Reward Mechanism: StableYield+

The Stable Yield mechanism is summarized here. The contract architecture, in particular how the Stable Yield issuance works in concert with ‘conventional’ issuance, is here.

Overview

The Threshold Network will offer multiple cryptographic services (‘applications’) via a common work token (T). The high-level economic dynamics of each application are tied together by the sharing of staked collateral, but other mechanisms, including the eligibility for and calculation of token rewards – will exist on a per-application basis.

This snapshot is for the Threshold Network’s primary rewards mechanism, which includes a novel Stable Yield component that will apply only to tBTCv2 at genesis. That is, stakers who provide the tBTCv2 service will benefit from a minimum target yield, regardless of other staker participation. The other applications (PRE, Random Beacon, etc.) will distribute a portion of the total rewards issued to stakers, but the sum of tokens a PRE staker periodically receives depends on the staking rate (a conventional design). 

Since this proposal contains novel and conventional components, we are calling it StableYield+.

To understand the reasoning behind the Stable Yield Mechanism, please read the full forum proposal and supporting research.

The key parameters at network genesis are the following:

(1) Maximum overall annual nominal inflation of 10%, across all applications
 (2) Stable Yield staking rate threshold of 30% (above which the Stable Yield mechanism kicks in)
 (3) Stable Yield anti-dilution constant of 0.5

For (1), note that the overall nominal inflation (10%) will be shared by all the applications that are operational at genesis. The split of allocated issuance to each application will be decided by the multi-sig council. The council will aim to reassess this on a quarterly basis (4x per year), but may step in more regularly if required.

Note also that parameters (2) & (3) exist to regulate the threshold at which low participation yields rise above the stable figure, and to what extent they rise, respectively. The anti-dilution constant is simply a moderator on the nominal inflation when low participation makes yields extremely high regardless.

To make this clearer, let’s work through an example with dummy figures: ⁃ Network launches with an initial token supply of 10bn. ⁃ 10% top-line nominal inflation implies minting 250m tokens for the first quarter (2.5%). ⁃ This 250m is initially split between tBTCv2 (200m) and PRE (50m). ⁃ For tBTCv2, the Stable Yield mechanism targets a minimum yield of 2% per quarter (8% APY). Hence, if the average staking rate is 50%, then 100m of the 200m are distributed (100m / 10bn / 50% * 4 = 8%). The other 100m are held for next quarter. If the staking rate were 80%, then 160m tokens of the 200m would be distributed (160m / 10bn / 80% * 4 = 8%). The sum of tokens left over is taken into account by the Multi-sig council next quarter to ensure the 8% target yield is maintained.
⁃ For PRE, there is no target yield. If the staking rate is 50%, then the effective annual yield is 50m / 10bn / 50% *4 = 4%. 


Vote Structure

The options are: 1 – Yes, I support the StableYield+ reward mechanism. 2 – No, I do not support the StableYield+ reward mechanism.

We kindly request that if you vote against the StableYield+ proposal in this Snapshot, that you might drop a note in Discord #governance channel or on the forum – explaining your reasoning – such that our communities can work together to move forward based on this feedback.