F. Blockchain Coin Economy
The functions of the DMDv4 coin include:
● On-chain governance;
● Network security;
● Payments;
● Network fees and deployment of smart contracts;
● DMD represents a limited and constant-size resource that has reward earning abilities;
● Earning rewards for active coin usage as a validator or dPOS staker aimed at protecting the blockchain.
In addition, DMD is highly distributed, being held by numerous smaller investors rather than concentrated in the hands of a few. Following is the distribution of DMD tokens from Block explorer as of June 2024, showing the highly distributed nature of the token holdings, with less than half of the tokens being held by the top 100 people in the network.
Token issuance for the DMD coins has followed the original plan and continues on the trajectory outlined in the original DMD Diamond Whitepaper. DMD does not issue coins based on an algorithm. Rather, all coins are created with the initiation of the blockchain, and they are allocated to the DMD coin holders on a one-to-one basis. The total emission of DMD coins is 4,380,000.
DMD Diamond’s emission model was remodelled with the advent of the second iteration of the core software in 2014. It implied ever-decreasing inflation from a step 50% APR progressively to around 1% in the years to come. The premise was based on block numbers as signposts for when to introduce changes to the monetary supply. This made it clear and intuitive when and how much the adjustment would have taken place.
The coin rollout is the cornerstone of DMD’s monetary system, however, changes to the way this new blockchain works and accounts change with DMDv4. As a leaderless consensus, there are no blocks in a classical UTXO sense; transactions are approved as fast as they come, which makes it impossible to follow a model where block numbers happen at a predefined time. The only predefined transaction is that if there is no network traffic for 10 minutes, the blockchain emits a heartbeat transaction.
To stay true to the previously arranged coin emission there will be a new way of calculating daily inflation, and it ties to the way rewards are distributed among delegates and validators from Epoch rewards that are funded by delta pot and reinsert pot and governed by a sophisticated smart contract construct. More details can be found in Solving the Lost Coin Problem section.
DMDv4 release coincides with DMD going through Stage 3 of the emission model as outlined in DMDv3 Whitepaper where issuance of network rewards slow down from 0.5 DMD to 0.157 DMD per block, while annual monetary inflation will fall from 3.5% to 0.96% within the period of approximately 8 years.
At the release of DMDv4, all smart contracts are initiated in the genesis block, together with information about bootstrapping validators. In order to start the network, a predefined number of nodes must be selected to provide service for the duration of the initial staking Epoch. That process requires a high degree of coordination, therefore the core team serves as the technical enablers of this blockchain and will host a trusted set of DMD Diamond Foundation nodes to launch the network.
There is no monetary advantage for initiating validators, as their pools are empty while the reward itself is lowered.
Registration to join the new network can take place during the initial Epoch, with full registration taking an effect at the next staking Epochs.
When you transition to DMDv4, you will also be able to stake DMD on validator nodes for the purpose of earning coins for validation, as well as for voting on proposals in the DAO that will govern the DMD chain. After the transition, the Diamond DMD team will no longer provide any support for the DMDv3 blockchain. DMDv3 is open source, so it is feasible for anyone who wishes to maintain the legacy code to do so. To eliminate inactive users and lost coins, there will be a claiming period under which your DMDv4 coins need to be claimed in order not to return to the pool of coins.
● Claiming DMDv4 balance within 3 months of release entitles coin holders to the full amount of coins, with 1 DMDv4 coin for every 1 DMDv3 coin owned by the coin holder. The release of DMDv4 is at least 3 months after the release of this Whitepaper. The rollout will include a trusted phase at the start to ensure that the first validators on the network are known.
● Between 3-6 months of release, DMDv3 coin holders can claim 75% of the coins. The other 25% are returned to the coin pool as described in Solving the Lost Coins Problem section.
● Between the 6th month and 5 years, DMDv3 coin holders can claim 50% of the coins they originally held.
● After 5 years, all leftover coins are redirected to the governance and reinsert pot and the claiming period ends.
All coins are created at the genesis block and put in different pools for distribution over time through the blockchain rules of DMD. DMDv4 has four pots:
● Claiming pot: The Claiming pot starts as the total amount of coins that should be held by coin holders and are already allocated to the coin holders in DMDv3. At the initiation of the chain, coins are sent directly to their owners as soon as they run the claiming dApp tool to prove ownership of the old DMDv3 address and link it to their new DMDv4 address. The remaining claiming pot is a 1-to-1 representation of all coins that are waiting to be claimed by the DMDv3 coin holders.
● Delta pot: The delta is the coins that would have been generated between the current issuance at DMDv3 snapshot and the maximum total coins of 4.38 million DMD. The delta pot is one of the sources for epoch rewards (the other one is the reinsert pot).
● Reinsert pot: Coins are recovered to the Reinsert pot under two circumstances: when people do not claim their DMDv4 coins and when validators are inactive for 10 years. The reinsert pot is funded with 50% of the coins that are abandoned by being staked on an inactive validator node. Validator nodes are closed if they are not active for 10 years, so if someone stakes their coins on a validator node that has not been active for 9 years, their stake will be reclaimed 1 year later — but it should be obvious that someone should not stake coins on an inactive validator. Transaction fees also go into reinsert pot, which means they help to secure the blockchain in future years instead of instant to be added towards the actual validator reward.
● Governance pot: The Governance pot is managed by the DAO. The governance pot is funded by 10% of epoch rewards (adaptable value can be increased by DAO decisions) and by a part of the late/never claimed coins (50% towards governance pot and 50% towards reinsert pot). Moreover, the governance pot is funded with 50% of the coins that are abandoned by being staked on an inactive validator node (validator nodes are closed if they are not active for 10 years).
The block rewards that are allocated from the Delta and Reinsert pools are related to the amount of funds in those pools. As the size of the pool reduces, the amount of DMD per transaction will also reduce. Depending on the value of the coins at the time, this may or may not represent a real change in the reward value for the validators.
● If a DMDv3 holder does not claim their coins within 3 months of the DMDv4 mainnet release, 25% of the coins are recovered and split between the Reinsert and DAO pools. As of the publication of this White Paper, DMDv3 holders can claim their coins, so in fact, they have 6 months from the date of release of the White Paper to claim DMDv4.
● If the DMDv3 holder does not claim their coins within 6 months of the release of DMDv4, another 25% of the coins are recovered.
● If the DMDv3 holder does not claim their coins in 5 years, all coins are recovered, and they lose their rights to claim DMDv4. This could happen intentionally if they decide to stay with DMDv3 or if they are simply inactive.
● If a validator candidate is inactive for 10 years, the staked tokens for the validator nodes are recovered into the pools. Also, any delegated staked tokens for that inactive validator are returned to the pool.
These mechanisms are sustainable over the long term to remove the problem of missing coins, and also to continuously fund the DAO and the Reinsert pool.
During the coin rollout, 10% of coins are used to fund the development. In addition, the DAO is funded by 50% of the unclaimed coins in the transition from v3 to v4. The DAO funds will be used to promote the DMD project, as voted on by the community members. Funds can be used for chain upgrade developments, marketing, or any other activity that the coin holders choose to fund based on proposals to the Governance DAO.
