preloader

Defining suterusu staking and token economics

  • Wednesday, Dec 18, 2019
blog-image

Defining Suterusu’s Staking and Token Economics

Blockchains provide a functional medium for price discovery in the digital world, which makes them an ideal foundation of the digital economy. However, reconciling the community-driven decision-making with networks of value requires building a sustainable staking ecosystem for platform users.

That’s where our staking and economic models come into play. Based on a blend of liquid democracy and meritocracy, our staking model incentivizes participation and, when combined with our technical advances, serves as the basis for a secure and flourishing network for private finance.

The dual-layer of our staking and token economics are our governance model and validation process – both intertwined with our native Suter token.

Governance & Node Validation

One of the primary considerations of any consensus system in a blockchain is security, which confers value to the native assets transferred across the network and protects the inscription of data into the ledger at an economical cost. Economic security in Suterusu relies on validation of the state of the network by nodes using proof-of-stake (PoS), and the subsequent role of nodes in the governance of the network as a corollary.

Based on the concept of “incentive compatibility,” we actualized a token model using Suter that takes into account behavioral models of network participants. We can break down this model into two distinct processes:

  1. Node validation (2 Node Types)
  2. Governance

Community members are defined as Suter token holders who can wield their tokens for a suite of functions, including delegating their tokens to validator and nominator nodes for staking or for their use in governance. Suter holders are rewarded with staking interest from their delegated tokens, which incentivizes active community participation in the governance and validation process – otherwise token holders risk the opportunity cost of returns on their Suter tokens. Suters can be purchased by the public on the open market, which will have a deflationary capped supply.

The two types of nodes in Suterusu are validator and nominator nodes.

Nominator Nodes

Nominator nodes function as a sort of check on validator nodes by verifying transaction data that is processed by validator nodes based on standards determined by the community at large. Suter token holders can choose to become nominator nodes or delegate votes to them in the governance process of on-chain decision-making that sets standards and protocol changes for the broader network.

Validator Nodes

Validator nodes actually process transaction data on the network, and concurrently propose and verify blocks on the blockchain. Becoming a validator node requires a specific threshold of stake and hardware costs, and there is a maximum of 100 validator nodes at the beginning of the network, with the minimum stake set at 10 million Suters.

For the first year, validator nodes will be rewarded between roughly 50% - 90% of the Suter they have staked in the system. The exact number depends on a variety of factors. _(Stay tuned for a medium article specifically about this topic!) _

Validator nodes can be voted on by delegators (community token holders) and encompass the most influential actors in the governance process, who can even charge delegator fees to community members investing their Suter tokens with the validator node.

The validation process is also closely correlated to the broader governance model.

Governance

In Suterusu, governance is based on a stake-weighted referendum for protocol changes, such as the standards that define nominator node evaluations of validator node transaction verification. Simple majorities determine the direction of the network, but if there is insufficient participation by the community, we introduce a liquid meritocracy mechanism that enables the token holders to delegate votes to experts on their specific spheres of proficiency.

The overarching idea is to fuse the adaptability of liquid democracy voting processes with the meritocratic systems of Eastern Asian bureaucracies to leverage the advantages of both while simultaneously reducing their shortcomings.

Suter holders are empowered to offload decision-making to experts in complex scenarios outside of their professional scope or participate directly when they are compelled to act on a specific topic.

**Suter Token Economics & Distribution **

The total capped supply of Suter tokens is 10 billion. The economics and distribution of the tokens are designed to encourage participation in the construction of the network from the outset of the mainnet launch. We have built a deflationary-based issuance process where less Suter tokens are issued per block over time, and also have developed a token burning mechanism similar to Bancor’s burn model.

Out of the total 10 billion Suter tokens the distribution is as follows:

  • 16 percent will be reserved for fundraising.
  • 4.8 percent for the Suterusu team.
  • 3.2 percent for the Suterusu Foundation.
  • The remaining 76 percent will be allocated as mining rewards, with 5 percent of those rewards delivered to the Suterusu team.

Team and Foundation tokens will be locked for 3 years, and all fundraise investor tokens will be locked for 6 months.

There is no ICO, only the private placement round and bootstrapping of the network with incentive rewards for nominator and validator nodes.

At network launch, Suter tokens will be distributed directly to validators and nominator nodes based on a dynamic calculation that the community will determine at the outset of the mainnet launch. With nearly 80 percent of the capped supply earmarked for the staking system, users have a compelling incentive to actively participate in the validation and governance of the network at the beginning.

Many PoS networks suffer from launch crises where network participants are not incentivized to hold for the long-term and instead are torn apart by tiered-price mechanisms for pre-launch investors and a stark centralization at the network’s origin.

We propose a solution to this problem with the nominator nodes.

Nominator nodes, in particular, will play a pivotal role in the bootstrapping of the governance and enable the initial allocation of tokens to be more decentralized than most other blockchain network launches. For example, we refer to our nominator node token system as “mortgage issuance,” where, initially, participants in the private placement round become a nomination node at the mainnet launch.

Nominating nodes subsequently share the mining block rewards with validator nodes according to the number of mortgage tokens, which are locked for 6 months and released via a linear supply schedule within 180 days of the lockout period’s expiration.

Consequently, the rewards proffered to nominator nodes are analogous to long-term mortgages, which encourages an active interest in the network’s security and community governance while allowing a soluble level of liquidity for investor assets. Additionally, nominator nodes can accelerate the rate of mortgage issuance of their Suter tokens by becoming validator nodes at the same time, which requires more economical costs in terms of hardware – binding them deeper to the outcome of the network.

Overall, our token model is referred to as “Staking as an Offering,” which is more conducive to network participation, better node distribution, and node health at the network’s launch – a sizeable improvement over conventional ICOs that have fallen out of public favor and proven their proclivity for spurious promises of sustainability.

Our system provides liquidity and potent incentives for investors to gravitate towards Suterusu and become both nominators and validators. As a result, we can bootstrap a flourishing network for the anonymous transfer of financial assets using our innovative technology – redefining the blockchain business model for the digital economy in the process.