The New Emission Model Proposal with 80% Supply Cut

In recent weeks, we have received extensive feedback on Qubic's emission and supply model. As a community-driven project, it is essential to consider these insights and identify potential areas for improvement.

After an in-depth analysis of Qubic's tokenomics, we've determined that with the introduction of an emission schedule, the maximum supply can be adjusted to 200 trillion (trn) QUBIC instead of 1000 trn QUBIC. This adjustment can be made without compromising Qubic’s core vision and mission.

We also propose these adjustments to miners and computers to vote on, with details at the end of this post.

This guide will walk you through the essentials of Qubic's current emission mechanisms, detailing the roles of computors (our nodes), the Arbitrator (who ensures fairness), and miners  (who do the work to keep everything running). 

It also highlights the changes introduced by the new emission model, ensuring that you understand the specifics and its impact on the network's future growth.

Part 1: Exploring Emissions and Key Roles in Qubic

In order to understand the new emission model, it is important to first understand how emissions work in Qubic, as they play a crucial role in maintaining the network's operations and rewarding participants. 

Weekly Emissions and the Role of Computors

Each week (called an “epoch”) Qubic emits 1 trn QUBIC coins, which are distributed among 676 computors (1.479 billion QUBIC per computor). These computors are essential for the network's functionality as they:

• Secure the network

• Run smart contracts 

• Validate transactions 

Computors receive emissions as a reward for their services. However, it's important to note that a revenue algorithm is in place to ensure that only the most efficient computors receive the highest revenue, incentivising optimal performance across the network.

Over the past ten epochs, the average revenue per computor has consistently been around 99%, as shown in Figure 1:

Figure 1: Average revenue earned by computers over the last 10 epochs

Read more about Computors in our documentation. 

The Arbitrator: Ensuring Fairness

The Arbitrator in Qubic has the important role of resolving network disputes between computers and maintaining network integrity. 

To ensure there is no incentive to collude, they receive the remaining revenue after computors have been allocated their reward. This has averaged about 1% per epoch over the last few months.

Learn more about the role of the Arbitrator in our documentation.

The Role of Miners

Miners are also essential to Qubic. They contribute to AI research via our “uPoW” (useful proof of work) approach and secure positions for computors. By successfully completing tasks, they help secure the rank of the computors, ensuring they continue to stay in the top 676 computors within the network and earn their rewards.

For more information on miners and uPoW, see our documentation.

Summing Up Part 1

Qubic emits new coins every week and distributes them to participants who help keep the network running smoothly. These participants include computors ("our nodes"), an "Arbitrator" (who ensures fairness), and "miners" (who do the work to keep everything running). 

Part 2: Computor Revenue and the Donation Process

With the introduction of the protocol extension in Project X, we enabled computors to reallocate portions of their revenue to causes they wish to support. We call these donations. The emission model will use this extension.

What Changes

From now on, a percentage of each computor's revenue will be automatically deducted and directed to designated donation addresses that correspond with the computors’ chosen initiative, e.g. the emission model or CCF. Such a donation only is enacted, if at least 451 of the 676 computors agree (a quorum consensus) on an initiative. Let's break down what this means:

Current Process 

The computors generate revenue according to the revenue algorithm and get paid out a maximum of 1.479bln per epoch. The remaining amount is sent to the Arbitrator.

New Process

A portion of the revenue (15% in the case of the emission reduction) will be automatically deducted from a computor’s actual revenue and sent to a designated donation target address, e.g. the emission model smart contract. The remaining amount is still sent to the Arbitrator.

The attentive reader may have read an important element here: “actual” revenue.

The proposal you are reading right now is an adjustment to what was proposed in our previous blog post. This new proposal recommends that if we apply for 15% of the revenue, it should be taken from the actual revenue generated by the computors, not from an expected amount of 1.479bln per computer (100% of their revenue).. Here’s why:

• Actual Revenue vs. Expected Revenue: Computors often generate slightly less than 100% of their expected revenue, usually around 99% on average, with the rest being received by the Arbitrator. For example, if the expected revenue is 1 trillion QUBIC in emissions, the actual revenue might be around 990 billion QUBIC.

• Remaining Revenue: The difference (10 billion in this case) will be allocated to the Arbitrator. 

This approach ensures that the deduction reflects the actual earnings of the computors, ensuring the approach is more accurate and fair.

PLEASE NOTE: This adjustment is essential because we have identified potential attack vectors that need to be avoided. By basing the donation percentage on actual revenue, we minimise the risk of manipulation and ensure a more secure and fair ecosystem. **

Example Calculation

To illustrate, let’s consider one computor with a maximum revenue of 1.479 billion per epoch who wishes to donate to the new emission model smart contract:

1. Revenue Generation: If this computor generated 99% of their expected revenue, they would make: 

   1.479 × 0.99 = 1.464bln in revenue
   
   

2. Donation Deduction: 15% of this revenue will be deducted and sent to the emission model smart contract: 

   1.464 × 0.15 = 0.220bln (compared to 0.222 billion when calculated with 1.479 billion)
   
   

3. Revenue Distribution: After deduction of all donations, the rest of the actual revenue is sent to the computor.
   
   This calculation is repeated for every computor.
   
   

4. Remaining Revenue: After all computors have been processed, the Arbitrator receives the remaining amount of QUBIC. 

This process ensures that the donations are fairly and accurately calculated, based on the actual revenue of each computor. It also helps us avoid potential vulnerabilities in the system, as previously stated.

By understanding these changes, you can see how the computor revenue and donation process works to maintain sustainability and security in Qubic’s decentralised ecosystem.

** Side Note on Security Considerations

If you are wondering about the specifics of a potential attack, let's consider 2 scenarios: 

• Scenario A: where a percentage of the actual revenue is donated, and

• Scenario B: where a percentage of 1trn QUBIC is donated.

Please note, we are considering extreme cases for better understanding.

Scenario A

If the Quorum has the least possible quality of service, all computors earn 66% of the revenue (660 billion QUBIC) because it is the lowest permitted value by the protocol. 

The Quorum (451 of 676 computors) would be able to donate all 66% to a smart contract which then pays all of it to the ones who voted for this. 

The Result

The 66% (451) computors receive 100% income each (1.479trn).

The remaining 33% receive 0% and have no incentive to do further work for the network. 

Scenario B

Computors again earn 66% due to suboptimal service. The quorum can donate 100% (1 trillion QUBIC) to a smart contract which then pays 100% to 66% of computors. 

The Result 

The 66% (451 computors) receive 150% income each (2.218 billion).

The remaining 33% receive 0% and have no incentive to further work for the network. 

So in scenario B, a computer may earn 150% of their potential revenue, whereas in scenario A it would be 100%.

This is Where the Arbitrator Comes into Play

One of the roles of the Arbitrator is to protect the interests of users. 

In scenario A, the Arbitrator keeps 33% of 1trillion QUBIC and can use this to pay the 33% of computors who received no revenue. These computers are then incentivised to work. 

In scenario B, the Arbitrator keeps 0% of 1 trillion and has no means to do anything to improve network performance.

We will implement the system illustrated in scenario A, via the protocol extension, improving the security and fairness of Qubic's ecosystem.

Summing Up Part 2

The introduction of a protocol extension in Project X allows computors to reallocate portions of their actual revenue to support designated causes. This new process deducts 15% of a computor’s actual revenue, rather than the expected revenue, minimising risks of manipulation and ensuring fairer distribution. 

Scenario A, which illustrates potential attack vectors, highlights the importance of basing donations on actual revenue, with the Arbitrator playing a critical role in maintaining network stability and growth by redistributing remaining funds to keep all computors incentivised. 

This adjustment enhances both security and fairness within Qubic's ecosystem.

Potential Impact

Computors earn rewards for their work, and they now have the option to donate some of those rewards to causes they care about, like supporting the emission model. This donation will automatically take a small portion of what they actually earn, ensuring everything remains fair and secure.

This new donation process not only helps support important initiatives but also ensures that the network stays fair and secure. This also demonstrates the commitment of Qubic's participants to ensuring the ecosystem's long-term success and stability, which can help build trust and attract more investment.

Part 3: The Case for a 200 Trillion Max Supply Cap and a New Emission Model

The Qubic Halving Approach

Achieving a maximum supply of 200 trillion QUBIC  involves implementing a method similar to traditional "halvings", but specifically customised for the Qubic ecosystem. 

The 200 trillion cap is a carefully considered move that balances the needs of the Qubic ecosystem with the expectations of its users and investors.

Introducing the “Supply Watcher”

In order to achieve a maximum supply of 200 Trillion QUBIC, we need to introduce the most predictable emission model possible.  This section will outline how we ensure this model is effective by introducing you to the “Supply Watcher”.

For an easier understanding, we break down the concept of the model into three parts:

1: The Halving

For year one, we propose an emission reduction of 15%. After that, in each consecutive year, we propose to introduce Bitcoin style halvings, cutting supply in half.

2: Integrating Qubic’s Burning Mechanism

The halving described above is already enough for most blockchains. In Qubic, however, we need to also respect the burning mechanism. 

Executing smart contracts burns QUBIC. Assuming the amount of burnt QUBIC rises with the number of deployed smart contracts, it is very likely that the burns amount to a considerable percentage of total supply being reduced. This needs to be taken into account.

The "Supply Watcher," a built-in feature of Qubic's emission smart contract, ensures that this burning process is carefully monitored and adjusted. 

For example, if 10% of QUBIC have already been burned, the Supply Watcher will only allow an additional 5% to be burned (in line with the target emission reduction of 15%). This prevents an excessive reduction in the total supply.

3: Managing Supply with the Arbitrator

Lastly, it’s important to remember the role of the Arbitrator: If they receive 1% of emissions in a week (epoch), this amount will be deducted from the ecosystem burns to determine the remaining amount to be burned.

Let’s consider the example described above: Burns account for 10%, and the Arbitrator receives 1%. This means that 9% is subtracted from the target emission reduction of 15%.

Summing Up Part 3

The total number of Qubic coins will be capped at 200 trillion, which is much less than originally planned. We’ll reduce the number of new coins created each year, and the "Supply Watcher" will make sure we don’t burn too many coins, keeping everything balanced.

The Way Ahead

We are excited to announce that as part of this blog post, we are also submitting two crucial proposals for computor voting:

• Proposal 1: Launch the emission smart contract and continue its development. Computors. 
  The proposal is live at https://app.qubic.li/public/proposal/bedb2cf7-ccd3-4de6-8d15-c246c913eedc 
  
  

• Proposal 2: Start reducing the maximum supply to 200 trillion QUBIC and initiate a 15% reduction in emissions as soon as possible.
  The proposal is live at https://app.qubic.li/public/proposal/81ca1427-2ebc-4e78-a662-25a643f48292

To follow the voting results, see the status at https://app.qubic.li/voting 

These proposals are presented to the computors for a decision, so that we can initiate the first emission reduction on September 18th.

The new emission model is a significant achievement for the Qubic ecosystem. By capping the maximum supply at 200 trillion QUBIC and introducing an emission reduction strategy, we aim to enhance the long-term stability and value of the network. 

The introduction of the “Supply Watcher” and the continued role of the Arbitrator will ensure that these changes are implemented smoothly and securely, safeguarding the network's integrity.

Now is the time for all community members, especially computers and miners, to join the discussion on Discord and actively participate in co-creating the future of Qubic. Your involvement is crucial as we move forward together in this exciting phase!