We have had some questions regarding the token supply, pre-minted tokens, elastic money supply and external relations/pegging, which we can discuss in this thread.
There are no pre-minted tokens when the network goes live.
Fixed supply, 2-4 years
The supply has a cap of 100.000.000.000 tokens (100bn tokens), for the period.
Elastic money supply
The supply algorithm can issue or burn tokens to regulate the supply. I.e. for each epoch (consensus round) fees are paid both by users and nodes. When an epoch occurs, all fees are burned, a node wins the reward and it receives a number of tokens. The number of tokens can either be larger than the burned fees, which increases the overall supply, or smaller, which decreases the overall supply.
The measurement of the demand is described in the technical paper, but not in-depth, as we need a certain volume of transactions to test the algorithm. It is a hypothesis, and we need a large amount of real data to do a statistically valid test, for us to construct validation of our variables, test correlations and to check causal relations. In general, all variables are intrinsic variables, meaning no external inputs, i.e. no oracles, will affect the algorithm.
The algorithm measures three general constructs:
- The velocity of money, which is how many times a token has been transferred over a given period of time.
- The representation of production, which is seen as adoption in the monetary system. This is likely to be measured by combining the number of nodes in the system with the number of name records, and other internal variables that can be said to represent production indirectly.
3) The quantitative supply of tokens
The dependent variable is the price level, which should be kept constant and is a relation between the supply, velocity of money and adoption.
The aim is to reach a point where, if using a flywheel as an analogy, the flywheel has reached an ideal combination of size and velocity, keeping it running stable.
A token needs to be used within a given period of time; otherwise, it will be burned. The period is somewhere between 1-3 years. A holder of tokens can always create a self-transaction, where fees are paid, which makes tokens valid for another period. This ensures that dead tokens, tokens where the private key has been lost, will not occupy the network forever with no value. We envision that wallets will have built-in token auto-renewal features to prevent unwanted expiry of tokens.
Stable coins and pegging
Tagions are not pegged to anything. Tagion is a free-floating and independent monetary system like all other large monetary systems. Over time, the money supply algorithm instills trust and aims to create an intrinsic stable token. Internally, pricing in a monetary system is relative to all the goods and services it measures. In other words, how many Tagions do a hamburger cost? It is an ongoing social process that needs a close to constant relation between supply and demand of the Tagion tokens, as described above, to be steady and trusted.
Externally, it relates to other currencies, e.g. BTC, ETH or USD(T) enabled with the Tagion DEX protocols. Foreign currencies are always paired against Tagions in the DEX. It means that the currency pairs’ liquidity can serve as external dampers in the system, as there is a correlation with the liquidity of the pairs.