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  • Blockchain Oracle Design Patterns

    Amirmohammad Pasdar, Zhongli Dong, Young Choon Lee
    Original: https://arxiv.org/abs/2106.09349

    Why do we need oracles?

    Smart contracts and blockchain do not have access to the information outside of their networks (i.e., off-chain data). The blockchain in fact is an enclosed system where interactions are limited to the data available on it. Hence, it is still an open practical problem referred to as the “oracle problem” that is defined as how real-world data can be transferred into/from the blockchain.

    3c3b8026-9caa-4faf-9ee6-9dec9df3724d-image.png

    Voting- or reputation-based

    Voting relies on participants’ stakes for outcome finalization while reputation considers reputation in conjunction with authenticity proof mechanisms for data correctness and integrity.

    09778743-9db1-472f-ae40-c8c76c7ba531-image.png

    Data feed services

    respond to queries and may consult with different sources (or a single source) to fetch the required information and return it to the smart contracts.

    Computation oracles

    perform user-defined computation-intensive tasks off-chain, providing computing power to the blockchains

    Interface pattern

    • request-response when the data space is huge and can be implemented as on-chain smart contracts and initiated on-chain, or off-chain oracles for monitoring, retrieving, and returning data
    • publish-subscribe when the data is expected to change, e.g., RSS feeds, and
    • immediate read when the data is required for an immediate decision.

    Source - online, hardware or human

    Oracle sources can be chosen from (a) software oracles where data comes from online sources (e.g., online servers), (b) hardware oracles where data comes from the physical world (e.g., sensors), and © human oracles that are also responsible for verifying the authenticity of information and its translation into smart contracts.

    Direction - in or out

    Information direction means the way information flows; from/to external resources, e.g., a smart lock is an outbound oracle that once the payment is received at the address, unlocks the lock in the physical world.

    Trust model - centralised or decentralised (permissionless)

    Centralized oracles are efficient but they can be risky because a single entity provides information, controls the oracles, and a failure makes the contracts less resilient to vulnerabilities and attacks. In contrast, decentralized oracles (i.e., consensus-based oracles) increase the reliability of the information provided to the smart contracts by querying multiple resources. It should be noted that an oracle is considered decentralized if it is permissionless- users can join or leave, and every user has an equal privilege.

    Security

    Consider integrity, confidentiality, and availability

    Oracles are prone to be hacked; their process is vague, they can be bribed, and may not be stable [20]. Also, smart contracts lack direct network access, and the use of transport layer security (TLS) to fetch information while keeping data untampered during transmission is not enough Hence, mechanisms should exist to digitally sign the data for verification, and in this regard, oracles are neither tamper-resistant nor trustless.

    Oracles do not mainly hold security properties of native blockchain protocols, however, the correctness of the data can be attested through authenticity proof mechanisms, e.g., software-based [21, 22] or hardware-based approaches [6, 23].

    Voting-based

    To mitigate the issue in terms of the data correctness, users can form a set of voters and/or certifiers who are involved in the process of data correctness approval that is shown in Figure 3. Each voter and certifier put stakes on responses to verify the data. If the outcomes are matched, rewards are distributed between them, otherwise, they are penalized. It may also inherit the game theory concept Nash Equilibrium (e.g., [25–27]) defined as the determination of the optimal solution in a non-cooperative game in which each player does not have any incentive to alter the initial strategy.

    Drawbacks

    Lazy equilibrium- a form of verifier’s dilemma- in which voters always return the same answer to questions to secure profits without performing works for correctness.
    Sybil attacks: when attackers out-vote honest nodes on the network by creating multiple fake nodes to take over the network. A Sybil attacker can also employ mirroring that makes oracles to post individual responses based on a single data-source query.
    Freeloading is another issue and defined as a cheating oracle obtains and copies the response of another oracle without paying per-query fees. This issue threatens the response time of oracles but can be addressed with commit and reveal strategy; sending cryptographic commitments to the responses and in the next round revealing the responses.

    Prediction markets

    Prediction markets are platforms where financial shares in outcomes or facts are created, shared, and exchanged by participants. These platforms enable users to bet on anything, e.g., political forecasting, and receive compensation or become penalized if they are correct or wrong.

    They are resistant to manipulation but also are largely scalable, and can help with the aggregation and distribution of unlimited information. Data in the prediction markets depends on the number of participants to take part in because the more participants, the more data and consequently, the more effective the prediction markets are. Prediction markets can be based on distributed oracles, e.g., the Delphi-based prediction market called Omphalos [31], and markets should have a tradable market price at all times known as the market liquidity.

    Prediction markets can also be multi-dimensional markets in which users not only trade on the state probabilities but also the relationship between dimensions.

    Stake-based

    d520e150-0f4c-4ab0-816f-275bb8967aaf-image.png

    Astraea [25] is a general-purpose decentralized oracle running on the public ledger that relies on a voting-based game strategy. This framework employs monetary and staking fees which assure the system is immune to Sybil attacks. This oracle has entities that may have one or more roles such as submitters, voters, and certifiers who may freely join or exit the system. Boolean propositions are submitted to the system based upon paying a fee by submitters, and voters play a low-risk/low-reward game by placing a small stake of their confidence on the truth of random propositions. In contrast, certifiers play a high-risk/high-reward game by placing a large stake in the outcome of the selected voting and certification process.

    The outcome of voting and certification is the stakeweighted sum of votes or certifies, respectively, and due to the random nature, it is resistant to manipulation. In weighted votes, the weight (and reward) is affected by the level of the deposit made as the higher the deposit, the heavier the weight, and the higher rewards and penalties. If the outcome of voters and certifiers are matched, they are rewarded, otherwise, the players who take the opposite position are penalized. Hence, this oracle encourages players to place bet/vote on the propositions that have such a high level of confidence. The voting and certification deposit should be small or large relative to the total voting stake on the proposition as the former could not control the outcome and the latter could be penalized and could not tamper with the outcome.

    posted in Paper Party 🧻
  • RE: Economics and Math of Token Engineering and Defi [Lisa Tan]

    Bonding Curves

    Bonding curves are a way to dynamically set prices on assets with available in a limited quantity. Bonding curves set prices so each subsequent buyer will have to pay slightly more for it.

    A bonding curve is a curve (equation) that connects two variables. For example, token prices change when the token supply changes. This is determined by math, coded in a smart contract. This is not determined by other factors like trading in the secondary market.

    They are:
    Continuously liquid - can be exchanged (or mint/burnt) at any time
    Hard coded - according to a pre-set formula
    Executed from smart contracts - giving them immutability, trust and predictability

    For it to not be a Ponzi scheme, the tokens should allow users to claim on future cash-flow by the ecosystem. This could be earning via transaction fees or earning via future profits from the ecosystem.

    Uses

    Trading, fund-raising, curation markets

    Trading

    The most common use of bonding curves is with AMM (automated market makers) which is the main function of DEXs (decentralised exchanges).

    An AMM is an alternative to a stock exchange, in that it provides a real-time vehicle for exchanging assets. Stock exchanges use an order book model, involving a separate class of “market makers” who continually adjust their buy/sell offers while watching the market bids. In AMMs this is replaced by a store of actual assets ready to be exchanged (called a “liquidity pool”) and the exchange rate between the two assets is set using a bonding curve formula.

    See: https://finematics.com/bancor-v2-explained/

    Value comes from the ease of liquidity, availability of liquidity and network of other tokens to interact and trade with.

    Fund-raising

    Value comes from the entitlement to future cash flow. Other than value increasing from more participants joining the ecosystem, the value can also increase from revenue generated from the ecosystem.

    Price setting:

    -Raising funds using a buy and sell function (e.g. Aragon fundraising function)
    -Determining price in a closed economy (e.g. Nexus Mutual $NXM pricing)
    -Curation market using tokens as a signal

    Curation Markets

    “Each topic/meme/idea/goal has an associated token of value that is used to curate information inside it.” - Simon de la Rouviere

    With curation markets, tokens get allocated (or staked) on topics, which creates a collective signal. For example, if reddit upvotes required staking a token, or adding a restaurant to Tripadvisor required staking tokens which could be slashed if it wasn’t real. The value of the token creates a stronger incentive than a free expression, so can be designed to curate sets.

    Value comes from the entitlement to future cash flow or accurately signal market sentiments.

    Formulae

    Play with the various functions and parameters: http://bit.ly/bondingcurve

    Linear - favours early buyers too much
    Exponential - encourages early holders at the cost of volatility later
    Logarithmic - high volatility early but stability later
    3D curves - adding a z-axis for “productivity level, technology adoption curve, users in the system, active users as a fraction of total users, etc.”

    Augmented bonding curves - combines the general bonding curve with a funding pool, lock-up mechanism and inter-system feedback loops. Used to manage speculation and to align incentives to generate returns.

    Dynamic bonding curves - prices of tokens are determined by the proportion of token owned. Used to incentivise early adopters, punish freeloaders and encourage active participation in the ecosystem.

    Factors to consider

    ❏Incentivise early adopters
    ❏Price stabilisation at the end
    ❏Cost appreciation based on some factor of supply increasing (or productivity of platform or token)
    ❏Prevention of abuse or arbitrage
    ❏Growth of underlying product (s-curve, as a function z-axis)
    ❏Returns appropriately attractive across reasonable range or to focus more on early adopters

    Practical Questions to get Started
    ❏What function is the bonding curve used for? Decentralised exchange (instant liquidity), fundraising, curation market or something else?
    ❏How many users can the project attract and sustain? (At the introduction stage, at the maturity state)
    ❏Are both early and late adopters adequately incentivised to participate? Do you want them to be equally incentivised?
    ❏Can I attract the amount of capital needed to take the project to an adequate level of adoption?

    posted in Paper Party 🧻
  • RE: Economics and Math of Token Engineering and Defi [Lisa Tan]

    Token Design

    Mechanism design focuses on the rules of the system. Rules and functions can be coded into the token itself, and the token usually serves as a focal point and incentive.

    To work well, tokens need to:
    ●Define the token policy.
    ●Reward with financial incentives to encourage specific behaviours outlined in Mechanism Design.
    ●Design proper architecture of the token bearing in mind various aspects of the tokens including property rights, identity, payoffs.
    ●Mathematical proofs or models for necessary valuation, supply, etc.

    Financial incentives

    Platform activities
    a.Transaction fees
    b.Rewards for joining the network
    c.Discount tokens (discussed in Chapter 14)
    d.Referral links
    e.Reward policies beyond mining
     
    Returns on investment
    a.Expected returns to tokens owned: via staking or changes in value of underlying asset
    b.Arbitrage on exchange rates of token prices
    c.Price level volatility of the tokens
    d.Liquidity mechanisms: exchanges, liquidity function
    e.Riskiness of token
    Directing inflation to reward behaviour - eg. emissions towards users or stakers.
    This becomes an interesting play between tokens locked up in stake and inflation rate of the ecosystem.

    Instead of staking as a collateral, decentralised liquidity provider or as part of governance, Token Curated Registries (TCR) uses staking as a signal to rank preferences. Users are then rewarded for their participation via native tokens.

    As financial securities:

    the tokens could be an alternative to traditional financial assets and there is an opportunity cost to holding them.
    In DeFi, this “returns to stake” mechanism is paired with a governance utility function to add to the value accrual of the native token. As a result, it mixes two asset classes in traditional finance: equities and fixed income.

    Architecture

    6dba4152-cf24-4e74-aad1-f020c62e027b-image.png

    Currencies are a form of money with 3 main functions: a unit of account, medium of exchange and store of value.
     
    Added advantages that digital currencies has over physical currencies include, but are not limited to:
     
    Instantaneous transactions
    Automatic update of accounting ledger
    Cross-border transfer of ownership

    580618a9-09ff-4100-9d8f-bb740d25fce6-image.png

    Property rights
    a.Economics of property rights: claim rights, ownership rights, rights to participate in governance decision making process
    b.Harberger taxation
    c.Representation of an identity and the rights of the identity (i.e. person, art, digital representation of something in physical form)
     
    Distribution
    a.Allocation and lock-up of tokens in various time periods
    b.Conviction staked inflation funding: distribution of newly minted tokens as a function of number of tokens staked and duration of staking period

    Token economics

    Monetary policy
    a.Supply of tokens, expected growth of money supply
    b.Inflationary, dis-inflationary or deflationary tokens
    c.Distribution of token allocation
    d.Velocity: how often tokens change hands (if necessary)
    e.Exchange rate regime: fixed-exchange (pegged), intermediate-exchange, floating-exchange
    f.Zero-lower bound (ZLB) or effective-lower bound (ELB) for tokens with a monetary function
    g.Negative interest rates or currency with an expiry date for specific type of token objective function
    h.Reserve ratio or leverage given on collaterals

    Token valuation: variables that can allow tokens to have endogenous value
    a.Endogenous factors
    Backed by off-chain assets: fiat currency, gold assets, even the possibility of government bonds
    Bonding curve (discussed further in Chapter 11:
    Net present value
    Expected value of funds
    Dynamic price equilibrium
    Demand growth of platform or demand of tokens
    Savings function: Savings function depends on the (1) Growth rate of tokens
     
     (1) Growth rate of tokens
    a.[Automated] Fixed token inflation increases tokens every specific time period
    b.[Not automated] Token inflation with respect to tokens staked or locked-up
    (2) Expectations of future price level (or utility) of tokens
    c.E.g. holding the token longer increases the ranking of the token compared to newly minted tokens. This could result in shorter withdrawal times when the token is used to stake
    d.E.g. the exchange rate of native tokens increases over time due to growth of the ecosystem, which means that the token-dominated price of products decreases. There is an incentive to save the native token, since the expected future prices of products is lower
    Heterogeneity of user base: different risk appetites resulting in different demands of the token at different times, to smooth out the demand of tokens
    Platform productivity: expectation of platform’s growth demand, efficiency at coordinating participants and achieving objectives
     
     
    b.Market to dictate
    Dutch auction: Dutch auction works in a similar way as Vickrey-Clarke-Groves auction, where this method generates the greatest social welfare. This works for similar goods and goods are priced by the market. E.g. government bonds or the launch of a new token.
    Exchange rate of tokens to dollars reflects buyers’ willingness to buy in both a centralised order book way and a decentralised market maker method.
    Scarcity of tokens affecting pricing choices cause buyer competition that reveals consumer values
    Rational expectations of exchange rate in the next period
    Value to users: the ecosystem or network effects that add value to users
    Automated market maker using each token pool to dictate market prices, facilitated by arbitrage traders to achieve price equilibrium in various exchanges

    posted in Paper Party 🧻
  • RE: Economics and Math of Token Engineering and Defi [Lisa Tan]

    Maker DAO Case Study

    DAI is a stable-coin, loosely pegged to the USD.

    DAI is a lending protocol, which lends DAI based on an over-collatoralised loan. (eg you stake $1000 of ETH, and you can mint $500 in DAI) You can stake a small range of coins as collateral: LINK, BAT, USDC…

    MKR is the governance token for Maker DAO.

    2 token system, to separate supply/demand pressure on governance token from the stablecoin.

    1eb22c25-defe-4c41-92e0-fb84a889af48-image.png

    Uses of DAI:

    ●Lending protocols like Aave, Compound, Celsius. They use $DAI as $DAI has less volatility in pricing and allows for more stable lending and borrowing.
    ●Decentralised exchanges like Uniswap, Curve, Balancer. $DAI is a common token pegged to USD, which allows for easy trade and demand.
    ●Derivative platforms like Chai use MakerDAO’s $DAI Saving Rates (DSR) to represent a claim on deposit in the DSR. And Opyn to long or short $DAI.

    Users of MKR:

    MKR holders have a say in the levers that keep DAI pegged. They can influence what types of collateral are accepted, and how to adjust the dials that keep DAI trading near $1.

    Decision Making Protocol

    Linked to the resolution mechanism, $MKR holders can reach consensus on an active proposal. The proposal is then empowered by a smart contract to modify internal variables on the platform.

    MKR holders can make decisions on issues such as:
    ●Trigger an emergency shutdown
    ●Add new CDP type
    ●Modify existing CDP type
    ●Modify $DAI saving rate
    ●Choose a set of price oracles
    ●Choose a set of emergency oracles

    The following risk parameters are governed by $MKR holders:
    ●Debt ceiling
    ●Liquidity ratio
    ●Savings rate
    ●Liquidation penalty
    ●Auction duration
    ●Auction step size

    Resolution mechanisms

    Safety mechanisms
    There’s are automated safety mechanisms, one if CDP fails, and another emergency shutdown triggered by vote or oracle.

    DAI savings rate adjustments
    Prices deviate in the short run. To deal with this, the $DAI savings rate changes to reduce price instability. The $DAI savings rate is a global system parameter that affects how much $DAI holders can earn in return on their holding over time, and base borrowing costs for generating $DAI from CDPs.

    Proposal Contracts
    $MKR token holders will cast votes to elect a proposal as active. Proposals are executed once they have gained approval by $MKR voters. The changes are applied immediately to the internal governance variables, then the proposal contract wipes logic and is not re-used. Modifications are delayed for 24h until the proposal contract takes effect. This is to protect the platform against malicious governance proposals that harm the system.

    Non-financial incentives

    40c4fcd2-0442-4e1e-b311-1473f1847724-image.png

    Voting protocol

    1 .Time-limited poll - soft-check consensus
    2. Continuous approval voting - on-chain, changes variables:

    The policy of staked votes continuously challenges and reinforces the status quo of the system. Proposals are compared to the majority vote between the new desired proposal and the most recent successful proposal. Old proposals are deleted and wiped away, so changes to old successful proposals need to be submitted with changes. The system is continuously active, which requires continuous governance. New proposals can be submitted at any time by any $MKR token holder.

    Allocation mechanism

    Users mint DAI by depositing assets as collateral.

    Maker’s fee comes from when users close that position, burning their DAI to get their collateral back. They call this their stability fee.

    This is part of how the peg is maintained.

    This risk parameter is used to manage supply and demand for $DAI during negative growth periods. When the demand for $DAI decreases, the savings rate associated with minting new $DAI increases. More users will want to repay the CDP (debt) and $DAI is burned. This reduces the $DAI available and increases the prices of $DAI. When the fees increase, it is also more expensive to create new $DAI, which increases the prices of $DAI once again.
     
    The fee is calculated on a continuous basis using a continuous compound formula: . The collected fees are then burned.

    5153931c-b375-416b-83e9-534ef474df4b-image.png

    Bargaining protocol

    There are two types of auctions in MakerDAO when undergoing an emergency shutdown and liquidation:
    ●Debt auction: when CDP becomes under-collateralised, a reverse auction is created to sell $MKR for $DAI.
    ●Collateral auction: collateral from CDP is sold through an auction during liquidation. This is to ensure that the debt owned by the CDP is covered and to give the CDP owner the best price for their excess collateral refund.

    The liquidation protocol used to function like so:

    1. Defaulted CDP is closed by a Keeper. CDP assets are sent to a smart contract (LPC) and the CDP assets are for sale.
    2. Liquidation penalty AND stability fee are applied to the $DAI-dominated loan.
    3. LPC removes PETH collateral to satisfy the outstanding debt.
    4. CDP owners can remove their remaining collateral. They receive the value of the leftover collateral minus debt, stability fee and liquidation fee.
    5. The seized PETH is for sale.
    6. The $DAI earned from PETH sale is burned and removed from the supply.
    7. If there is insufficient $DAI from the sale, PETH is drawn from the pool and offered for sale. But this negatively impacts the ETH:PETH ratio.

    Since it’s now multi-collateral, the CDP assets are auctioned off:

    MakerDAO will buy collateral of a CDP and sell it in an automatic auction. The auction will determine the price of the CDP by market forces, since prices are unknown. The system will raise enough $DAI to cover the CDP debt. This is done by diluting the supply of $MKR tokens and sell it to bidders in an auction format.
     
    Collateral of the CDP is sold, where proceeds up to the CDP debt amount plus liquidation penalty will be used to buy $MKR and remove it from the supply. This counteracts the $MKR dilution in the previous stage.
     
    When enough $DAI is raised via the auction to cover the CDP debt and penalty, the auction switches to reverse auction to sell as little collateral as possible. Leftover collaterals will be returned to the original owners.

    Community info

    A set of trusted price oracles are chosen by $MKR voters. These provide real-time information about the prices of collateral assets.
     
    Maker’s oracle uses two feeds, Light Feed and Dark Feed50. Light Feed comes from raw data from DeFi protocols. Dark Feed are anonymous individuals. The goal is to have a 1:1 ratio. Any protocol can apply to be a Light Feed to provide information to the Maker system. The governance then provides Data Models and tooling to calculate prices of digital assets.

    Oracle governance:

    An oracle governance framework is a proposal to define the rights and responsibilities of the governance mechanism. It includes:
    ●Defining criteria for selecting new feeds
    ●Defining criteria for selecting new oracles
    ●Adding and removing feeds
    ●Adding and removing oracles
    ●Identifying performance metrics for feeds and oracles
    ●Selecting the oracle price sensitivity parameters
    ●Selecting the Oracle Security Module (OSM) delay parameter

    posted in Paper Party 🧻
  • RE: Economics and Math of Token Engineering and Defi [Lisa Tan]

    Maker DAO Case Study

    DAI is a stable-coin, loosely pegged to the USD.

    DAI is a lending protocol, which lends DAI based on an over-collatoralised loan. (eg you stake $1000 of ETH, and you can mint $500 in DAI) You can stake a small range of coins as collateral: LINK, BAT, USDC…

    MKR is the governance token for Maker DAO.

    2 token system, to separate supply/demand pressure on governance token from the stablecoin.

    1eb22c25-defe-4c41-92e0-fb84a889af48-image.png

    Uses of DAI:

    ●Lending protocols like Aave, Compound, Celsius. They use $DAI as $DAI has less volatility in pricing and allows for more stable lending and borrowing.
    ●Decentralised exchanges like Uniswap, Curve, Balancer. $DAI is a common token pegged to USD, which allows for easy trade and demand.
    ●Derivative platforms like Chai use MakerDAO’s $DAI Saving Rates (DSR) to represent a claim on deposit in the DSR. And Opyn to long or short $DAI.

    Users of MKR:

    MKR holders have a say in the levers that keep DAI pegged. They can influence what types of collateral are accepted, and how to adjust the dials that keep DAI trading near $1.

    Decision Making Protocol

    Linked to the resolution mechanism, $MKR holders can reach consensus on an active proposal. The proposal is then empowered by a smart contract to modify internal variables on the platform.

    MKR holders can make decisions on issues such as:
    ●Trigger an emergency shutdown
    ●Add new CDP type
    ●Modify existing CDP type
    ●Modify $DAI saving rate
    ●Choose a set of price oracles
    ●Choose a set of emergency oracles

    The following risk parameters are governed by $MKR holders:
    ●Debt ceiling
    ●Liquidity ratio
    ●Savings rate
    ●Liquidation penalty
    ●Auction duration
    ●Auction step size

    Resolution mechanisms

    Safety mechanisms
    There’s are automated safety mechanisms, one if CDP fails, and another emergency shutdown triggered by vote or oracle.

    DAI savings rate adjustments
    Prices deviate in the short run. To deal with this, the $DAI savings rate changes to reduce price instability. The $DAI savings rate is a global system parameter that affects how much $DAI holders can earn in return on their holding over time, and base borrowing costs for generating $DAI from CDPs.

    Proposal Contracts
    $MKR token holders will cast votes to elect a proposal as active. Proposals are executed once they have gained approval by $MKR voters. The changes are applied immediately to the internal governance variables, then the proposal contract wipes logic and is not re-used. Modifications are delayed for 24h until the proposal contract takes effect. This is to protect the platform against malicious governance proposals that harm the system.

    Non-financial incentives

    40c4fcd2-0442-4e1e-b311-1473f1847724-image.png

    Voting protocol

    1 .Time-limited poll - soft-check consensus
    2. Continuous approval voting - on-chain, changes variables:

    The policy of staked votes continuously challenges and reinforces the status quo of the system. Proposals are compared to the majority vote between the new desired proposal and the most recent successful proposal. Old proposals are deleted and wiped away, so changes to old successful proposals need to be submitted with changes. The system is continuously active, which requires continuous governance. New proposals can be submitted at any time by any $MKR token holder.

    Allocation mechanism

    posted in Paper Party 🧻
  • Eden Network - a Harberger taxed slot system to counter MEV

    https://edennetwork.io/EDEN_Network___Whitepaper___2021_07.pdf

    Network Objectives

    1. Protect users from malicious MEV (frontrunning, sandwich attacks, etc.) and reduce the negative externalities MEV has on Ethereum
    2. Improve earnings for block producers and increase consensus-level security against block reorganization
    3. Tokenize access to MEV, and redistribute value to network stakeholders

    How? Per EIP-1559:

    Block producers are also allowed to accept transaction bundles. Bundles are be included after any priority queue transactions, but before transactions from regular Ethereum/Eden users.

    Miners that participate in the Eden network and receive rewards for prioritising Eden transactions above all other transactions.

    There are a set number (3) of “slots”, each with a unique index (i.e. slot 0, slot 1, etc.) that indicates their position within blocks
    i. At any time, each slot is owned by exactly one account (the “slot tenant”), who has the right to set a “delegate address” for that slot.
    ii. Transactions to (Ethereum transaction field to) the delegate address will be included in the slot
    iii. The delegate address may be either an EOA (a regular account) or a smart contract
    address
    iv. Transactions submitted directly to the Eden Network relay that revert (fail) have the option of not being included in the block, saving the sender gas fees

    Users reserve these slots via a continuous auction mechanism known as a Harberger tax
    i. Slot tenants are taxed on a linear basis at some tax rate (3.3%
    ) per day on the initial principal of their stake. The taxed amount is burned, and the tenant loses their claim on the slot once their entire balance is depleted (301 days as per proposed tax rate)
    ii. Any user may become a slot tenant by staking a minimum of 110%1
    the EDEN staked by the existing slot tenant at the time the existing slot tenant bid for their slot
    iii. In the event that another user outbids the current slot tenant, the original slot tenant is immediately eligible to claim any untaxed balance they have in the smart contract (or increase their stake to reclaim the slot). Being outbid is the only mechanism to recover an untaxed balance
    iv. Once a slot tenant is outbid, they simply lose the slot instead of being pushed to the following slot

    Block Producer Reward Procedure
    For a given block producer that participated in Eden Network honestly over the course of an epoch, that block producer is “owed” some EDEN reward according to the emission schedule in proportion to their contribution to all produced Eden blocks. The exact calculation of owed balances is performed in a decentralized manner by a subgraph on The Graph.
    To remit payments, an admin address generates a Merkle tree of these balances and posts the root of the tree to a distributor contract. Each new distribution mints a non-transferable ERC-721 NFT owned by the distributor contract whose metadata is an IPFS URI to the full set of Merkle proofs. Any block producer (or their delegated claimer account) can present the Merkle proof for their address to the distributor to claim their rewards.

    Inflation/deflation mechanisms

    Since the Harberger tax implementation creates perpetual deflationary pressure on the circulating supply of EDEN, and the network mints new tokens at an exponentially decreasing rate, we can counteract the implied scarcity through a net emissions mechanism. In a future release of the
    protocol, the network will mint additional tokens equal to the minimum tokens burnt in a given day or 66,000 tokens as part of a net issuance mechanism.
    Monthly inflation is distributed as follows:

    1. Block producers: 60%
    2. Liquidity Providers: 30%
    3. EDEN Treasury: 10%
    posted in Paper Party 🧻
  • RE: test test test

    Hello @pitaj - were you having any trouble with the forum?

    posted in Things 🎀