools, UMB holders can generate yield on their UMB holdings. They will receive a pro-rata share of fees paid by developers using the Umbrella Network — net of any direct costs.
Validator Nodes will open a vault into which UMB holders can stake their tokens. Validator Nodes will use these tokens during consensus rounds as part of their tokens at stake. Validator Nodes will participate in the sharing of user fees as long as they vote with the majority. Incorrect or false votes by a Validator Node will be penalized, forcing them to lose a portion of the tokens put at stake.
The Umbrella Foundation will receive 25% of User Fees. The proceeds will be used for the continued development of the network as well as operating costs. The balance of the tokens will be split on a pro-rata basis between Validator Nodes according to how many tokens were put at stake by each Validator Node. Validator Nodes that vote with the majority will receive a pro rata portion of 25% of the User Fees. Validator Nodes will then pass their portion of User Fees onto the participants in the Validator Pools on a pro-rata basis.
So if Umbrella receives 100 UMB in fees, 25 UMB will go to the Foundation, and 75 UMB will go to the Validators if they vote with the majority.
Rewards
Staked tokens will be rewarded with rUMB, Umbrella’s rewards token, on a 1:1 ratio. Rewards are triggered by achieving business milestones; alternatively, the rewards are triggered on a specified timeline if the business milestones are not yet achieved by the specified timeline. There will be 4 milestones which will most likely be based on the number of data requests made for Umbrella Oracle data.
For the first milestone round, Milestone 1, Umbrella will generate 111,872 rUMB₁ everyday after launch. rUMB₁ will be redeemable for 1 UMB when certain business milestones are reached or 1 year from the start of Milestone 1. Each day, a maximum of 223,744 rUMB₁ can be exchanged for UMB. This rUMB₁ for UMB exchange process will take 6 months or less.
The Second Milestone Round, Milestone 2, will mirror the first. The main difference is that rUMB₂ for Milestone 2 will be issued each day until business milestones are reached or 1 year from the start of Milestone 2. Once milestones are reached or time expires, up to 223,744 rUMB₂ will be redeemable for UMB. Same as for Milestone 1, this Milestone 2 rUMB₂ for UMB exchange process will take 6 months or less.
Milestones 3 and 4 will be similar except for using rUMB₃ and rUMB₄.
Future Medium posts will discuss details of Milestones 1–4.
TOKEN DISTRIBUTION SUMMARY
Umbrella Network originally set out to distribute 2/3 of the tokens directly to the community. However, the realities of the cost of development, legal, marketing and other costs made it necessary to increase the Private Sale (Early Contributors) allocation to 15%. As a result, we have adjusted the total percentage distributed to community to 60%. We are still quite proud to have kept the direct distribution at that type of level. And we are excited to be able to allocate 33% of all token supply to reward UMB token stakers.
The only pre-mined tokens were for the AMM and public sales pools. All other tokens are subject to vesting schedules which are outlined below.
Overall, 70% of tokens are subject to 4 year linear vesting. Below is the release schedule over the next 12 months of the circulating token supply.
COMMUNITY
Public Sale
A public sale was conducted on Polkastarter’s IDO platform on February 9, 2021 where 5 million tokens were sold in a fixed price swap. The price was $0.05 per $UMB token. Tokens were available immediately following the sale.
Node Fund
The Node Fund has an allocation of 50 million tokens which will be linearly distributed over a 4 year period. The Node Fund will have access to tokens only once they are minted and allocated to the Node Fund. The tokens are to be used for incentivizing and subsidizing nodes during the early stages of the Umbrella Network ecosystem. Unallocated tokens will be burned at the end of the 4 year term.
Partner Fund
The Partner Fund has an allocation of 50 million tokens which will be linearly distributed over a 4 year period. The Partner Fund will have access to tokens only once they are minted and allocated to the Partner Fund. The tokens are to be used for incentivizing and subsidizing partners during the early stages of the Umbrella Network ecosystem. Unallocated tokens will be burned at the end of the 4 year term.
Marketing & Airdrop
The Marketing & Airdrop fund is allocated 25 million tokens which will be utilized for marketing purposes to grow awareness and promote Umbrella Network. These tokens are unlocked over the first year. Airdrops have become quite a popular way to grow the token holder user base. Uniswap and 1INCH are probably some of the best known examples of engaging the community via large airdrops, where 1INCH targeted their competitor’s users, and Uniswap used it to reward their existing Liquidity Providers. Umbrella’s first use of this token pool was for the Bounce Finance NFT Lottery. Listed below are the token unlocks we have planned for marketing & airdrop activities
- Day 4: 2.5 million unlock
- Day 7, 11, 18, 25, 30: 2 million on each of those days, total unlock of 10 million
- Balance will be unlocked monthly over remaining 11 months
AMM / Liquidity Pool
We allocated 5 million tokens to provide liquidity in various markets and exchanges. 2.5 million tokens are currently locked into the Uniswap UMB/ETH AMM Pool. The balance of 2.5 million will sit in company reserves and could be deployed in the future to provide additional liquidity.
Token Rewards(rUMB)
Our largest allocation is towards rewards for our community of token holders. Over 163 million tokens, approximately 33%, of the total token supply is set aside for this.
On a daily basis, UMB token holders will be rewarded with rUMB tokens. rUMB is an ERC20 token that will be convertible 1:1 to UMB. rUMB conversion to UMB will commence on a future date based on reaching business milestones or a predetermined time. Once the milestone or predetermined time has been met, rUMB will be converted to UMB. The conversion will occur pro rata on a weekly basis over the timespan of 6 months (26 weekly increments).
On a daily basis, 111,872 rUMB tokens will be issued. For individual stakers, the tokens will be distributed on a pro-rata basis based on the total number of tokens staked.
FOUNDATION
Development Fund
The Development Fund has an allocation of 50 million tokens which will be used to continue the development of the Umbrella Network product and operate the business. Operations include business development, marketing, finance, HR, legal, and administration. This pool is unlocked linearly over 4 years, though funds do not need to be liquidated or otherwise used during that time period.
Future Sales
The Foundation has set aside 25 million tokens to be unlocked linearly over 4 years. These tokens are set aside in the event Umbrella decides to raise additional capital via private markets. Umbrella reserves the right, but may not end up doing so.
Team
The Team will be rewarded 10.3% of UMB tokens over 4 years to be linearly distributed. This is in recognition of the time, risk, and financial commitments made by the team during the early stages of the development of the foundation and product, and to incentivize continued commitment.
Early Contributors / Private Sale
Early Contributors provided financial assistance, technical consultation, strategic guidance and marketing support when Umbrella Network was merely an idea. For this commitment, they will be rewarded UMB tokens vesting linearly over 18 months.
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For any inquiries, please contact us at marketing@umb.network
