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🪙 Tokenomics

An ideal tokenomics should facilitate the coincidence of the interests of three groups of participants:

  • Long-term holders who, having invested once, may not return to the blockchain for years.
  • Regular users of the system who constantly use it for a variety of tasks.
  • Validators who spend computing resources and time to keep the system running.

The coincidence of interests is not just a theoretical concept. When applied to tokenomics, it means that the growth of some functional parameter of the system must benefit all participants. Since Antofy is a truly scalable blockchain, we chose network activity, in other words, the number of transactions per unit of time, as such a parameter.

Also, we are pretty sure that it is impossible to create a single-coin tokenomics model in which transaction growth results in gains for all participants, so Antofy tokenomics uses two coins: ABN and sABN. Their supply is managed by Antofy Grinder, which is essentially an automated central bank.

If a cryptocurrency has its own blockchain, it is called a coin, unlike tokens, whose operations are processed by third-party blockchains. Thus, the description of the mechanics of how the blockchain economic model works should be called "coinomics."

The most common tokenomics model today is the one applied 13 years ago for Bitcoin. It implies that the number of coins is limited, and their issuance, which decreases over time to zero, comes as a reward to network nodes for making the system work. Therefore, users must buy them from node owners, often with fiat currency, to interact with the system.

It appears that users still pay nodes of the system in fiat currency but through an intermediate medium in the form of a blockchain coin. This payment arrangement has one indisputable advantage - because the number of coins is limited - when the system's popularity grows, its price skyrockets. But this same property also entails internal contradictions.

Investments vs Coin Backing

As we already wrote in the Positioning section, Bitcoin is primarily a bank, and therefore, its main task is to safeguard the Bitcoins in users' accounts. So transactions can be thought of as depositing or withdrawing funds. With this approach, there is nothing wrong with a transaction taking an hour to process because the Bitcoin blockchain is not primarily a payment system.

In this model, the main concern is that funds are withdrawn at the expense of new users who want to invest in the system. Meaning that Bitcoin is rising in value because people buy it expecting it to become even more expensive.

This is why short-sighted financial experts sometimes call Bitcoin a Ponzi scheme. But they are wrong - in addition to its function as a store of value, Bitcoin now also acts as a measure of value (e.g., WBTC on Ethereum) and a means of payment (Lightning Network).

But because of Bitcoin-like tokenomics, a conflict between network users and long-term holders has become apparent. Investors withdraw tokens from circulation, causing the price to rise, which raises costs for using the blockchain functionality that backs the coin. Thus, at the peak of the bull run, the commission on the use of smart contract functionality in Ethereum is prohibitive, reaching hundreds of dollars per transaction.

Imagine Netflix released its token with a limited supply, which is needed to pay for movies. Many people will want to buy it as an investment asset, causing its price to rise. Users wishing to watch movies will have to pay a lot more. This will lead to a decrease in the number of actual clients, while they are the key to the service's success and, consequently, the value of the issued token.

That is why in the real world, paying for a service and investing in it are separated into two different types of assets: fiat currencies and stocks.

Users vs Node Owners

Exchanging money for services or goods is such a simple and old concept that we don't even realize it hides a problem. It is faced mainly by people in developing countries suffering rapid currency depreciation. The local currency decline makes the population poorer since most goods in any country are imported in today's globalized world. But exporters in such countries, on the contrary, make excess profits because their income remains stable, and local costs relative to these revenues are reduced.

In the blockchain world, this problem is more pronounced as cryptocurrency users continue to live in the real world and use fiat money for living. As cryptocurrency rises, network node owners play the role of exporters in countries with weakening currencies. Their income increases while their living costs remain the same. But those who use the network for something other than investing or trading act as people getting poorer.

For example, the transaction cost has a dramatic profitability impact on online business that involves cross-border cryptocurrency payments, especially if numerous transactions are assumed.

Thus, the users' and the node owners' interests directly contradict each other. For users, commissions are costs, and it is beneficial to reduce them. For node owners, rewards are income, and it is profitable to increase them. But in an ideal world, the interests of users and node owners should coincide - both groups should be interested in the growth of network popularity and its further development.

At some point, the following chain of events may occur. Bitcoin issuance during the halving will drop so much that it will become unprofitable to mine in the face of such competition. The number of miners will begin to decrease, and Bitcoin's hashrate will start dropping. This will make users nervous about blockchain security, and they will begin withdrawing money from Bitcoin. The price of Bitcoin will drop, making mining even more unprofitable.

Within standard single-coin tokenomics, it is impossible to balance the user costs with the node owners' revenues because of the real-world coin price volatility. But this balance is crucial for customer availability if blockchain provides unique functionality.

Antofy Tokenomics

It seems that it is almost impossible to make a consistent model of tokenomics on a single-coin basis - while using two coins makes it possible to resolve virtually all internal contradictions.

In general, an ideal tokenomics should facilitate the coincidence of the interests of three groups of participants:

  • Long-term holders who, having invested once, may not return to the blockchain for years.
  • Regular users of the system who constantly use it for a variety of tasks.
  • Validators who spend computing resources and time to keep the system running.

The coincidence of interests is not just a theoretical concept. When applied to tokenomics, it means that the growth of some functional parameter of the system must benefit all participants. Since Antofy is a truly scalable blockchain, we chose network activity, in other words, the number of transactions per unit of time, as such a parameter.

Also, we are pretty sure that it is impossible to create a single-coin tokenomics model in which transaction growth results in gains for all participants, so Antofy tokenomics uses two coins: ABN and sABN. Their supply is managed by Antofy Grinder, which is essentially an automated central bank.

ABN (BEP20) Token on Binance Chain

ParameterValue
Maximum Supply27,000,000
Total Supply27,000,000
Locked Supply26,396,357
Decimal18
Transaction Fee0%
Contract Binance0x7062f2e2b917ed14b2b0833e9e0278cb4bc62c69

ABN Coin Native Chain

ParameterValue
Maximum Supply27,000,000
Total Supply27,000,000
UtilityABN is used to issue sABN
Issuance99% Supply Can be minted only as validator's reward

It is vital for investors and validators that there are explicit mechanics for the growth of the asset in the long run. But in most modern networks, it is not entirely obvious what a coin is secured with, so the main criteria for long-term investments remain the limited supply of the token and the possible popularity of the decentralized system in the future.

In Antofy, ABN is designed for investment purposes and is directly secured by user activity. ABN is a sABN coin printing certificate. Its main properties are a constant demand from the system and persistent burning. Thus, the more sABN must be printed, and the more ABNs will be used for this purpose, part of which will be burned.

Thus, even a constant amount of daily transactions will reduce the overall supply of ABN. Therefore, both investors and validators benefit from the network activity since it directly reduces the ABN coin supply.

ABN Utility

ABN is used by Grinder for sABN issuance. Anyone can put ABN coins in the Grinder specifying ABN / sABN rate. The Grinder continuously uses the ABNs offers with the highest bids to issue sABNs. During the order processing, one part of the ABN burns irretrievably, and the other part becomes available for reissue into circulation. It will stop being burned when only 1 000 000 ABNs remain.

The percantage of ABN burned depends on the amount of ABNs put in Grinder for sABN issuance. The formula is:

ABNburned  =  100ABNgrinderedABNgrindered+107ABN_{burned}\;=\;100\cdot\frac{ABN_{grindered}}{ABN_{grindered}+10^7}

When the number of ABNs used for sABN issuance exeeds 990 000 000 there will remain only 1 000 000 of ABN coins and they will stop burning.

ABN Issuance

Validators' rewards will be calculated in sABN as the sum of burned commissions and inflationary sABN issuance. ABN will be issued corresponding to that amount using a constant product formula as validators' rewards. This means that the reduction of ABN token issuance will not occur in leaps and bounds, as in the case of Bitcoin halvings, but gradually.

Since validator rewards are not directly dependent on the specific transactions they process, the distribution of ABN among validators can be adjusted based on many factors. In addition, this approach prevents front-running.

The ABN supply depends on the number of sABNs minted by the Grinder. That includes all newly minted sABNs (issuance and replacement for burned coins). The number of ABNs to mint is defined by the formula:

ABNissued=1016sABNminted+108ABN_{issued}=\frac{10^{16}}{sABN_{minted}+10^8}

The Grinder uses a virtual ABN system pool to issue ABN. The Grinder can only take ABN from there to the extent of the burned commissions and inflation issuance. ABN used but not burned during sABN minting returns to this virtual pool. Thus, over time, fewer and fewer ABN will be issued as a reward.

You can imagine - that there is a virtual AMM in Grinder with a pool of sABN totally minted / ABN for issuance. But the calculation of the ABN issue is done without having a real AMM - just by the constant product formula.

ABN Circulating Supply

The amount of ABN circulating supply depends on the ratio of the ABN burning speed to the issuance volume. The ABN burning pace is determined primarily by the ABN market price. The ABN issuance depends on the number of sABNs burned as commissions. Thus, the exact amount of ABN in circulation can only be approximated.

Our simulation shows that though the total supply of ABN is 100 000 000, it is unlikely that there will be more than 20 000 000 ABNs in circulation at any given moment.

The circulating supply of ABN is calculated based on a computer model.

It assumes that the number of transactions grows from 0 to a given number within about half a year, and the rate at which Grinder uses ABN is directly proportional to the ratio of sABN and ABN coins in circulation.

sABN / ABN Rate

The SABN / ABN rate depends very much on the initial distribution of coins - therefore, it can even fall during the first few years if the number of transactions is not very high. But in the long term, the amount of sABN in circulation will grow, and the amount of ABN will fall after the peak is passed. So, in the long run, depending on the number of transactions in the blockchain, the amount of sABN given per ABN will steadily grow.

The sABN / ABN rate is calculated based on a computer model as a ratio of the sABN circulating supply and the ABN circulating supply.

The model assumes that the number of transactions grows from 0 to a given number within about half a year, and the rate at which Grinder uses ABN is directly proportional to the ratio of sABN and ABN coins in circulation.

sABN Coin

ParameterValue
Maximum SupplyUnlimited
Circulating SupplyLimited by formula
Initial Supply1 000 000 000 sABNs during the first 1000 days
Inflation5% yearly after 1000 days
UtilityRewards in Antofy are paid in sABN
IssuanceAnyone can issue ABN by burning sABN in the Grinder

What matters most to blockchain users is that transaction fees is 0.

Frontrunning is the ability to outrun someone else's massive transaction by increasing the commission paid and earning from the resulting price increase.

In Antofy, the sABN coin will be used to pay Rewards. Moreover, because sABN is an inflationary coin with a 5% supply growth per year, its price will correlate with the real-world inflation rate in the long run.

sABN Utility

The formula defines the target Reward in sABN depending on the total number of transactions. For the first 1000 days, the formula is:

Rewards=107107+TXNdailyRewards=\frac{10^7}{10^7+TXN_{daily}}

After 1000 days the formula changes to account for the sABN inflation:

Rewards=0.01sABNsupply0.01sABNsupply+TXNdailyRewards=\frac{0.01\ast sABN_{supply}}{0.01\ast sABN_{supply}+TXN_{daily}}

sABN Issuance

sABN can only be released into circulation by burning ABN in the Antofy Grinder. There is a queue of orders arranged by the ABN / sABN rate for this purpose. The more ABNs are offered in exchange for a single sABN, the sooner the Grinder will process that order. The closest analogy to such a queue is exchange limit sell orders, executed by persistent demand from the Grinder.

The mathematical formula defines the sABN issuance depending on the day after the launch. For the first 1000 days, the formula is:

sABNissuance=52209083e0.00591626day(1+e0.00591626day)9.6sABN_{issuance}=52209083\cdot\frac{e^{-0.00591626\cdot day}}{\left(1+e^{-0.00591626\cdot day}\right)^{9.6}}

After 1000 days the formula changes to keep the constant inflation rate:

sABNissuance=10773sABN_{issuance}=\frac{10^7}{73}\\

These calculations apply only to newly created sABNs. Simultaneously with the issuance, sABNs will be minted through Grinder to replace the burned commission.

sABN Circulating Supply

The Antofy Grinder controls the issuance of the sABN coin to reach the target circulating supply determined by a mathematical formula. Since the sABN coin is inflationary and the commissions paid in sABN are burned, there is a constant need to create new sABNs. Antofy Grinder will print sABNs providing the necessary issuance and replacing burned sABN coins to reach the target sABN circulating supply.

The mathematical formula defines the target supply depending on the day after the launch. For the first 1000 days, the formula is:

sABNsupply=109.0112(1+e0.0059162day)8.6  109.011228.6sABN_{supply}=10^{9.0112}\cdot\left(1+e^{-0.0059162\cdot day}\right)^{-8.6}\;-\frac{10^{9.0112}}{2^{8.6}}

After 1000 days the formula changes to keep the constant inflation rate:

sABNsupply=10773(day+6300)sABN_{supply}=\frac{10^7}{73}\cdot\left(day+6300\right)

FAQ

Do you have two tokens? But LUNA also did, and it collapsed!

If some single-token system goes bankrupt, it doesn't mean all single-token mechanics are doomed. We have fundamentally different mechanics from LUNA, self-sufficient and not directly tied to the real world. Thus, it cannot be broken by external manipulation, as it happened with LUNA.

How will I be able to deposit or withdraw money from Antofy?

In the beginning, a bridge with Ethereum will be set up to interact with the outside world, allowing users to use wrapped ETH in Antofy. It will also be possible to withdraw capital from the Antofy network using this bridge.

Bridges to other popular blockchains will be created in the future. If necessary, it will be possible to make a bridge with reverse logic, where sABN or ABN is withdrawn from Antofy, and in another blockchain, the user receives wrapped sABN or ABN tokens.

What happens if no one puts ABN in the Grinder?

That won't happen. At least, the Antofy Team will put a single ABN in the Grinder queue at a price sufficient to issue a billion sABNs. And we have no doubt that there will be many such overpriced orders.

ABN will not be burned when trading on the exchanges. Will it break the system?

There will be DEX in Antofy, so it will be possible to trade ABN for sABN outside the Grinder.

If the price of ABN on DEX drops much relative to prices in the Grinder queue, it will open up an arbitrage opportunity. Anyone can buy a cheap ABN on the exchange and put it into the Grinder at a much higher price.

If the price on the exchange exceeds the price in the Grinder, it would be more profitable to cancel the Grinder's order in the queue and sell the ABN on the market.

Thus, the price on the exchange and in the Grinder queue will strongly correlate. But the burn price in the Grinder will likely be slightly higher than the exchange rate since it will take some time to process the order via the Grinder. In other words, if there is a possibility to swap ABN on the DEX immediately or through Grinder, say, within a week, then, obviously, the long wait must be somehow compensated.

What happens if ABN collapses?

As has already been said, the prices in the Grinder queue and on the exchange correlate. If the price of ABN falls (relative to sABN), then the Grinder will start to consume (and burn) significantly more ABN. Therefore, at moments of deep ABN drawdowns, it will be burned at an accelerated pace.

Where will the first sABN tokens come from?

The initial sABN tokens must appear somehow to launch the system. Otherwise, it will be impossible to make any transactions. For that, Antofy will have a rule (both initially and in the future) that each new validator will receive 100 sABN as a gift.

Will ABN be distributed evenly?

ABN will be distributed among validators as a reward. Since we plan to launch a network with about a thousand initial validators, and about 10% of the total ABN supply will be distributed among them in the first year, there should be no large ABN holders.

Well, except for the Antofy Team, which needs a lot of tokens to create bridges, provide liquidity for centralized exchanges, offer grants for developers, etc. The additional reward the Team will receive as Routers' rewards by operating the network layer.