As Proof of Stake and delegated Proof of Stake models continue to gain momentum, POA Network is creating the first stable coin chain which uses delegated Proof of Stake for Sybil control and consensus. This will enable chain validators and delegators to stake tokens and acquire rewards for signing blocks on the network. In this post, we will explore the $DPOS token and its unique inflation model.
$DPOS is a new ERC20 token designed specifically for staking. The initial use case will cover the xDai DPOS chain, but other chains may use DPOS for staking as well.
A dedicated staking token provides a separation of concerns on the chain. Two tokens exist simultaneously, and each has a specific purpose (transactional or staking). This provides flexibility with the model and the opportunity to customize the reward structure.
This flexibility is important for the xDai DPOS chain, where xDai is used as the transactional token. xDai is pegged directly to DAI, so the price is predictable and stable (within a small margin). It is designed for users who want to make purchases or send currency that maintains its value, with no time delays or high fees.
To secure the chain, incentives must be provided for the validators and delegators who stake their assets in order to protect the network. Providing rewards strictly in xDai can be problematic; xDai is tied directly to its DAI counterpart which creates a number of constraints. To increase reward flexibility and provide meaningful incentives, $DPOS is used as the staking and primary block reward token for validators and delegators.
The $DPOS token has a fixed supply of 100,000,000. Of that amount, a full 73% is reserved for token rewards. During the initial exchange offering (IEO), only 4% of the total supply will be available for public users. The remaining amount is initially locked and released over time. See below for a breakdown of the total DPOS supply and release schedule.
|Distribution Type||Amount||Initial Lock|
|Staking Rewards [Locked by protocol, released over the token lifetime]||73,000,000||Yes|
|xDai Ecosystem Fund [Locked, distribution begins after 1 staking year]||15,000,000||Yes|
|xDai Foundation Reward [Locked, distribution begins after 3 staking months]||4,000,000||Yes|
|Private Offering [Partially Locked (35% released at inception, remaining 65% distributed during first 9 staking months)]||4,000,000||Yes|
|Public Offering [Unlocked]||4,000,000||No|
$DPOS Distribution.pdf (82.2 KB)
Token Release Schedule
Tokens will be released at various intervals during the first several years in production. This will infuse the network with additional $DPOS during the establishment and growth phases.
Note: We use staking weeks, staking months and staking years in our distribution schedule. In this model, there are 4 staking weeks in a month and 12 staking months in a year (1 staking year is 48 weeks rather than 52).
Tokens allocated for rewards are released over many years (~36 staking years) based on a fully automated and rules-based reward schedule.
The $DPOS token will be released 3 months before staking begins. Included in the release is the public sale as well as a percentage of tokens released to private investors. During these initial 3 months, the network will undergo substantial testing to ensure a seamless transition to delegated staking.
Token emissions are as follows:
- First 6 active staking months (months 4-9 after token release): 32% APR
- Months 10-15 after token release: 16% APR
- Months 16-21 after token release: 8% APR
- Months 22+: 4% APR
xDai Ecosystem Fund
This fund is responsible for incentivizing the ecosystem to promote adoption. DApps, games, wallets and other innovations will be supported and promoted.
- Total: 15,000,000
- Locked for year 1 after token release (48 weeks)
- Released at end of year 1: 1,500,000 (10%)
- Released for following 2 staking years (96 weeks): 140,625 per week (remaining 90% distributed per 1 week staking epoch).
xDai Foundation Reward
The foundation reward recognizes founders, advisors, and partners.
- Total: 4,000,000
- Locked for first 3 months after token release (12 weeks)
- Released at end of month 3: 800,000 (20%). This release will correspond with the xDai stable chain transition to delegated staking.
- Released for following staking year (48 weeks): 66,666 per week (remaining 80% distributed per 1 week staking epoch).
An exclusive offering available to a select group of pre-approved investors.
- Total: 4,000,000
- Released during token offering: 1,400,000 (35%)
- Released for following 9 months (36 weeks): 72,222 per week
$DPOS Tokens will be offered in an Initial Exchange Offering (IEO). Only 4% of the total supply will initially be offered to the public.
- Total: 4,000,000
- Released during initial offering, 3 months prior to network transition: 4,000,000 (100%)
Variable Inflation Model
The $DPOS staking token can accommodate different reward schedules depending on the needs of the chain. With xDai DPOS, rewards for staking and delegation are released using a variable inflation model. Inflation starts at 32% and is halved to 16% after 6 staking months. This halving occurs two more times until an annual inflation rate of 4% is reached at staking month 19.
The 4% inflation will be sustained until staking rewards are exhausted (approximately 36 staking years with 100% staking). When the reward distribution is complete, a governance decision may be enacted to update the reward model. Additional incentives (including transaction fees for validators and bridge entrance/exit fees for validators and delegators) will also ensure permanent compensation in exchange for protecting the xDai DPOS chain. $DPOS supply scarcity will also contribute to potential increases in the market valuation of the token.
- xDai $DPOS Emissions Year 1-4.pdf (109.3 KB)
$DPOS and xDai
$DPOS staking provides an opportunity for individuals to earn rewards and incentives in exchange for protecting the integrity of the chain. $DPOS is designed to be unlocked over time, maintaining a level of scarcity and regulating value.
$DPOS will provide Proof of Stake protection for the xDai DPOS chain, a chain which uses a stable coin for fast, extremely inexpensive transactions. xDai has already been adopted by many in the crypto community as a way to send stable currency and pay vendors quickly with minuscule fees. The delegated Proof of Stake model will further decentralize this protocol and provide staking opportunities and reward incentives for interested $DPOS token holders. In addition, $DPOS will create a funding stream for the xDai ecosystem to fast-track mainstream adoption.