| IIP | 0003 |
| Title | Revised block reward schedule |
| Author | Adam Mattlack and Michael Pfeiffer |
| Status | Draft |
| Type | Standards track |
| Created | 01-06-2018 |
This IIP introduces a revised block reward schedule.
“Revised block reward schedule” — The ION blockchain will issue higher block rewards over a longer period of time.
- Effect: Higher block rewards are designed to incentivize the direction of computing power to maintain secure blockchain protocols. This is an improvement over a protocol that drops off precipitously leaving insufficient predictable motivation to maintain a growing ecosystem that includes not only ION, but all secondary tokens on the core blockchain.
- Revised block reward schedule
- This proposal adjusts the block rewards schedule so that the decline in rewards would be more gradual. Retaining higher rewards in the coming years increases the likelihood of adequate incentivization for maintaining network security, not only for ION, but also for all secondary tokens, thus protecting the viability of the ecosystems that depend upon the ION blockchain.
The ION White Paper (2016) specifies the following block reward schedule:
The following chart shows a problem with the white paper specification. Notably, the Block reward is scheduled to drop off precipitously from Year 4 (5.75 ION/block) to Year 5 (1.85 ION/block). The effect potentially discourages masternode operation. Decay of the masternode network would erode the utility of the ION network, and disrupt economies built around secondary tokens.
| Year | ION/Block | Issuance/Year | Total Projected (WP spec) | Inflation Rate (%) (WP spec) | Total Realized + Projected Realized (4/25) | Amount behind spec |
|---|---|---|---|---|---|---|
| 1 | 23 | 12,000,000 | 22,900,000 | 177% | 19,300,000 | 3,600,000 |
| 2 | 17 | 9,000,000 | 31,900,000 | 39.3% | 27,000,000 | 4,900,000 |
| 3 | 11.5 | 6,000,000 | 37,900,000 | 18.8% | ||
| 4 | 5.75 | 3,000,000 | 40,900,000 | 7.9% | ||
| 5 | 1.85 | 1,000,000 | 41,900,000 | 2.44% | Too steep | |
| 6 | 1.85 | 1,000,000 | 42,900,000 | 2.38% | ||
| 7 | 1.85 | 1,000,000 | 43,900,000 | 2.33% | ||
| 8 | 1.85 | 1,000,000 | 44,900,000 | 2.27% | ||
| 9 | 1.85 | 1,000,000 | 45,900,000 | 2.22% | ||
| 10 | 0.2 | 100,000 | 46,000,000 | 0.22% | Too steep | |
| 11-100 | 0.2 | 0.22 - 0.18% |
The proposed block reward schedule holds steady the number of new ION generated from Years 4-9. During this time period, while the block reward is static, the Inflation Rate nevertheless declines because the proportion of new coins relative to the total supply diminishes.
For the purposes of this document, “inflation” is treated as “supply inflation” and is calculated as the number of new ION generated in a year relative to the total existing supply at the beginning of the year.
| Proposed | White Paper Reference | Realized + Proposed | |||||
| Year | ION/Block | Issuance / Year | Total Projected (White Paper spec) | Inflation Rate (%)(WP spec) | Total Realized + Proposed Realized | Issuance/Year Realized + Projected Realized | Realized/Proposed Inflation Rate |
| 1 | 23 | 12,000,000 | 22,900,000 | 110% | 19,300,000 | 7,400,000 | 67.89% Realized |
| 2 | 17 | 9,000,000 | 31,900,000 | 39.3% | 27,000,000 | 8,300,000 | 43.01% Realized |
| 3 | 11.5 | 6,000,000 | 37,900,000 | 18.8% | 33,000,000 | 6,000,000 | 22.22% Projected |
| 4 | 5.75 | 3,000,000* | 40,900,000 | 7.9% | 36,000,000 | 3,000,000* | 9.09% Projected |
| 5 | 5.75 | 3,000,000* | 41,900,000 | 2.44% | 39,000,000 | 3,000,000* | 8.33% Projected |
| 6 | 5.75 | 3,000,000* | 42,900,000 | 2.38% | 42,000,000 | 3,000,000* | 7.69% Projected |
| 7 | 5.75 | 3,000,000* | 43,900,000 | 2.33% | 45,000,000 | 3,000,000* | 7.14% Projected |
| 8 | 5.75 | 3,000,000* | 44,900,00 | 2.27% | 48,000,000 | 3,000,000* | 6.66% Projected |
| 9 | 5.75 | 3,000,000* | 45,900,000 | 2.22% | 51,000,000 | 3,000,000* | 6.25% Projected |
| 10 | 1.90 | 1,000,000 | 56,000,000** | 1.8% | 52,000,000 | 1,000,000* | 1.96% Projected |
| 11-100 | 0.2 | 100,000 | 65,000,000* | 1.8% | 61,000,000 | 100,000 | 0.019% Projected to 0.016% Projected |
This proposal calls for the issuance of an additional 6 million ION over the currently realized supply. The currently realized supply is about 5 million ION lower than the white paper specification. The proposed adjustment achieves the goal of incentivizing a robust masternode network without substantially increasing supply inflation.
This chart does not address the potential earnings from fees generated from the ION network and from the proposed token network. Significant transactional velocity could mean that masternode operation would be sufficiently profitable from fees alone that network generation of new ION may no longer be necessary to incentivize masternode operation.
While this proposal addresses the drop off in block rewards from Year 4 to Year 5, it does not address the drop off from Year 9 (1.85 ION/block) to Year 10 (0.2 ION/block) which is also precipitous. The proposal defers these decisions to a future vote by the ION governance once there is sufficient information about the transactional velocity of the network to estimate the incentives necessary to maintain network security and utility.