On March 15th, Marvin Tong, a member of the Phala Network Congress, issued a proposal “Phala Mining Tokenomic Launch” on forum. The proposal aims to update Phala Tokenomics. It has now entered the referendum stage and will end at block height #1461600. Judging from the current voting results, there is a relatively high probability that the vote can be passed. How will the upcoming launch of the Gemini Tokenomics impact the Phala community and overall ecology? I will share my research and analysis here.
Background
Khala, as the pre-mainnet of Phala Network on Kusama, was launched in September 2021 to test the stability of the network technology and Tokenomics. After nearly half a year of testing, Khala network has reached its fourth halving period and has achieved a maximum of 20,000+ computing nodes that are online at the same time.
In the current Tokenomics, 1% of the total amount of PHA is used for mining rewards for miners on Khala Network. With the launch of the Gemini Tokenomics, this number will increase to 70%. Furthermore, rewards will be awarded equally to miners on Phala and Khala networks.
Important Adjustment of This Upgrade
The following important adjustments will be made to the current Phala Tokenomics:
1. More rewards will be released
A total of 1 billion PHA tokens have been issued. The distribution of token usage and the updated mining reward output is as follows. This upgrade will increase the reward to miners from 1% to 70%, and the rewards allocated to miners will all be activated.
We are currently in the fourth halving period of Khala Network, with a standard output of 25.3k PHA per 7200 blocks. Once Gemini launches, the total daily mining rewards will increase to 720k PHA, which is 28.4 times the current value!
2. Additional Delegation Allowed Without “Stop”
Another primary focus of this Tokenomic upgrade is to remove the additional limit on the amount of delegation.
In the past, we may have had such troubles: the initial delegation amount was set too small, resulting in a lower value of V than expected, which affects the rate of increase of V value. You can only increase the amount of delegation through stop .But you need to wait seven days for cooling-down, and the incremental V exchanged for past online performance will also be cleared. These issues will be improved with this upgrade.
In the future, Phala Tokenomics will support additional delegation without a cooling-down period, and the V value will be recalculated when miners put in more delegation. As a result, there is no longer a seven-day waiting period for the additional delegation. However, the incremental V will still be reset to zero and recalculated after the additional delegation.
3. Maximum Mining rewards of a Single Worker Becomes Unlimited
There is a constraint limit in the current Phala Tokenomics to avoid excessive rewards for the remaining miners when the number of miners is too small. For each payment, miners get the minimum value between the number allocated by the budget and at the time of this payment.
Because of this limitation, when the number of mining workers is small, miners cannot obtain relatively high income, which is not conducive to the incentives of Phala network to miners when ecological development is hindered. Therefore, in this update, this maximum limit of rewards has been removed. In the case of insufficient participation in the early stage, miners who enter the market first can get excess returns.
The V value will be reduced by the same amount as the payout reward in each payout event. Affected by the above limitations, the increment of the V value for each payment event in the past will not be negative. After this update, a constraint will be added. If the payment reward exceeds the increment of the V value, the increment of the V value will be deducted to 0 at most, and the reduction of the v value will not occur.
4. The Slash Mechanism Will Not Be Activated
The Slash mechanism that has not been launched in the Phala Tokenomic will not be activated in this upgrade. But it is foreseeable that this mechanism will be activated in the future as the reward increases.
5. Mining Script Upgrad
With the upgrade of this Tokenomic, mining script for solo miners made by contributors from the community will launch. And the team also upgraded PRB to include the function of additional delegation.
If you are a senior Phala miner and don’t need additional delegation, you don’t need to prepare for regular mining. However, if you want to learn more about the updated mining script or PRB, please pay attention to the article on new mining script operation and PRB that will be released this weekend.
If you are new to Phala Network, or you want to use your PHA to delegate and make a profit, please pay attention to Phala’s Wiki, which has a detailed explanation. （Phala Network Wiki）
Will market circulation be affected by the substantial increase in mining rewards?
Not necessarily.
Let’s take a look at how Phala’s mining rewards are calculated.
Referring to the Phala Tokenomics, we know that the following formulas are essential:
Formula 1 — Payout Event：
Formula 2 — Share of a worker：
Formula 3 — V value of a worker：
Formula 4 — Calculation of ΔVt：
When we calculate how rewards are distributed to miners and study the correlation between miner metrics and performance, our logic is to learn the formulas from 1 to 4.
But when we want to use these formulas to calculate, the order when we use them is 3–4–2–1.
➡️ For example, Bob recently opened a mining worker with an Intel quad-core processor, and he spent about $500 on the hardware. He delegated 10 thousand PHA for it.Its performance test result is 378, and the confidence level is lv.5 (ConfidenceScore is 0.7).
- Therefore, its V=(1+0.7⋅(1.5−1))⋅(10000+0.3⋅3780.667)=13729 （Formula 3）
- If every performance test is standard without special compensation
(γ(Vt)h(Vt)), its ΔVt=(1.0002−1)⋅Vt+0.016=0.002Vt+0.016 （Formula 4）
I made a chart, and if everything is normal, it will take 143 days for V value to increase to the maximum.
- Its initial share=√[13729×13729+(2⋅378⋅0.7)×(2⋅378⋅0.7)]= 13739.2 (Formula 2)
By calculating the gray shaded area in the figure, the sum of its Share within 143 days is approximately equal to 68.809% of the worker’s Share, which is always the maximum value of V. Therefore, the rewards of Bob’s worker in the past 143 days is approximately equal to 68.809% of the worker with the maximum V value.
How will Bob’s rewards change before and after the Tokenomic update?
The number of PHA delegated in Khala stake pool is 33,986,754(#1433847). This amount of PHA can be delegated to 1699.33 workers with the maximum amount of PHA (about 20 thousand PHA per worker);
The sum of the total Share on Khala is 60,815,075.05, which is converted into a maximum Share (about 30005) to 2026.83 workers.
After nearly half a year of stable network operation, the currently running miners have an average increase of 19.27% compared to the initial Share through stable online.
For Bob’s worker, we can do some simple calculations to predict the change in rewards based on the current value obtained without considering the growth of the online V value from the community mining workers:
The cost Bob pays is a one-time investment of $500 equipment as a miner and a daily management cost of less than $15/month, and his 10,000 PHA as a delegator. Even for the current holding price of $0.27 /PHA, such an annualized rate of return is still profitable.
Supply and Demand Changes in Tokenomics
The following views are limited to the deduction of Tokenomics supply and demand and do not represent any investment advice.
Under the attraction of such APY, what might happen to the market?
Will token holders enter the market for delegates, and will miners add workers?
At present, the circulation of PHA in the market is 272 million pieces, and the daily trading volume is about 800w when it is active. Therefore, although 720k PHA will be mined every day once Gemini Tokenomics is launched, there may be a potential increase in staking in the market.
In the same way as the calculation above, we can give another set of numbers:
- In the first halving period, when the entire network delegation amount was 200 million, the number of full-delegated workers was about 10,000 (each worker has 20,000 PHA), which is five times the current number. However, considering the 20% increase in V value, there are still about 8,000 workers, which requires nearly 120 million PHA to be additionally delegated into the stake pool.
- At this time, the monthly reward of each full-delegated worker can still reach 1728 PHA (if the worker is running normally).
- In our first halving period, only 129 million PHA can be mined totally.
Based on the above supply and demand speculation, we believe that although more PHA will be released through the Gemini upgrade, at the same time, more (compared to the current) demand for PHA will be leveraged. And the relationship between supply and demand will return to balance under the adjustment of the market.
Gemini Tokenomics Will Promote the Construction of Phala Decentralized Cloud Computing Platform
Since the cloud computing automation supply and demand is balanced, the development of the supply protocol (mining protocol) is mostly completed. In the next step, the development team will focus on developing applications using Web3 cloud computing technology.
Update calendar for Gemini Tokenomics
The Kusama Network block time is unstable, and the time cannot be accurately estimated.
You can click https://polkadot.js.org/apps to query the specific time of the real-time block height.
References
- Phala Network wiki about Tokenomics：https://wiki.phala.network/en-us/learn/tokenomics/tokenomics）
- Proposal of Gemini Tokenomic Launch：https://khala.subsquare.io/democracy/referendum/27
About Phala
Phala Network tackles the issue of trust in the computation cloud.
By organizing a decentralized network of computation nodes around the world, it offers high-performance services without relying on any cloud vendor. Phala workers run the programs in Secure Enclaves, a privacy technology already embedded into modern processors, enabling versatile and confidential execution. Together, this creates the infrastructure for a powerful, secure, and scalable trustless computing cloud.
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Must Read Before Gemini Upgrade was originally published in Phala Network on Medium, where people are continuing the conversation by highlighting and responding to this story.
