Claims process and Initial thoughts on the HODL program

Chris Dev

December 11, 2019

With the claims processing running smoothly and over 5 million of the 6 million coins claimed as we continue toward our January 2nd deadline for claims, I wanted to write an update an talk about two things:

1.) What to do with unclaimed coins.

2.) Some preliminary details of the HODL program.

With respect to the unclaimed coins, there are several possibilities that have been discussed. They are:

1.) Add them to the HODL program.

2.) Add them to the dev funds.

3.) Do another airdrop.

4.) Burn them.

Of these options, given the current amounts in #1 and #2, we don't really see a need to add more and #3 doing another airdrop would create a lot of overhead and likely push out other priorities and also probably have a limited benefit. That leaves #4. The benefit of #4 is actually everyone that has MWC benefits because it reduces supply. There are some technical challenges with burning coins in a Mimblewimble based protocol. The only way to provably burn them is to make a modification to the full node, but that can be done at a later date and the funds can provably sit in an output until that modification is made. We are currently working on a way to prove amounts in outputs without moving them. (In the current wallet, the only way to prove an amount is by doing a transaction). This feature will also be used for the HODL program.

Regarding the HODL program, as everyone is aware, 2 million MWC were set aside in cold storage as a fund to reward HODLers. So far, we have not given specifics on exactly how the program will work other than some basic ideas. We wanted to expand on those ideas here and we will still plan to give full details of the plan in early Q1 2020 and implement the plan sometime during Q2 2020.

Our initial thoughts are that the 2 million MWC would be split into 10 - 200,000 MWC chunks. Each chunk would be used as a quarterly reward for coins that did not move during the quarter. Since there will be some actions required to register and claim the coins, there will likely be some coins that end up not being sent out. That will mean we may have enough left over to do a reward for an 11th and possibly 12th quarter of HODL rewards.

In terms of how the rewards are allocated, the initial idea is that, anyone can register any output (this includes coins received from the airdrop, mined, traded, etc). Of the 200,000 coins per quarter, we are thinking that 75% will be rewarded proportionally to the amount registered and 25% will be rewarded based on the "days destroyed metric". What that means is if you have 100 MWC with an output that was created 1 year ago, you would get twice the reward as 100 MWC in an output that was created 6 months ago, and this only applies to the 25% allocated to the days destroyed. The other 75% of funds will be rewarded regardless of age of the output. This will incentivize long term holding, while still giving reason to HODL newly received coins as well. Also, we will have a "max age" set to the start of the first period, so there's no need to worry about moving coins around before the beginning of the first period. Any feedback on these ideas would be great to hear.

Some notes about the HODL program: please keep in mind that we have to send out the payments on the actual network and therefore if the program were to become very large, we might have to set limits in place. Likely we will need a dust limit because someone could in theory register a very large number of outputs for 0.0001 MWC. Another measure that could be taken is to implement a grandfather clause at some point. We are thinking of setting dust limits of 1 MWC initially and likely these kinds of problems won't be an issue at all right away.

Finally, we wanted to talk a little about the motivation behind the HODL program. The reason we planned to implement the HODL program from the start is that it gives more incentive for airdrop recipients (and others) to HODL coins as opposed to selling them immediately. We could have easily allocated all 8 million coins to the airdrop, but that would not have set up the right incentives. MWC is designed to have a much more attractive stock to flow ratio (S2F) than Grin or Beam during its entire existence (and in particular after the first 4 years). The HODL program is designed to make those first four years MUCH better for HODLers. During the first four years, about 1.2 million coins are mined per year and the existing supply starts at around 10 million (depending on how you count things). That means we have over a 10% monetary inflation rate per year. With the HODL rewards, that can help offset these rates. After the first halving in 4 years, the total supply will be exactly 15 million and about 625,000 coins will be created per year. That is right around a 4% monetary inflation rate, which is very attractive, and there is no comparison to Grin and Beam which will still be in the high double digits at that time. Obviously over time, it gets even better with each halving. So, the HODL program is really a reward and incentive to those that see the potential here in the early years and largely offset the monetary inflation rate of the first 4 years of the coin.